ALBERTA SECURITIES COMMISSION DECISION Stephen Kapusta ... Decisions Orders Rulings...آ  #3890517...

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Transcript of ALBERTA SECURITIES COMMISSION DECISION Stephen Kapusta ... Decisions Orders Rulings...آ  #3890517...

  • #3890517 v1

    ALBERTA SECURITIES COMMISSION

    DECISION

    Citation: Kapusta, Re, 2011 ABASC 322 Date: 20110607

    Stephen Kapusta, Neil Holmes, Mark Birchard, Dino Zelantini, Michael Doty and Indraneel Raychaudhuri

    Panel: Stephen Murison Beverley Brennan, FCA Karen Prentice, QC

    Appearing: Liam Oddie for Commission Staff

    Edward Halt, QC

    for Stephen Kapusta Lillian Pan and Michael Whiting

    for Neil Holmes, Mark Birchard, Dino Zelantini, Michael Doty and Indraneel Raychaudhuri

    Submissions Completed: 7 March 2011

    Date of Decision: 7 June 2011

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    Table of Contents

    I.  INTRODUCTION ............................................................................................................ [1] 

    II.  EVIDENTIARY MATTERS  A.  General ...................................................................................................................... [6] B.  Expert Witnesses ..................................................................................................... [13] 

    III.  FACTUAL BACKGROUND  A.  Canext and the Respondents 

    1.  The Company .............................................................................................. [22]  2.  Canext's Business ........................................................................................ [25]  3.  Certain Roles and Functions at Canext ....................................................... [27]  4.  Canext's Disclosure Policy .......................................................................... [33]  5.  Canext Share Trading Generally ................................................................. [41] 

    B.  Events In and Around (or Pertinent to) the Relevant Period  1.  Activity on the Ground; Certain Management and Board Activity 

    (a)  Before the Relevant Period ................................................................. [49]  (b)  Plans for an Offset Well ...................................................................... [54]  (c)  Drilling and Early Results of the 10-32 Well ..................................... [56]  (d)  A Third Party's Reaction in Mid-January 2008 .................................. [67]  (e)  Activity Continues in January 2008 .................................................... [75]  (f)  The January Board Meeting ................................................................ [79]  (g)  Events from Early to Mid-February 2008 ........................................... [90]  (h)  The February Board Meeting ............................................................ [107]  (i)  The February Release........................................................................ [120]  (j)  Events in Early March 2008.............................................................. [130]  (k)  Plans for Another News Release ....................................................... [133]  (l)  The March Release............................................................................ [153] 

    2.  10-32 Well Oil Production Overview ....................................................... [162]  3.  Analysts' Research Reports ....................................................................... [166] 

    C.  The Respondents' Purchases and Sales of Canext Shares ..................................... [180]  1.  Kapusta ...................................................................................................... [181]  2.  Holmes ...................................................................................................... [188]  3.  Birchard ..................................................................................................... [194]  4.  Zelantini .................................................................................................... [198]  5.  Doty ........................................................................................................... [208]  6.  Raychaudhuri ............................................................................................ [215]  7.  Blackout Queries in March 2008: Kapusta's Recollection ....................... [223]  8.  Observations on the Respondents' Trading ............................................... [225] 

    D.  Application of the Disclosure Policy .................................................................... [226] 

    IV.  ANALYSIS  A.  The Allegations ..................................................................................................... [231]  B.  Applicable Provisions of the Act .......................................................................... [232] 

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    C.  Issues for Determination ....................................................................................... [237]  D.  Material Fact or Material Change? ....................................................................... [239] 

    1.  Objective Test ........................................................................................... [240]  2.  Timing of Materiality ................................................................................ [241]  3.  Grounds Advanced by the Parties for their Positions on Materiality ........ [243]  4.  Analysis on Materiality 

    (a)  Weaknesses in the Parties' Positions ................................................. [250]  (b)  Use of Hindsight ............................................................................... [255]  (c)  Accumulation of Information............................................................ [257] 

    (i)  December 2007 ........................................................................ [262]  (ii)  Early to Mid-January 2008 ....................................................... [264]   (iii)  Mid-January through February 2008 ........................................ [269]  (iv)  Early March 2008 or Throughout the Relevant Period ............ [276]  (v)  Findings on Materiality ............................................................ [279] 

    E.  When Was the Material Information Generally Disclosed?  1.  Respondents Rely on the February Release .............................................. [282]  2.  Finding on the November 2007 News Release and Investor Presentation ............................................................................................... [288]  3.  Finding on the February Release Disclosure ............................................ [290]  4.  Reasons for Reticence of No Assistance ................................................... [295]  5.  First General Disclosure: The March Release .......................................... [297] 

    F.  Corroboration of Materiality and General Disclosure  1.  Sources of Corroboration .......................................................................... [302]  2.  Content and Message of the March Release ............................................. [303]  3.  Capital Market Analysts' Responses to the March Release ...................... [304]  4.  Market Trading Response to the March Release ...................................... [310]  5.  Conclusion on Corroboration .................................................................... [315] 

    G.  The Respondents' Respective States of Knowledge  1.  Knowledge of the Material Information ................................................... [316]  2.  Knowledge of the March Release ............................................................. [322] 

    H.  Consequences of Findings on the Issues ............................................................... [327]  1.  Kapusta ...................................................................................................... [328]  2.  Holmes ...................................................................................................... [330]  3.  Birchard ..................................................................................................... [332]  4.  Zelantini .................................................................................................... [334]  5.  Doty ........................................................................................................... [337]  6.  Raychaudhuri ............................................................................................ [340]  7.  Conclusions on Respondents Summarized ............................................... [342] 

    I.  Defences ................................................................................................................ [344]  1.  General ...................................................................................................... [345]  2.  Reasonable Mistake of Fact ...................................................................... [349] 

    (a)  Raychaudhuri .................................................................................... [350]  (b)  Doty ................................................................................................... [353]  (c)  Zelantini ............................................................................................ [357]  (d)  Kapusta.............................................................................................. [360]  (e)  Conclusion on "Mistake of Fact" ...................................................... [366]

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    3.  Due Diligence ........................................................................................... [367]  (a)  Doty ..............................................