Topic: Securities regulatory decisions

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U.S. Securities and Exchange Commission Proposes “Best Interest” Standard for Retail Broker Dealers

On April 18, 2018, the U.S. Securities and Exchange Commission (“SEC”) announced proposed rules that would require broker-dealers to act in the best interests of their retail clients when recommending investments. The SEC opened the proposed rules to a 90 day comment period. This announcement follows a March 15, 2018 decision by the U.S. Fifth … Continue reading

The OSC’s Jurisdiction on an Appeal from a Decision of a Director: Re Dhillon (2018) ONSEC 14

In Re Dhillon, the Director of Compliance and Registrant Regulation (“Director”) of the Ontario Securities Commission (“OSC” or “Commission”) refused Dhillon’s application for registration under s. 27 of the Ontario Securities Act (the “Act”) on the ground that Dhillon lacked both the proficiency and integrity for registration, and that his registration would otherwise be objectionable … Continue reading

Civil Forfeiture in the Securities Context

Administrative fines are are regularly imposed by the Ontario Securities Commission (the OSC) in enforcement proceedings as sanctions for violations of Ontario securities law. Less well-known, but equally important, is the ability of the OSC to require wrongdoers to forfeit to the Crown the ill-gotten proceeds of unlawful activities. This post outlines the process by … Continue reading

Bustle without the Hustle not an “Act in Furtherance of a Trade” under the Ontario Securities Act

A recent decision by the Ontario Court of Justice provides lessons about the scope of the Ontario Securities Commission (OSC)’s powers to regulate acts “in furtherance of a trade”.  The OSC’s case was against two individuals who helped create a website for a new company.  The website included an investors relations page which stated that … Continue reading

Aurora/CanniMed: Canadian securities regulators provide guidance on takeover bids in Canada – Expect to see more hard lock-ups and fewer tactical poison pills

Key takeaways: expect to see an increased use of hard lock-ups (that is, lock-ups in which a shareholder agrees to tender shares even if a superior bid comes along), which will provide bidders with reduced risk during the new 105-day bid period well-structured hard lock-ups do not necessarily result in target shareholders being joint actors … Continue reading

Federal court holds that CFTC can regulate virtual currencies as commodities

On March 6, 2018, in a fraud proceeding involving a virtual currency product, a New York federal court held that virtual currencies can be regulated by the Commodity Futures Trading Commission (CFTC) as commodities. Commodity Futures Trading Commission v. McDonnell (E.D.N.Y. Mar. 6, 2018).[1] This ruling marks the first federal judicial endorsement of the CFTC’s … Continue reading

The Ontario Court of Appeal Affirms the Test for Tippee Liability: Finkelstein v. Ontario Securities Commission

In the recently released decision in Finkelstein v. Ontario Securities Commission, the Ontario Court of Appeal (the Court) considered for the first time the definition of “person in a special relationship with an issuer” found in s. 76(5)(e) the Securities Act (the Act) as it applies to successive tippees who possess material, non-public information about … Continue reading

The Principle of Parity in OSC Settlements Does Not Preclude Disparity Where Warranted: Techocan International Co. Ltd. (Re), 2017 ONSEC 44

The Ontario Securities Commission’s decision in Techocan International Co. Ltd. (Re), 2017 ONSEC 44 affirms that absent exceptional and compelling circumstances, a respondent cannot resile from a settlement agreement on the basis of a co-respondent’s subsequent settlement on terms perceived to be more favourable. Facts On March 23, 2016, Staff of the Ontario Securities Commission … Continue reading

OSC orders trading platform systems upgrade

On November 13, 2017, Staff of the Ontario Securities Commission brought an application seeking a temporary order suspending the registration of Omega Securities Inc. (Omega) as well as trading in two alternative trading systems run by Omega called Omega ATS and Lynx ATS, pending the outcome of a hearing on the merits. Staff alleged that … Continue reading

Supreme Court Denies Leave to Applicants Seeking to Challenge Bifurcation of OSC Proceedings

The Supreme Court of Canada recently denied leave to appeal the Court of Appeal for Ontario’s decision in Ontario Securities Commission v. MRS Sciences Inc. (MRI Sciences), which considered the bifurcated nature of proceedings before the Ontario Securities Commission (the OSC). The decision is significant for its judicial endorsement of the OSC’s current two-phased approach … Continue reading

SEC action against hedge fund raises difficult questions for investment advisers

The SEC recently extracted a settlement from a hedge fund that raises difficult compliance-related questions for investment advisers. On August 21, 2017, Deerfield Management Company L.P. (“Deerfield”), a hedge fund and registered investment adviser, paid approximately $4.6 million to settle SEC charges that Deerfield failed to create and enforce policies and procedures reasonably designed to … Continue reading

