For the first time in almost a decade, a company executive found guilty of insider trading is set to serve jail time for the crime in Ontario.

Barry Landen, former vice president of corporate affairs with Agnico-Eagle Mines Ltd., was found guilty in October of insider trading in securities of the company. Justice Rebecca Shamai of the Ontario Court of Justice found that Landen sold Agnico-Eagle shares in October 2003 while in possession of undisclosed material information, contrary to the Securities Act. He avoided losses of $115,000 through the trades, according to the Ontario Securities Commission.

On Jan. 29, Shamai sentenced Landen to 45 days in jail and levied a fine of $200,000. The maximum sentence Landen could have received for the quasi-criminal charges was five years in prison and a fine of up to $5 million.

“Any time there’s a jail sentence for insider trading in Canada, it is significant,” says Philip Anisman, a securities lawyer in Toronto, “because it sends a signal that insider trading will be more seriously treated than some people think it has been, and the sentencing isn’t going to be just a slap on the wrist.”

Landen will be the first person to serve jail time as the result of an OSC investigation involving insider trading since 2000, when Glen Harvey Harper, the former president, CEO and chairman of Golden Rule Resources Ltd., served six months in prison for two counts of insider trading.

A case subsequent to Harper’s saw Andrew Rankin, a former managing director with RBC Dominion Securities Inc., sentenced to six months in jail in 2005 after being convicted of tipping a friend about merger and acquisition deals involving RBC clients. That conviction, however, was overturned by a judge the following year.

The OSC says Landen’s sentence highlights the seriousness of his crime. “Justice Shamai made clear in her reasons that illegal insider trading is a serious offence,” says Kathryn Daniels, manager of litigation with the OSC in Toronto.

Landen’s conviction comes at a time when the Ontario regulator has indicated that it is stepping up its efforts to tackle insider trading. Last year, the OSC established an investigative unit to identify those who use non-public information to their own advantage.

OSC CRACKDOWN

“This unit is able to act quickly, to investigate and to help prosecute cases of misconduct,” David Wilson, chairman of the OSC, said when speaking at the 2009 McMaster University World Congress in January.

But according to Anisman, the crackdown on insider trading is not new: “Insider trading has been on the Canadian securities policy agenda for a long time.”

The serious treatment of the crime has been a global phenomenon in the past couple of decades, Anisman adds. This is because the incidence and treatment of insider trading has come to reflect market integrity.

Says Anisman: “It has become one of the dominant symbols of a market’s integrity over the past 40 or 50 years.”

Still, experts in securities law agree that Landen’s sentence is significant, particularly as penalties for insider-trading offences are often criticized as being insufficient to deter offenders.

“There’s been discussion around how effective the penalties have been as a deterrent, either to prevent people from reoffending or to discourage others from even thinking about offending,” says Glorianne Stromberg, a former OSC commissioner. “The fact that the court will impose a prison sentence is a factor that the marketplace will take due note of.”

The Landen case is also likely to have implications on future cases by adding to the body of law that is considered.

“It’s precedent-setting,” says Anita Anand, associate dean in the University of Toronto’s faculty of law, “in terms of possibilities for further prosecutions that are subsequently brought.”

Anand says Landen’s conviction is particularly significant, given that the case was of a quasi-criminal nature brought in provincial court, which, therefore, demanded a higher burden of proof from the OSC. This burden of proof, she says, is one reason that so few insider-trading offenders are convicted.

“In the recent past, it has been difficult for the prosecution to meet the burden of proof,” Anand says. “This raised questions as to the usefulness of the quasi-criminal jurisdiction. This conviction lays some of those questions to rest.”

The OSC had laid charges against Landen in November 2005.

@page_break@In addition to insider trading, Landen was charged with tipping off acquaintance Stephen Diamond about an undisclosed material fact about Agnico-Eagle in September and October 2003. Shamai found Landen not guilty of the tipping charges. IE