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R.S.O. 1990, c. S. 5, AS AMENDED  


IN THE MATTER OF Khaldoun Kader


May 16, 2006

Panel: Paul M. Moore, Q.C.
Suresh Thakrar

- Vice Chair (Chair of the Panel)
- Commissioner
Counsel: Melissa MacKewn
Scott Boyle

Lawrence Ritchie
Karen Minz
- On behalf of Staff of the Ontario Securities Commission

- On behalf of Khaldoun Kader



The following text has been prepared for purposes of publication in the Ontario Securities Commission Bulletin and is based on excerpts of the transcript of the hearing. The excerpts have been edited and supplemented and the text has been approved by the chair of the panel for the purpose of providing a public record of the decision.

[1] The panel has reviewed the written submissions and has listened to counsel and has determined to approve the settlement agreement as being in the public interest.


[2] This was a hearing under sections 127 and 127.1 of the Securities Act, as amended, for the commission to consider whether it is in the public interest to approve a proposed settlement agreement between staff of the commission and the respondent, Khaldoun Kader, regarding the respondent's conduct of illegal insider trading and making false statements to staff in relation thereto.

[3] By way of overview, the respondent has admitted that he conducted illegal insider trading in contravention of subsection 76(1) of the Act and that he provided false and misleading information to staff in relation thereto in contravention of clause 122(1)(a) of the Act. Accordingly, he has agreed to sanctions which include: A ten-year cease trade order (subject to a limited carve out); a payment in the amount of one and one-half times the profit earned; a contribution towards the commission's costs in this matter; and a reprimand.

[4] It is necessary to impose strong sanctions in insider trading cases, to deter illegal insider trading by making it clear to the particular respondent, and all like-minded individuals, that failing to respect the securities laws of Ontario and the authority of the commission in upholding them, will not be tolerated from those who wish to have the privilege of participating in Ontario's capital markets.


[5] The factual background taken from the agreed statement of facts in the settlement agreement is as follows:

[6] The respondent is 33 years old and is a resident of the City of Mississauga. He was granted a license as a Certified Public Accountant in 1966 from the California Board of Accountancy and has been employed in several accounting positions in Canada and abroad, from 1996 to the present.

[7] The respondent is not, and never has been, an officer or director of a reporting issuer.

[8] IMAX Corporation is a reporting issuer in Ontario. IMAX's common shares are listed on both the Toronto Stock Exchange and the NASDAQ Exchange in the United States.

[9] On October 28, 2004, IMAX reported its third quarter 2004 financial results. IMAX reported net earnings from continued operations of US $0.04 per diluted share, substantially ahead of management guidance for a breakeven quarter, the first quarter mean of USD $0.01 a share, and analysts' expectation of US $0.01 cent a share. IMAX also reported significant gains in revenue as compared with the third quarter of 2003.

[10] On October 27, 2004, prior to the release of the third quarter results, shares in IMAX closed on the NASDAQ Exchange at US $5.52 per share.

[11] During October and November of 2004, which was the "Material Time," the respondent was employed at IMAX as Director of Finance and Treasury. Prior to October 18, the respondent became aware, in his capacity as Director of Finance and Treasury, that the net earnings per share of the third quarter of 2004 were going to be materially higher than management guidance and analysts' expectations.

[12] Between October 18 and 27, 2004, through an on-line internet access brokerage account in his mother's name, the respondent directed and financed the purchase of 110,000 shares of IMAX at a cost of approximately US $607,000, exclusive of commissions.

[13] Between October 28, 2004 and November 1, 2004, the respondent directed the sale of all of the IMAX shares for proceeds of just under US $700,000, exclusive of commissions.

[14] No other shares were traded in the account during the Material Time.

[15] That constituted the illegal insider trading.

[16] In April and May of 2005, the respondent told staff of the commission that he was unaware of the account and the trading in it. That consisted of the false statement to the commission.


[17] The respondent admits that at the time of his purchases of IMAX shares, he was a "person in a special relationship" with IMAX, as defined in the Act, and that the material increase in earnings per share for the third quarter of 2004 was a material fact that had not been disclosed. As such, the respondent admits that he engaged in illegal insider trading in violation of section 76.1 of the Act.

[18] The respondent also admits that he made false and misleading representations to staff in contravention of subsection 122(1)(a) of the Act.

[19] And he admits that the foregoing conduct was contrary to the public interest.


[20] The sanctions agreed to in Part IV of the settlement agreement, which we will order today in approving the agreement, are as follows:

(a) The respondent will cease trading in securities for a period of 10 years effective from the date of the order approving the settlement agreement, with the exception that the respondent will be permitted to trade in securities limited to mutual funds in registered retirement savings plans in which he has sole beneficial interest;

(b) The exemptions contained in Ontario securities law will not apply to the respondent for a period of 10 years effective from the date of the order of the commission approving the settlement agreement;

(c) The respondent will be reprimanded by the commission;

(d) The respondent will be prohibited from becoming or acting as a director or officer of a reporting issuer for a period of 10 years effective from the date of the order of the commission approving the settlement agreement;

(e) The respondent will pay the sum of $5,000 to the commission in respect of a portion of the costs of the investigation and proceeding in relation to this matter; and

(f) The respondent will make a settlement payment of US $136,077 to the commission for the allocation to or for the benefit of third parties as determined by the commission under section 3.4(2) of the Act.


[21] The commission's mandate in upholding the purpose of the Act, as set out in section 1.1 of the Act, is as follows:

(a) to provide protection to investors from unfair, improper or fraudulent practices; and

(b) to foster fair and efficient capital markets and confidence in them.

