Ontario Court of Appeal Restores Commission's 15 Year Sanctions in Piergiorgio Donnini Matter

Toronto – In a unanimous decision issued today, the Ontario Court of Appeal allowed the Commission's appeal of the decision of the Ontario Divisional Court and restored the Commission's 15 year sanctions imposed on Piergiorgio Donnini.

The appeal arose out of a hearing before the Commission pursuant to sections 127 and 127.1 of the Securities Act (Ontario) in respect of allegations made by Staff of the Commission against Donnini. On September 12, 2002, after a five day hearing, the Commission found that Donnini committed unlawful insider trading, contrary to section 76(1) of the Act. In exercising its protective and preventive jurisdiction under section 127(1) of the Act, the Commission imposed sanctions on Donnini, including a 15-year suspension of Donnini's registration. In addition, pursuant to section 127.1, the Commission ordered Donnini to pay investigation and hearing costs in the amount of $186,052.30.

Donnini had appealed to the Divisional Court the Commission's findings that he committed unlawful insider trading, the Commission's order imposing the 15 year sanctions and award of costs against him.

The Divisional Court had dismissed Donnini's appeal from the finding that he committed unlawful insider trading, but allowed the appeal in respect of the sanctions imposed on Donnini and the award of costs. In particular, the Divisional Court reduced the sanctions imposed by the Commission on Donnini from 15 to 4 years. On the issue of costs, the Divisional Court directed the Commission to reconsider its costs award against Donnini by following certain specific procedural steps.

In restoring the 15 years sanctions ordered by the Commission in respect of Donnini, the Ontario Court of Appeal made the following comments:

"...The high level of deference which a reviewing court must show to a security commission's decision extends to the question of sanctions because of the expertise of the commission regarding securities matters...

The Commission wrote careful and extensive reasons on the sanctions issue. The Commission considered the extent and seriousness of the unlawful conduct, Donnini's experience in the market, his position in the industry, his other violations of securities law and Yorkton's own internal rules and, of particular importance, general deterrence[...]

There is no doubt that the 15-year suspension of Donnini's registration is a substantial penalty. However, the Commission took into account the appropriate factors in imposing such a severe sanction - Donnini's senior position at Yorkton, his experience in the industry, his other misconduct in the market and, perhaps most importantly, the devastating impact insider trading can have on the integrity of the market and on investor confidence. In my view, these factors stand up to "a somewhat probing analysis."

The Ontario Court of Appeal dismissed Donnini's cross-appeal on liability, stating:

Moreover, on the record before the Commission, there was ample evidence to support the Commission's conclusion that Donnini had engaged in unlawful insider trading. The Commission's findings that the proposed second special warrants financing (including its size and price) was a material fact, that Donnini knew of the material fact by 2:45 p.m. on February 29, 2000, and that he acted on this knowledge by trading in KCA shares on a "massive scale" on February 29 and March 1, before the information was known publicly on the market, are all amply supported by the record and, especially, in the comprehensive reasons of the Commission.

Finally, the matter of the costs award is referred back to the Commission for further consideration.

The Court of Appeal's decision is available at http://www.ontariocourts.on.ca/.

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