The Alberta Securities Commission (ASC) is seeking direction from the Supreme Court of Canada (SCC) on the evidence required to prove insider trading, and the basis for determining sanctions in these sorts of cases.

The ASC said Monday it is seeking leave to appeal a recent decision of the province’s appellate court that went against the regulator, overturning certain findings of a regulatory tribunal in an alleged insider trading case.

In Walton vs Alberta, the Alberta Court of Appeal upheld appeals from three individuals, ruling that there wasn’t sufficient evidence against them; and, it directed the commission to reconsider the sanctions levied against two others in the case, saying that the panel didn’t give adequate justification for the penalties imposed in the case.

The appeal involved five individuals (John Herbert Holtby, Kenneth Michael Burdeyney, Randall George Kowalchuk, Dale Francis Holtby, and John Jacob Shepert) who, along with others, were found in violation of insider trading rules in connection with a takeover bid for Eveready Inc. by Clean Harbors Inc. (See ASC orders sanctions in illegal insider trading of Eveready shares, investmentexecutive.com, July 2, 2013.)

The five men appealed the regulators’ findings against them, and the sanctions subsequently imposed by the panel.

“The linchpin of the entire factual matrix is the appellant John Herbert “Bert” Holtby. He was a founder of the original business, and one of the directors of Eveready, and admittedly knew about the Clean Harbors takeover discussions … The commission found that Holtby engaged in insider trading, and improperly disclosed the material fact to others,” the appeal court explained in its decision. But appeal court noted that the regulator also found that several others also learned of the takeover talks and traded on that information, too.

The appeal court ruled that there wasn’t enough evidence to reach that conclusion against several of the appellants.

“The findings of fact and credibility of the commission are entitled to deference, but the findings that Holtby tipped Burdeyney, that Burdeyney tipped Walton, and that Walton encouraged her husband are unreasonable,” the appeal court said in its decision. “The clear, convincing and cogent evidence that the commission realized was needed was missing from this record.”

On the question of sanctions, the appeal court also said that the commission didn’t give sufficient reasons for its decision; and, as the findings against three people in the case have now been set aside, “On this record, it is impossible to say if the sanction is reasonable. Its severity leaves cause for concern, and it lacks the justification, transparency and intelligibility that the decision making process requires,” the appeal court said.

Therefore, it ruled that the sanctions imposed by the commission against two individuals should be set aside, and the entire matter remitted to the regulator for reconsideration.

The ASC said Monday that it is now “seeking the Supreme Court’s guidance on the standard of proof and evidence required to prove illegal insider trading allegations and on the resulting determination of sanctions.”

The ASC noted that its ruling in the disciplinary hearing “relied on a combination of direct and circumstantial evidence to conclude that certain individuals illegally traded or ‘tipped’ others.”