[22] There are several relevant factors that we need to take into account in approving a settlement agreement. They are similar to the factors that a commission panel would take into account in imposing sanctions after a contested hearing on the merits. In crafting a public interest sanction, the commission should consider at least three issues:

  • first, whether or not there is a reasonable likelihood the objectionable conduct will be repeated;
  • second, whether or not the objectionable conduct is such as to bring into question the integrity and reputation of the capital markets in general; and
  • third, the impact on the respondent.

[23] Several factors should be taken into account in determining the nature and duration of sanctions, and these considerations were set out in Re M.C.J.C. Holdings and Michael Cowpland (2002), 25 O.S.C.B. 1133 and Re Belteco Holdings Inc. (1998), 21 O.S.C.B. 7743.

[24] The role of the commission Panel in reviewing a settlement agreement is not to substitute the sanctions it would have imposed after a contested hearing for what is proposed in the settlement agreement; rather the commission should ensure that the agreed sanctions are within acceptable parameters.

[25] This is what we have done in approving this settlement agreement.

[26] Sanctions imposed by the commission in illegal insider trading proceedings under section 127 of the Act vary substantially according to the circumstances of each case.

[27] Commission staff has provided us, as precedents, with the names of several cases which we have looked at: In the Matter of Piergiorgio Donnini (2002), 25 O.S.C.B. 6225; rev'd (2003), 37 B.L.R. (3d) 46 (Ont. Sup. Ct.); rev'd (2005), 1 B.L.R. (4th) 101 (Ont. C.A.); In the Matter of Jonathan Carley (2003), 26 O.S.C.B. 8197; In the Matter of Robert Walter Harris (2005), 28 O.S.C.B. 5373; and In the Matter of Jo-Anne Chang and David Stone, Settlement Agreement between Staff of the Commission and Jo-Anne Chang and David Stone, signed April 9, 2005, approved by Commission Order dated April 11, 2005.

[28] As I stated, we believe these sanctions are within acceptable parameters.

[29] This case is somewhat different from some of the cases that come before us in that false statements were made to staff. So it's not just illegal insider trading but the fact that the respondent misinformed staff: that he did not know about the account or was unaware of the account. Now, it may have been youthful exuberance—the first reaction when confronted with a suggestion of wrongdoing. Nevertheless we can't ignore it.

[30] In the case of Wilder et al v. Ontario Securities Commission, [2001] O.J. 18 No. 1017 (C.A.) at page 9, the Ontario Court of Appeal stated:

The OSC is charged with a statutory obligation to do its best to ensure that those involved in the securities industry provide fair and accurate information so that public confidence in the integrity of the capital markets is maintained. It is difficult to imagine anything that could be more important to protecting the integrity of the capital markets than ensuring that those involved in those markets, whether as direct participants or advisers, provide full and accurate information to the OSC.

[31] The primary factors that we did take into account when considering this case are the following:

(a) The respondent's conduct demonstrated a serious disregard for Ontario securities law, the authority of the commission and his obligation as a participant in the capital markets in Ontario to provide full and accurate information to the commission;

(b) By way of lengthy prohibitions on trading and serving as an officer and director of a reporting issuer, the proposed sanctions recognize and address the likelihood of future misconduct by the respondent;

(c) However, the respondent did act promptly and the respondent does recognize the seriousness of his conduct and accepts the consequences;

(d) Staff counsel suggested that this was not the case of a youthful ingénue not really knowing what he was doing. On the other hand, it is not the case of a hardened sophisticated registrant trying to manipulate the system. The respondent is only 33 years of age. He's not a registrant.

(e) The respondent's employment has been terminated;

(f) The respondent's admissions eliminate the need for a full hearing and therefore conserve the resources of the commission and save the public considerable expense;

(g) The respondent has never been the subject of any prior allegations or violations of Ontario securities law;

(h) The amount of the proposed payment will not be regarded as a "licensing fee" which would merely restore the status quo; and

(i) The amount of the proposed payment together with other sanctions send a clear message to the respondent and other participants in the capital markets that engaging in illegal insider trading and providing false information to staff in relation thereto, are serious offences which will not be countenanced in our capital markets.


[32] In conclusion I want to say that because this respondent is relatively young, because this is a first offence, because these sanctions do go out for a long period of time, because of the consequences to the respondent with respect to his employment, and because this was a single incident (and I don't know for sure about the misrepresentation to the Commission and the terms under which it was made), it appears to us that these sanctions are severe. We acknowledge that these sanctions will have serious consequences. We are hopeful that the respondent will be able to get on with his life and that this incident will not be an irreparable black mark on his future.

[33] I want to make the point that we are not here to punish. We are here to protect the public in the future.

[34] The respondent should know that there is section 144 of the Securities Act which will allow him a way to come back in the future to seek a variation in the sanctions if future circumstances suggest a variation would be appropriate. I don't want to predict what those circumstances might be, but the respondent should be aware of that section.

[35] That concludes my oral reasons for approving the settlement. 

[36] COMMISSIONER THAKRAR: I just echo the last few words that you said. This respondent is young and should take this as a lesson that he learned and move forward to better things.

[37] THE CHAIR: Mr. Kader, would you stand? Mr. Kader, I know you're aware of the seriousness of the actions that you've done and we appreciate the fact that you have cooperated with the commission and you've agreed to make the payment that will be made. You are now reprimanded, you may be seated.

[38] If there's nothing further, this hearing is terminated.

Approved by the chair of the panel on May 30, 2006 .

“Paul M. Moore”