The Ontario Securities Commission and the Quebec Securities Commission have slapped Air Canada with a $1 million penalty, an audit review and a reprimand in a settlement over the company’s selective disclosure practices.

The penalties, which will see the airline pay $500,000 to each province, and another $80,000 to the OSC to cover the cost of the investigation, were agreed to by the airline in settlement agreements approved today.

In the agreements, Air Canada admits that on October 5, 2000, it disclosed material facts to industry analysts and did not disclose those same facts to the market in general.

The firm left voicemails for 13 analysts revealing that its earnings would be lower than expected. The decision to inform the analysts was made by Michael Peterson, Air Canada’s executive vice president and CFO. The voicemails were delivered by Valerie Peck, director of Investor Relations.

The next day, Air Canada stock tanked. It opened a dollar bellow the previous day’s close, and dropped another 75¢, closing down about 12%. The TSE asked the firm to comment, and it issued a press release referencing the event, but still did not disclose the same information it had given analysts the previous evening.

In the settlement agreement, Air Canada admitted that the press release did not contain the same information that had been disclosed to analysts the previous day. It also admitted that the disclosure was selective and contrary to the public interest, and contrary to its own disclosure policy and in breach of its listing agreement with the TSE.

Along with the monetary penalties, the OSC ordered that Air Canada submit to a review by its auditors for each of the next four quarters to ensure compliance with applicable securities law, TSE rules and its own disclosure policy. These reviews will be publicly disclosed.