Tag archives: OSC

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

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

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 at least partly in writing due to the COVID-19 pandemic (Re Paramount, 2020 ONSEC 9).

History of the Proceeding

The merits hearing began on March 10, 2020 and had been scheduled to resume on March 23.  It had proceeded for … Continue Reading

The Scope of “Will Say” Statements: In the Matter of BDO Canada LLP

In BDO Canada LLP (Re), 2020 ONSEC 2, a panel (the Panel) of the Ontario Securities Commission (OSC) considered a motion brought by Staff alleging that BDO Canada LLP (BDO) failed to meet the standard imposed by the Ontario Securities Commission Rules of Procedure and Forms (Rules) in the preparation of its witness summaries. The motion is part of a larger proceeding against BDO related to alleged breaches of the Securities Act, RSO 1990, C S.5 in connection with audits conducted by BDO. As a part of pre-hearing disclosure, Staff and BDO … Continue Reading

Ding-Dong Dunsmuir is Dead: What Minister of Citizenship and Immigration v. Vavilov Means for the Ontario Securities Commission

The decision of the Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v. Vavilov (2019 SCC 65) and its companion decision in Bell Canada v. Canada (Attorney General) (2019 SCC 66), both released on December 19, 2019, breathe new life into the statutory right of appeal contained in section 9 of the Ontario Securities Act, R.S.O. 1990, c. S. 5.  Section 9 allows a person or company directly affected by a final decision of the Ontario Securities Commission (OSC) to appeal to the Divisional Court.  Following the decisions in … Continue Reading

Stung By Deceit: Re Natural Bee Works Apiaries Inc.

On July 3, 2019 the Ontario Securities Commission (“OSC”) released its decision in Re Natural Bee Works Apiaries Inc., 2019 ONSEC 23 (“Natural Bee”).   Natural Bee provides useful guidance concerning proof of falsity and participation in a fraudulent scheme under section 126.1(1) of the Ontario Securities Act (the “Act”).

Background

In Natural Bee, OSC Staff alleged that Natural Bee Works Apiaries Inc. (“NBW”), Rinaldo Landucci (“Landucci”), its sole director, and Tawlia Chickalo (“Chickalo”), an employee of NBW who was at one point identified as its President, … Continue Reading

Ontario Securities Commission v York Rio Resources Inc.: Enforcing OSC Orders as Court Judgments outside of Ontario

On May 21, 2019, in Ontario Securities Commission v York Rio Resources Inc., 2019 BCSC 776,  the British Columbia Supreme Court (BCSC) enforced Ontario Securities Commission (OSC) disgorgement orders as court judgments from another province.

Background

A joint investigation was conducted by the OSC and the British Columbia Securities Commission (BC Commission) into an $18.2 million fraudulent investment scheme.  On March 25, 2013, a panel of the OSC found that Mr. York, Mr. Runic, Mr. Schwartz, and the companies they controlled had committed a fraud, and on March 31, 2014, the OSC issued … Continue Reading

Imposition of OSC Sanctions Following a Conviction for an Offence Relating to Securities: The Availability of Carve-Outs in the Public Interest

In Theroux (Re), 2019 ONSEC 20 a hearing panel of the Ontario Securities Commission (OSC) was called upon to decide whether an individual convicted of five counts of fraud over $5,000 contrary to section 380(1)(a) of the Criminal Code should have the benefit of carve-outs from an order under section 127(10) of the Ontario Securities Act (Act) which would otherwise prohibit him from trading in securities and from being an officer or director of any company permanently.

Facts

Alain Theroux had pleaded guilty in the Ontario Court of Justice to five counts of fraud over … Continue Reading

Not ready yet: OSC rejects bitcoin fund prospectus

On February 15, 2019, the Ontario Securities Commission issued a decision in which it refused to issue a receipt for a prospectus filing made by 3iQ Corp. (3iQ) in respect of The Bitcoin Fund (the Fund).  The decision highlights the challenges faced by issuers seeking to do business in cryptocurrency markets, which regulators continue to view as highly problematic.

Background

3iQ designed the Fund as a non-redeemable investment fund (NRIF) that would expose investors to bitcoin and daily price movements of bitcoin relative to the US dollar.  3iQ filed a non-offering prospectus on behalf of … Continue Reading

Ontario Securities Commission awards whistleblowers $7.5 million in first ever payout

On July 14, 2016, the Ontario Securities Commission (OSC) launched the Whistleblower Program (the Program). Under the Program, individuals that provide information on violations of Ontario’s securities law to the OSC are eligible for awards of between 5% and 15% of total monetary sanctions or voluntary payments. The maximum amount a whistleblower can collect is $1.5 million when sanctions and/or payments are not collected and $5 million when sanctions and/or payments are collected. By June 2018, the Program had generated 200 tips. Tips may be submitted anonymously through counsel and the OSC makes all reasonable efforts … Continue Reading

Re Meharchand: An affirmation of fundamental securities law principles

On October 19, 2018, the Ontario Securities Commission (OSC) issued reasons for Re Meharchand, a case confirming core concepts in securities law including the definition of an “investment contract”, registration when in the business of selling securities, and the test for fraud.

