Topic: Other developments

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Ontario Court of Appeal clarifies that the test to continue a freeze order under the Ontario Securities Act has a lower standard than the test for reasonable and probable cause.

In Qin v. Ontario Securities Commission, 2021 ONCA 165 (“Qin”), the Ontario Court of Appeal considered whether a prior judicial finding that a freeze order under s. 126(5.1) of the Ontario Securities Act was “reasonable and expedient” in the circumstances precluded a party from arguing in a malicious prosecution claim that the Ontario Securities Commission … Continue reading

Alberta Court Finds that Administrative Penalty Survives Bankruptcy: The Sequel

In February 2020, we blogged about a then recent decision by Romaine J. of the Court of Queen’s Bench of Alberta relating to the interplay between the personal bankruptcy regime and administrative penalties.  In Alberta Securities Commission v Hennig, 2020 ABQB 48 (Hennig), the Alberta Securities Commission (ASC) levied an administrative penalty against an individual … Continue reading

The Courts’ Expectations of the Parties to a Lavallée Protocol when Technological Documents are Seized

In 2002, the Supreme Court of Canada developed a protocol to be applied whenever a search warrant was executed and some of the documents seized could potentially contain privileged information, in the case of Lavallee, Rackel & Heintz v. Canada (Attorney General), 2002 SCC 61, known as the Lavallée Protocol. As since adapted in Quebec, … 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 … 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 … 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 … 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 … 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 … 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 … 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 … 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 … 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 … 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 … Continue reading

Securities Commission Administrative Fines Are Forever

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, … Continue reading

Ontario Court of Appeal Rejects “Family Resemblance Test”; Sets Aside Custodial Sentence

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 … Continue reading

Unreasonable delay and Jordan’s presumptive ceilings – different approach from the SCC on verdict deliberation time

Canadian securities regulators have jurisdiction to lay charges under provincial securities legislation, and have prosecuted serious securities offences criminally. The persons so charged have a right to be tried within a reasonable time. Questions have arisen as to whether or not a court’s deliberation time was to be factored in the timelines identified in the … Continue reading

The Show Must Go On: The OSC Requires Enforcement Hearing to Continue Notwithstanding COVID-19

In a decision released on March 23, 2020, a Hearing Panel of the Ontario Securities Commission (OSC) ruled, over the objections of the respondents, that an oral hearing that had commenced under s. 127 of the Ontario Securities Act into allegations of fraud, misleading investors, unregistered trading and the illegal distributions of securities would continue … Continue reading

Quebec Court of Appeal confirms administrative penalties applications not subject to general rules of prescription

The Quebec Court of Appeal recently dismissed the appeals launched by directors and officers of a reporting issuer, Nstein Technologies, against two judgments rendered by the Court of Quebec in a statutory appeal of a judgment by the Quebec securities tribunal, the Tribunal administratif des marchés financiers (the TMF). The TMF had granted an application … Continue reading

Managing Securities Litigation Risks in the Age of Uncertainty

The price at which securities of many Canadian issuers are trading has been significantly affected by the global coronavirus pandemic. This will almost certainly impact their risk of litigation arising from the accuracy their public disclosures. For companies that are dual listed in the United States, the risks are likely enhanced. These risks appear to … Continue reading

Delaware Supreme Court holds Delaware corporations can adopt federal-forum selection provisions

On March 18, 2020, the Delaware Supreme Court reversed the Delaware Court of Chancery and held that Delaware corporations can adopt federal-forum selection provisions (FFPs) requiring that claims arising under the federal Securities Act of 1933 (1933 Act) be brought in federal court. The case is styled Salzberg et. al v. Sciabacucchi, No. 346, 2019, … Continue reading

Yukon Court of Appeal reinstates transaction price as fair value of shares

The Yukon Court of Appeal recently allowed an appeal from a Supreme Court decision that awarded dissenting shareholders US$71.46 per share as fair value of their InterOil shares, a 43% premium over the transaction price of US$49.98. The trial court decision had generally been viewed as an outlier in fair value case law, given that … Continue reading

US federal court holds unsponsored ADRs may be subject to US securities laws

On January 28, 2020, in a case that potentially expands the liability of foreign companies, the US District Court for the Central District of California denied a foreign defendant’s motion to dismiss securities law claims brought by US purchasers of its unsponsored, unlisted American Depository Receipts (ADRs). Specifically, in Stoyas v. Toshiba Corp., — F. … Continue reading

An investigator’s misconduct can lead to a stay of proceedings

In the last 5 years, investigators with the Quebec securities regulator, the Autorité des marchés financiers (AMF), have more and more often turned to authorizing judges to secure search warrants allowing them to enter people’s homes and collect evidence. The hearings before the authorizing judges are held ex parte and authorization is granted on the … Continue reading

Alberta Court Finds that Administrative Penalty Survives Bankruptcy

In January 2020, Madam Justice B.E. Romaine of the Court of Queen’s Bench of Alberta (Court) ruled that an administrative penalty levied against the Respondent by the Alberta Securities Commission (ASC) survived his discharge from bankruptcy. (See Alberta Securities Commission v Hennig, 2020 ABQB 48) The administrative penalty was levied in 2008 against the Respondent after … Continue reading
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