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

BC Supreme Court examines validity of release and injunction clauses affecting third party rights in plans of arrangement

Summary

In iAnthus Capital Holdings, Inc.(Re)[1], Gomery J. of the Supreme Court of British Columbia, approved an amended plan of arrangement (the Amended Plan) after he invited the petitioners to narrow the release and injunction clauses of the first plan the petitioners had applied for (the First Plan).[2]

The initial release clause was broad enough to make Gomery J. declare that he did not have the power to make it an ancillary order under British Columbia’s Business Corporations Act (BCA), and that it rendered the otherwise acceptable plan unfair and unreasonable. The clause had the effect … Continue Reading

First Global Data Ltd (Re): OSC requires merits hearing to proceed via videoconference despite respondents’ objections

COVID-19 continues to pose unique challenges to Canada’s legal system, including questions about how the Ontario Securities Commission (OSC) will conduct its proceedings.  In a recent decision, a Hearing Panel of the OSC ordered a merits hearing to proceed by videoconference (First Global Data Ltd (Re), 2000 ONSEC 23), despite the respondents’ strenuous objections. This decision, which follows a determination on March 23, 2020 that an unrelated merits hearing would continue partly in writing (discussed in our previous post), highlights the evolution of the OSC’s response to COVID-19 in conducting its proceedings.

Commission’s Current Continue Reading

Significant amendments coming to Ontario’s Class Proceedings Act, 1992

On July 8, Bill 161, the Smarter and Stronger Justice Act, 2020 (the SSJA), passed a third reading in the Ontario provincial legislature and received royal assent, becoming law.

The SSJA includes significant amendments to Ontario’s Class Proceedings Act, 1992 (CPA), marking the first time that Ontario’s class action legislation has undergone major changes since its enactment over 27 years ago.

To learn more about these amendments, please refer to our legal update.… Continue Reading

Re Rustulka: Registrants’ Suitability Obligations Under Securities Law

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

Passive Reliance on Fellow Director is Insufficient for Due Diligence Defence

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

Wright v Horizons ETFS Management (Canada) Inc.: Exchange-traded funds may attract statutory cause of action under section 130 of Securities Act

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

Highlights of Enforcement Report of the Autorité des marchés financiers

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
Continue Reading

The Quebec Court of Appeal provides useful guidance as to when a regulatory audit may actually be a penal investigation in disguise

Introduction

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

COVID-19 Scams on the Rise and Enforcement on the Horizon

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

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