Background

The respondents, Mr. Meharchand and his company, Valt.X were in the business of cybersecurity. Valt.X purportedly developed, produced and sold cybersecurity hardware and software products. However, over the relevant time, Valt.X had very little sales ($15,000 relative to 1,600,000 contributed by investors). OSC Staff (Staff) brought an enforcement action alleging that Valt.X … Continue Reading

Ontario Court of Appeal Grants Leave to Appeal Tiffin Decision: Will Determine Role of the “Family Resemblance” Test in Defining Securities under the Securities Act

It seems that the saga of the Ontario Securities Commission’s prosecution of Daniel Emerson Tiffin and Tiffin Financial Corporation is not over yet.  On November 28, 2018 (2018 ONCA 953), the Ontario Court of Appeal granted leave to appeal the May 15, 2018 merits decision of Charney, J which rejected the “family resemblance” test and found that certain promissory notes were “securities” within the meaning of the Securities Act (the Act).

Background

As we’ve previously discussed, Mr. Tiffin and his company, Tiffin Financial Corporation (TFC), were charged with three offences under the Act related … Continue Reading

Crime Doesn’t Pay: OSC Permanently Bans Convicted Fraudster

On November 26, 2018, the Ontario Securities Commission (OSC) issued an order permanently prohibiting Daniel Reeve, a financial planner based in the Kitchener, Ontario area, from participation in Ontario’s capital markets, including trading in any securities and becoming or acting as a registrant.

The permanent ban came after Reeve was convicted in the Ontario Superior Court of Justice in 2017 for having defrauded at least 41 investors of nearly $10 million (see R v Reeve, 2018 ONSC 3744). Justice Skarcica found Reeve’s conduct to have “presented virtually every aggravating circumstances recognized by the Criminal Code and the … Continue Reading

Divisional Court Upholds OSC Finding that Trading Software License Contracts are Securities Within Meaning of Securities Act

The Ontario Superior Court of Justice in Furtak v Ontario (Securities Commission), 2018 ONSC 6616, has upheld the Ontario Securities Commission’s (OSC) merits and sanctions decisions with respect to the Strictrade Offering, which we previously reported on here.

Background

In 2015, OSC Staff brought enforcement proceedings against Edward Furtak, Axton 2010 Finance Corp., (Axton), Strict Trading Limited (STL), Strictrade Marketing Inc. (SMI), Trafalgar Associates Limited (TAL), Ronald Olsthoorn, and Lorne Allen (collectively the Strictrade Parties) arising out a scheme that involved the marketing and offering of … Continue Reading

Motions for Further Disclosure in OSC Proceedings: Privilege, Relevance and Proportionality

In a recent decision of the OSC in Re Caldwell Investment Management Ltd. (October 12, 2018), a hearing panel (the “Panel”) denied a motion by Caldwell Investment Management Inc. (“Caldwell”) for further pre-hearing disclosure from OSC Staff. The motion was made in the context of an upcoming enforcement proceeding alleging, among other things, that Caldwell had breached its best execution obligation under s. 4.2 of NI 23-101 by placing most of its trades for execution through a related dealer, without having adequate policies and procedures in place to ensure that Caldwell’s best execution obligation was being met.

Caldwell brought … Continue Reading

Ontario Court Imposes Custodial Sentence for Securities Act Offences

The Ontario Superior Court of Justice has released what appears to be the final chapter in the Ontario Securities Commission’s (OSC) prosecution of Daniel Emerson Tiffin and Tiffin Financial Corporation.

Background

In July 2014, the Ontario Securities Commission’s administrative proceedings against Rezwealth Financial Services Inc., Pamela Ramoutar, Justin Ramoutar, Tiffin Financial Corporation, Daniel Tiffin, 2150129 Ontario Inc., Sylvan Blackett, 1778445 Ontario Inc. and Willoughby Smith, resulted in an order under s. 127 of the Securities Act (the Act) prohibiting Daniel Emerson Tiffin (Mr. Tiffin) and TFC from trading in securities or relying upon any exemption … Continue Reading

Ontario Securities Commission confirms test for severance

In a decision issued on July 24, 2018, the Ontario Securities Commission held that the test to determine whether a respondent’s case should be severed and heard separately is the same test used in criminal proceedings.

