Alexandra Sandel Clark

Staff of the Investment Industry Regulatory Organization of Canada (IIROC) applied for a hearing and review of an IIROC panel's sanctions decision regarding the respondent, a registered representative.

The IIROC panel had found that the respondent recommended and facilitated off-book investments in a private mortgage fund without ensuring prospectus exemptions, resulting in substantial client losses.

The panel imposed a $50,000 fine, close supervision, rewriting of exams, and $45,000 in costs, but declined to impose a suspension.

On review, the Ontario Securities Commission found that the panel erred in law and proceeded on an incorrect principle by failing to impose a suspension for participation in an illegal distribution of securities, and by inappropriately considering the alleged trauma of the proceedings on the respondent.

The Commission allowed the application and substituted its decision, imposing a two-year suspension on the respondent's registration.

The appellants appealed the Ontario Securities Commission's (OSC) decisions on the merits and sanctions regarding their conduct in the investment industry.

The Divisional Court held that the standard of review for the OSC's decisions is reasonableness, except for procedural fairness.

The court found that the OSC reasonably excluded fresh evidence, reasonably upheld the Investment Industry Regulatory Organization of Canada's (IIROC) findings on the merits, and conducted a procedurally fair fresh sanctions hearing.

The appeal was dismissed.

Bryan Andrew Vickers applied to the Ontario Securities Commission for a hearing and review of an IIROC hearing panel decision that suspended and fined him for failing to adequately supervise a registered representative.

Vickers argued the IIROC panel erred by basing its sanctions on a Guidance Note that was not included in the Agreed Statement of Facts.

The Commission found that the IIROC panel erred in law by considering the unadmitted Guidance Note and that its reasons were inadequate.

The application was granted and the matter was remitted to a newly-constituted IIROC hearing panel for reconsideration.

Julian Robert Ricci applied to the Ontario Securities Commission for a hearing and review of an IIROC hearing panel decision that suspended him for 24 months, fined him $200,000, and ordered $15,000 in costs for making misrepresentations to his firm's compliance staff and falsely endorsing client signatures.

Ricci argued the panel overlooked material evidence of client support and his prior non-registered time, and that the suspension was overly harsh.

The Commission dismissed the application, finding the IIROC panel did not overlook material evidence, err in law, or impose an unfit suspension, noting the Commission's restrained approach to interfering with self-regulatory organization sanctions.

The appellants appealed a Divisional Court decision upholding an Ontario Securities Commission order that imposed significant administrative monetary penalties (AMPs) for failing to report insider trades and failing to adequately supervise trading.

The appellants argued that the AMP provision of the Securities Act, which allows fines up to $1 million per infraction, violates s. 11(d) of the Charter because its magnitude constitutes a true penal consequence.

The Court of Appeal dismissed the appeal, holding that the constitutionality of an administrative penalty is assessed based on the actual penalty imposed, not the theoretical maximum.

The court found the fines were proportionate to the regulatory goal of deterring non-compliance in capital markets and did not amount to a penal sanction.

The court also upheld the Commission's findings regarding the appellants' failure to supervise and its consideration of the public interest in determining the sanctions.

The appellants appealed decisions of the Ontario Securities Commission finding that they breached securities laws and acted contrary to the public interest.

The Commission found that the appellant Rowan failed to file insider reports, traded during blackout periods, and failed to disclose his control over certain trust accounts.

The Commission also found that the other appellants failed to adequately supervise Rowan.

The Divisional Court dismissed the appeal, finding no error in the Commission's interpretation of 'control or direction' under the Securities Act, its public interest findings, or its imposition of administrative monetary penalties.

The appellant, a former employee of a Toronto Stock Exchange (TSE) member, appealed a decision of the Ontario Securities Commission (OSC) which upheld a ruling by Market Regulation Services Inc. (RS).

The OSC found that the Universal Market Integrity Rules (UMIR) were enforceable against the appellant for conduct that occurred during his employment, despite his subsequent resignation.

The Divisional Court dismissed the appeal, finding it reasonable for the OSC to conclude that the TSE validly adopted the UMIR and that RS had jurisdiction to discipline former employees for misconduct committed while they were employed by a TSE member.

The Ontario Securities Commission held a hearing to consider a proposed Settlement Agreement between Staff and Brian H. Crombie, former CFO of Biovail Corporation.

Crombie admitted to acquiescing in improper accounting practices regarding revenue recognition, disseminating materially inaccurate information concerning a truck accident, and providing misleading information to Staff during a continuous disclosure review.

The Commission approved the Settlement Agreement, finding it in the public interest.

Crombie was reprimanded, banned from acting as a director or officer of a reporting issuer for eight years, ordered to pay an administrative penalty of $250,000, and ordered to pay $50,000 in costs.

The Ontario Securities Commission held a hearing to consider whether to approve a Settlement Agreement between Staff and Biovail Corporation.

Biovail admitted to inaccurate and false public disclosure that materially impacted its financial statements, including failing to disclose arrangements with a research vehicle, improperly recognizing revenue from a 'bill and hold' transaction, failing to correct a material error in exchange rates, and disseminating incorrect statements regarding a truck accident.

Biovail also provided misleading information to Staff.

The Commission approved the Settlement Agreement, finding it in the public interest, and ordered Biovail to be reprimanded, pay a $5,000,000 administrative penalty, pay $1,500,000 in costs, and retain a consultant to review its compliance training.

Following a finding that the respondent violated the 'know-your-client' and suitability requirements by recommending an unsuitable leveraged investment strategy, the Commission held a written hearing on sanctions and costs.

The Commission accepted the joint submissions of Staff and the respondent, noting the egregious nature of the misconduct and the harm caused to vulnerable investors.