Regulatory and civil consequences of Initial Coin Offerings in Ontario

A great deal has been written recently about the possible regulatory uncertainty surrounding Initial Coin Offerings (ICOs) in Canada.  In an ICO, a newly issued cryptocurrency is sold to purchasers, who acquire a right of ownership symbolized by a “coin” or token, which may appreciate in value. Depending upon the characteristics of the ownership interest … Continue reading

OSC Sanctions Respondents in Strictrade Scheme

In Strictrade Marketing Inc. et al., 2017 ONSEC 12, the Ontario Securities Commission (the Commission) delivered robust sanctions to Respondents found to have marketed and sold licenses for trading software in breach of the Ontario Securities Act (the Act). Enforcement Proceedings In 2015, Commission Staff brought enforcement proceedings against the Respondents, Edward Furtak (Furtak), Axton 2010 … Continue reading

Reasonable diligence and good faith, no excuse for CFOs under IIROC regulatory regime

In Sutton (Re), the Investment Industry Regulatory Organization of Canada’s (IIROC) found that individuals with regulatory functions in securities industry may not enjoy immunity for errors where they acted in good faith and with reasonable diligence. Sutton was a specialist in the field of securities industry regulation. From March 2003 until July 2012, he acted … Continue reading

Canadian Securities Administrators to regulate Cryptocurrency Offerings and Crypto-Investment Funds

2017 has been an extraordinary year for cryptocurrencies.[1] The recent increase in the number of cryptocurrency offerings reflects a dramatic shift in investor-attitudes towards the crypto-economy. However, the increased popularity of initial coin offerings (ICO), initial token offerings (ITO) and cryptocurrency investment funds has triggered a wave of regulatory responses, from the USA to Singapore … Continue reading

BC Court of Appeal clarifies use of disgorgement remedy under the Securities Act

In Poonian v. British Columbia Securities Commission[1] the BC Court of Appeal recently found that the BC Securities Commission (BCSC) may, in limited circumstances, make orders pursuant to s. 161(1)(g) of the BC Securities Act (the Act)  holding persons jointly and severally liable for a disgorgement order where there is evidence showing control and direction … Continue reading

“Real and Substantial Connection” Test Applies to Regulatory Jurisdiction Over Offences with Extraterritorial Elements

In Ontario Securities Commission v. DaSilva, 2017 ONSC 4576 (DaSilva), the Ontario Superior Court of Justice confirmed that the “real and substantial connection” test applies in determining whether the Ontario Securities Commission (the Commission) has jurisdiction over offences with extraterritorial elements. Background: The Appellants’ Breaches of the No Trade Order In an earlier proceeding, the … Continue reading

SEC ruling on The DAO signals increased acceptance of blockchain-based securities

On July 25, 2017, the Securities and Exchange Commission (SEC) issued a statement on the regulatory significance of offers and sales of digital assets carried out using distributed ledger or blockchain technology.  That statement followed the SEC’s Report of Investigation into The DAO, an unincorporated organization designed to issue tokens administered on a distributed ledger … Continue reading

Home Capital Group Inc. Settlement with the OSC: Lessons Learned

On August 9, 2017 the Ontario Securities Commission (OSC) approved a settlement agreement entered into by Home Capital Group Inc (HCG), a reporting issuer in the residential and commercial lending business, Gerald Soloway (Soloway), its former founder and CEO, Robert Morton (Morton), its former CFO and  Martin Reid (Reid), its former President. Both Morton and … Continue reading

IIROC To Step Up Compliance Efforts in Response to Regulator Scrutiny

Last month, the Canadian Securities Administrators released its annual Oversight Review Report of the Investment Industry Regulatory Organization of Canada (IIROC), which evaluates the effectiveness of IIROC’s key processes and the organization’s compliance with its mandate during the period between April 2015 and July 2016.  IIROC oversees investment dealers (known as “Dealer Members”) and trading … Continue reading

Alberta Securities Commission declines to exercise public interest jurisdiction to terminate soliciting dealer arrangement in proxy fight

In its recent PointNorth Capital Inc. decision, the Alberta Securities Commission (ASC) was called upon to consider the appropriateness of a soliciting dealer arrangement that had been entered into by the issuer, Liquor Stores N.A. Ltd., in the context of a proxy fight. The arrangement was intended to address management’s constrained ability to solicit proxies … Continue reading

Johnny Come Lately: The Conclusion of the OSC Hearing Into Sino-Forest

By now the facts underlying the recently concluded Ontario Securities Commission hearing into Sino-Forest Corporation should be well known.  Sino-Forest was a reporting issuer in Ontario, reportedly in the business of operating commercial forest plantations in the People’s Republic of China.  Between 1995 and its demise in 2013, when it entered into a Plan of … Continue reading

Another Kick at the Canadian Effort to Create a National Securities Regulator

In a recent decision, a majority of the Quebec Court of Appeal held that the latest proposal to create a national securities regulator was unconstitutional. The Spectre of Federalism Unlike every other G-20 country, Canada does not have a national securities regulator. There is a long history of attempts to change this.  As early as 1935, the Royal … Continue reading
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