The decision, Hutchinson (Re), 2018 ONSEC 40, is available here.

Allegations of insider trading and insider tipping

The OSC commenced proceedings against four individuals alleging insider trading and insider tipping with respect to the securities of eight companies.

Commission staff alleged that Donna Hutchinson, a legal assistant at a law firm, provided material non-public information to her friend Cameron Edward Cornish regarding … Continue Reading

Ontario Court Rejects “Family Resemblance” Test for Defining Securities under the Securities Act

On May 15, 2018, the Ontario Superior Court of Justice in Ontario Securities Commission v. Tiffin confirmed that the “family resemblance” test cannot be used to answer one of the central questions of securities law: what constitutes a security?

Background

In July 2014, the Ontario Securities Commission (OSC) prohibited Mr. Tiffin from trading in securities or relying upon any exemption under Ontario securities law. Mr. Tiffin subsequently issued fourteen promissory notes on behalf of his company, Tiffin Financial Corporation (TFC), to six clients.  As a result, Mr. Tiffin and TFC were charged with breaches of s.122(1)(c) … Continue Reading

OSC Panel Approves Settlement Agreement for Insider Tipping Without Profit Disgorgement or Administrative Penalty

The Ontario Securities Commission’s recent decision in Re Hutchinson confirmed the important role of cooperation with Commission Staff in reducing sanctions for breaches of Ontario’s securities law.

Background

Donna Hutchinson worked as a legal assistant at a large Toronto law firm, assisting with merger and acquisition transactions. Through the course of her work, Ms. Hutchinson routinely gained access to non-public, confidential information regarding certain transactions. Ms. Hutchinson was alleged to have knowingly provided non-public information about six transactions to Cameron Cornish, another respondent in the proceeding, in violation of section 76(2) of the Ontario Securities Act, which prohibits insider tipping.… Continue Reading

OSC Continues Mediation Program on a Permanent Basis

On April 9, 2018, the Ontario Securities Commission (OSC) announced that its Mediation Program, which began as a pilot program in May 2015, will be continuing on a permanent basis.

The Mediation Program provides respondents represented by counsel, as well as enforcement staff, with the option to seek resolution through an independent third party mediator. Mediations will only occur with the consent of Staff and participating respondents, who must be represented by counsel. The ultimate aim of the program is to resolve outstanding enforcement matters in an efficient and cost-effective way. With respect to costs, each party is … Continue Reading

Not All’s Fair in Disgorgement and Fraud

On April 18, 2018, the Ontario Superior Court of Justice released its reasons in Ontario Securities Commission v. Bluestream Capital Corporation which is a useful illustration of the Ontario Securities Commission (OSC)’s power to garnish funds held by victims of investment fraud that are payable as debts to the perpetrator of the fraud.

The Background

Peter Balazs solicited a number of people to invest in his companies.  However, neither Mr. Balazs nor any of the companies were registered with the OSC, as required by the Ontario Securities Act, and the majority of the “invested” funds were used … 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 which proceeds derived from securities law violations may be forfeited to the Crown and ultimately returned to victims of securities law breaches.

The OSC cannot on its own compel a civil forfeiture to the Crown. That power belongs to the Attorney General of Ontario … Continue Reading

Ontario Securities Commission Revamps Whistleblower Program for In-House Counsel

Background

In 2016, the Ontario Securities Commission (OSC) adopted OSC Policy 15-601 (the Policy) which established its Whistleblower Program (the Program). The Program is intended to encourage whistleblowers to report serious violations of securities law, such as insider trading, fraud, misleading financial statements or trading-related misconduct. Under the Program, individuals who voluntarily offer such information to the OSC may be eligible for financial compensation if the information (i) was of meaningful assistance to the OSC in investigating the matter and obtaining a decision under section 127 of the Securities Act (Ontario) or section 60 of the … Continue Reading

Ontario provides protection to “whistleblowers” against reprisals

In December 2017, Ontario instituted a civil cause of action for employees who experience reprisals from their employers for providing information or assisting in certain other ways in regulatory or criminal investigations or proceedings involving contraventions of securities or commodity futures laws (whistleblowing).

The identical amendments to s. 121.5 of Ontario’s Securities Act and s. 54.1 of the Commodity Futures Act are wide in scope and protect “whistleblowers” as follows:

  • The new civil cause of action may entitle the employee to reinstatement or to payment of two times the amount of any remuneration they were denied as part
Continue Reading
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