The Obligation to Disclose Documents in the Possession of Third Parties: IIROC v. Crandall

In IIROC v. Crandall, 2020 NBCA 76 (Crandall), the New Brunswick Court of Appeal overturned a 2019 decision of the Financial and Consumer Services Tribunal (the Tribunal) in which the Tribunal found that the Investment Industry Regulatory Organization of Canada (IIROC) had breached its duty of fairness owed to one of its members by failing to disclose documents in the possession of the member’s former employer during enforcement proceedings.

The Court of Appeal’s decision is significant for two reasons. First, the decision establishes that the obligation of regulators to produce documents in the possession … Continue Reading

British Columbia (Securities Commission) v. BridgeMark Financial Corp.: The Open Court Principle Applies in Hearings of Securities Regulators

In British Columbia (Securities Commission) v. BridgeMark Financial Corp, 2020 BCCA 301, the British Columbia Court of Appeal upheld a decision of the British Columbia Securities Commission (Commission) to release documents obtained during an investigation and filed as evidence at a hearing to consider whether to extend a temporary cease trade order. A firm of class action lawyers (the Law Firm) requested access to the evidence for use in a class action against the subjects of the investigation. The persons subject to the investigation appealed the Commission’s decision to grant access to the Law Firm.… Continue Reading

Lathigee v British Columbia Securities Commission: You Can Run, But You May Not be Able to Hide from A Disgorgement Order By a Canadian Securities Regulator

In a recent decision of the Supreme Court of the State of Nevada (Court), the Court upheld an order made by the Nevada District Court recognizing and enforcing a judgment of the British Columbia Supreme Court arising out of enforcement proceedings by the British Columbia Securities Commission (BCSC) against Michael Lathigee (Lathigee).

After a contested hearing, the BCSC found that Lathigee had perpetrated a fraud under section 57(b) of the B.C. Securities Act, and ordered sanctions including pursuant to section 161(1)(g) that he disgorge $21.7 million in ill gotten gains. The BCSC registered … Continue Reading

BC Court of Appeal Clarifies the Good Faith and Best Interests Requirements of the Test for Leave to Commence Derivative Actions

In a recent split decision, a panel of the B.C. Court of Appeal (BCCA) considered the good faith and best interests requirements of the test for leave to commence a derivative action: 2538520 Ontario Ltd. v. Eastern Platinum Limited, 2020 BCCA 313.

A derivative action is a procedure pursuant to which a shareholder or other “complainant” may commence and control litigation in the name of a corporation that declined to commence its own litigation in respect of a wrong allegedly done to it.  Derivative actions are most frequently brought by shareholders to redress alleged wrongs perpetrated by … Continue Reading

IIROC Panel Rejects Majority of Respondent’s Affidavits at Sanctions Hearing

At a sanctions hearing in Re Eley, a Hearing Panel of the Investment Industry Regulatory Organization of Canada (“IIROC”) (the “Panel”) disallowed evidence submitted by the respondent, Douglas Eley, that was found to amount to “a thinly disguised attempt to re-open the Panel’s findings on the merits” rather than evidence relevant to sanctions (the “Sanctions Decision”).

The Merit Decision

Following a contested hearing, the Panel released a decision (the “Merits Decision”) in which it found that Mr. Eley had altered previously signed client documents, “seriously violating industry regulations” and his firm’s policies. … Continue Reading

Stay of Proceedings, a Drastic Remedy Granted for Violation of Constitutional Rights

A few weeks ago, in R. c. Goldberg, 2020 QCCQ 4548, the Court of Québec (Criminal and Penal Division) granted the most drastic remedy by ordering a stay of the charges brought against Bouclair Inc. (Bouclair), Peter Goldberg and Erwin Fligel, respectively the company’s Chief Executive Officer (CEO) and vice-president, for alleged tax evasion offences.

Factual Background

In 2011, the Québec fiscal authority, the Agence du Revenu du Québec (ARQ), began a routine tax audit of Bouclair. In the early stages of the audit, the ARQ’s auditor discovered the diversion of the CEO’s personal … Continue Reading

Do’s and Don’ts When Applying for a Search Warrant

In the context of a lawsuit by the Agence du revenu du Québec (ARQ) for failure to report and remit various tax amounts, the defendants sought to exclude the evidence seized by the ARQ under a search warrant authorized by the Court of Quebec. The reviewing judge (also of the Court of Quebec), in Agence du revenu du Québec v. Exacte, 2020 QCCQ 2840, clarified the rules for obtaining a search warrant, particularly the requirements for drafting the required supporting affidavit, and defined the duties imposed on the party who appears ex parte before the authorizing judge. Those rules equally … Continue Reading

The Context of Materiality in Secondary Market Misrepresentation Claims: Miller v. FSD Pharma Inc. Securities Class Action

In Miller v. FSD Pharma Inc. (Miller), a decision released June 23, 2020, Morgan J. of the Ontario Superior Court of Justice granted leave to proceed with a putative secondary market securities class action under s. 138.3 of Part XXIII.1 of the Ontario Securities Act (OSA) against FSD Pharma Inc. (FSD), a new entrant into the Ontario cannabis production market.[1] The Miller decision is significant for two reasons. First, the Court applied the “market impact” test for assessing the materiality of the alleged misrepresentations. Second, the Court adopted a contextual approach to … Continue Reading

Quadrexx Hedge Capital Management Ltd. v. Ontario Securities Commission: First Application Of The Vavilov Standard of Review to an OSC Decision

In a previous post, we discussed the new standard of appellate review of tribunal decisions described in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (Vavilov) and its implications for the Ontario Securities Commission (the OSC). In Quadrexx Hedge Capital Management Ltd. v. Ontario Securities Commission, 2020 ONSC 4392, the Divisional Court considered for the first time the application of Vavilov to a decision of an OSC Hearing Panel.

Background

After a contested hearing, a Hearing Panel of the OSC (the Panel) found that Miklos Nagy and Tony Sanfelice, … Continue Reading

Investor Protection Law Clinics Benefit from Cy-près Distribution of Settlement Funds: Makris v Endo International PLC

Makris v Endo International PLC

On October 1, 2020 the Ontario Superior Court approved a securities class action settlement agreement in the amount of $700,000 and a plan of allocation  providing for the distribution of the settlement amount, net of legal fees, disbursements and taxes, to two investor protection legal clinics.

The Cy-près Distribution of the “Uneconomic” Net Settlement Amount

During the class period, the defendant’s securities traded on both the Nasdaq and the TSX, with trading volumes on the TSX accounting for less than 1% of the trading volume on the US exchanges.  Most class members in the Ontario … Continue Reading

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