In Re Rustulka, 2020 ABASC 93, a hearing panel of the Alberta Securities Commission (the Commission) determined that a former exempt market dealing representative breached his “know your client” (KYC) and suitability obligations under Alberta securities law by failing to properly identify his clients’ investment needs, objectives, financial circumstances and risk tolerances and by reporting false and misleading information about the clients on KYC documentation. Misrepresentations made by the dealing representative concerning the risks of investing in the exempt market securities that he was selling induced his clients, many of whom were seniors or close to … Continue Reading
In a judgment dated June 9, 2020, the Superior Court of Quebec in Autorité des marchés financiers v. Descheneaux, 2020 QCCS 1779 (Justice R. Mongeon) confirmed that passive reliance on a fellow director, more knowledgeable and experienced with the legal requirements of raising capital under applicable securities laws, is insufficient to ground a due diligence defence to a strict liability offence such as breaches to the Quebec Securities Act.
Mr. Descheneaux, an officer and director of delSECUR, faced 18 counts of breaches of the Securities Act, for distributing securities without a prospectus and for acting as an … Continue Reading
The recent decision of the Ontario Court of Appeal in Wright v. Horizons ETFS Management (Canada) Inc. (2020 ONCA 337) is significant for two reasons. First, it recognizes the existence of a duty of care owed by a fund manager to purchasers of units of the fund in relation to the allegedly negligent design of the fund. In addition, it opens the door to potential claims under s. 130 of the Ontario Securities Act against fund managers in relation to misrepresentations in the fund’s prospectus notwithstanding that the funds are sold over a stock exchange.
The proposed class … Continue Reading
On May 28, 2020, the Autorité des marchés financiers, Quebec’s securities regulator, published its Enforcement Report for the period April 2019 to March 2020 (https://lautorite.qc.ca/en/general-public/publications/amf-publications/enforcement-report/)
Here are the highlights:
On the Sanctions front:
- $17,648,318 in fines and administrative penalties were imposed in proceedings brought by the AMF, 75% of which were fines under the Act respecting the distribution of financial products and services
- 83 individuals and firms were sanctioned for various offences
- 6 individuals were given a total of more than 6 years of jail time in penal proceedings
On the Surveillance and Investigations front:
- 16 cyber crime
If you are involved in securities litigation, you know how important it is to distinguish between regulatory audit and penal investigation.
If the regulator is conducting an audit to ascertain whether a corporation or its officers comply with securities legislation, it may usually rely on broad investigative powers to obtain documents and information upon request.
However, if the dominant purpose of the investigation is to determine whether a penal offence has been committed, then the protection afforded by the Canadian Charter of Rights and Freedoms kicks in, including the right of every person to be secure against unreasonable search … Continue Reading
As COVID-19 continues to impact capital markets around the world, securities regulators in North America are responding to an increasing number of securities-related scams. Provincial securities regulators across Canada, as well as the United States Securities and Exchange Commission, have now issued official warnings about fraudulent investment offerings and other scams that target investors.
Many of the alleged scams involve “pump and dump” tactics, where the perpetrators artificially inflate the price of a stock by releasing false information, then sell their stock before the market learns that the information was false. For example, on April 23, 2020, the Ontario Securities … Continue Reading
As discussed in our previous post, the Financial Markets Administrative Tribunal (TMF) had provided clarity in the application of the “investment contract” criteria, first enunciated in Pacific Coast Coin Exchange v. Ontario Securities Commission and codified under article 1 of the Quebec Securities Act, CQLR c V-1.1 (QSA), by finding that PlexCorps’ project was an investment contract.
On appeal, the Court of Quebec affirmed in Lacroix c. Autorité des marchés financiers, 2020 QCCQ 1467, the TMF’s decision that PlexCorps’ project was an investment contract.
PlexCorps offered a cryptocurrency called PlexCoin along with … Continue Reading
As we discussed in a previous post, administrative penalties levied by securities commissions may survive a discharge in bankruptcy. A recent decision of the Supreme Court of British Columbia (Court), Poonian (Re), 2020 BCSC 547 (Re Poonian), highlights that in addition, such administrative penalties may also prevent a discharge from bankruptcy altogether.
In Re Poonian, the Court denied an attempt by Thalbinder Singh Poonian and Shailu Poonian (the Applicants) to obtain a discharge from bankruptcy under the Bankruptcy and Insolvency Act, RSC 1985, c. B-3 (BIA).
The Applicants made a … Continue Reading
On March 16, 2020, the Ontario Court of Appeal released its highly anticipated decision in the saga concerning the Ontario Securities Commission’s (OSC) prosecution of Daniel Tiffin (Mr. Tiffin). The Court’s decision helps clarify the analysis used to determine whether a financial instrument falls within the meaning of “security” under the Ontario Securities Act (the Act), and confirms that certain promissory notes are considered “securities” under the Act.
The Quebec Superior Court, in California States Teachers’ Retirement System v. Bausch Health Companies Inc. (2020 QCCS 275), recently clarified the rules applicable to limitation periods in the context of secondary-market liability actions under the Quebec Securities Act (QSA).
Much like its Ontario counterpart, s. 225.4 QSA provides for an authorization mechanism whereby applicants wishing to institute a secondary-market liability claim against a public issuer must convince the court that their actions are taken in good faith and have a “reasonable possibility of success”. While such actions can take on the form of class … Continue Reading