The Commission ordered the termination of the respondent's registration, a permanent ban on acting as a director or officer of any registrant, and a reprimand.

No administrative penalty or costs were ordered due to the respondent's financial status and outstanding civil litigation.

The Ontario Securities Commission held a hearing to consider whether the respondent, a mutual fund salesperson, breached the Securities Act and acted contrary to the public interest by recommending an aggressive leveraging strategy to his clients.

The Commission found that the respondent failed to comply with the know-your-client and suitability obligations under OSC Rule 31-505 and failed to deal fairly, honestly, and in good faith with his clients.

The respondent recommended excessive leveraging that was entirely unsuitable given the clients' financial circumstances, risk tolerance, and investment objectives.

However, the Commission dismissed the allegation that the respondent gave undertakings relating to the future value of the investments in breach of section 38(2) of the Act.

A sanctions hearing was ordered to follow.

The Ontario Securities Commission convened a hearing to consider a settlement agreement between Staff and Eugene N. Melnyk regarding allegations of failing to file insider trading reports and failing to disclose his relationship with offshore trusts that traded heavily in Biovail shares.

The Commission approved the settlement, which included a $750,000 administrative penalty, $250,000 in costs, a one-year ban on acting as a director of Biovail, and a reprimand, finding the sanctions sufficient for specific and general deterrence.

Staff of the Ontario Securities Commission alleged that the respondent, a lawyer and business consultant, engaged in unregistered trading and advising, illegal distributions, and made misleading representations regarding securities of Saxton Investments Ltd. and Sussex International Ltd. The respondent had attended meetings and provided updates on Cuban business operations to investors and salespeople.

The Commission found that the respondent's conduct was informational rather than promotional, and did not amount to acts in furtherance of a trade or advising.

The Commission also found insufficient evidence that the respondent knew the operations were running at a loss when he provided updates, or that he engaged in illegal distributions.

All allegations were dismissed.

The Ontario Securities Commission held a hearing to determine whether it was in the public interest to impose sanctions against Pierre Alfred Montpellier and his companies under section 127 of the Securities Act.

Montpellier had previously pleaded guilty to criminal fraud and theft for operating a Ponzi scheme that defrauded 128 investors of over $5.3 million.

The Commission found that Montpellier's egregious conduct demonstrated he could not be trusted to participate in the capital markets.

The Commission ordered that Montpellier's registration be terminated, that he and his companies permanently cease trading in securities (with no RRSP carve-out), and that he be permanently prohibited from acting as a director or officer of any issuer.

The Ontario Securities Commission approved a settlement agreement with Mark Edward Valentine, former chair of Thompson Kernaghan & Co. Valentine pleaded guilty to securities fraud in the US and admitted to creating a culture of conflict of interest and noncompliance in Ontario.

The Commission found the settlement, which included a permanent director/officer ban, a 15-year cease-trade order, termination of registration, and a $100,000 costs payment, to be in the public interest.

Following a decision on the merits where the respondents were ordered to pay the costs of the Commission's investigation and hearing, a costs hearing was held to determine the quantum.

The respondents sought an adjournment, arguing that staff's disclosure of costs was insufficient, but the motion was dismissed as out of time.

Staff submitted a bill of costs for $32,332.60, supported by dockets that grouped tasks under generic descriptions.

The Commission found the docket entries insufficiently detailed to justify the full amount claimed and applied a substantial discount, fixing the quantum of costs at $20,000.00 to be paid jointly and severally by the respondents.

The applicant, a registered trader, sought a hearing and review of a decision by the hearing panel of Market Regulation Services Inc. (RS) finding him guilty of frontrunning contrary to Rule 4-204(1) of the Rules of the Toronto Stock Exchange.

The applicant argued he was denied procedural fairness, that the RS Panel erred in law by finding that risk and disadvantage to the client were not elements of the offence, and that the RS Panel overlooked evidence suggesting the trade was meant to facilitate a client order.

The Commission affirmed the RS Panel's decision, holding that the applicant had notice of the case to meet, that risk and disadvantage are not elements of Rule 4-204(1), and that the applicant's proposed inference was unsupported speculation.

The sanctions, including a $15,000 fine and a one-month suspension, were confirmed.

Staff of the Ontario Securities Commission sought to extend a temporary order suspending the respondent's registration and cease trading his securities pending a hearing on the merits.

The respondent did not oppose the registration suspension but sought to vary the cease trade order to allow trading in NASDAQ and over-the-counter markets.

The Commission found that the existing permissible trading areas covered a substantial proportion of North American securities and declined to expand them.

The temporary order was extended on its existing terms until July 31, 2004, or the commencement of the hearing.

Staff of the Ontario Securities Commission alleged that the respondents engaged in unregistered trading and advising, and distributed securities without a prospectus, in relation to an 'Asset Securitization Management Portfolio' promoted on their website.

The Commission found that the Trading Program was an investment contract and therefore a security.

The Commission held that offering the program on the internet constituted an act in furtherance of a trade, and that the respondents held themselves out as being in the business of advising.

Given the individual respondent's past criminal convictions for fraud and the highly questionable nature of the investment scheme, the Commission ordered permanent cease trade and director/officer bans.

The Information and Privacy Commissioner moved for an order sealing the private part of its record pending a judicial review application.

The underlying application was brought by a requester seeking access to police and securities commission records regarding allegations of his involvement in organized crime.

The sealing order was not opposed, but the requester's counsel sought access to the sealed record subject to a confidentiality undertaking to prepare for the judicial review.

The police and securities commission opposed access, citing the extreme sensitivity of the intelligence records.

The court granted access to the requester's counsel, finding that the benefit of full and informed submissions outweighed the risks of disclosure, provided counsel signed an expanded undertaking not to act for the client in any other proceeding arising out of the information.