Securities Law

The Ontario Securities Commission held a hearing to consider allegations that the respondents operated an illegal investment scheme called "Eggvestments" through a business club.

The respondents raised over $1 million from investors by promising guaranteed returns of up to 20% from foreign currency trading.

The Commission found that the respondents traded in securities without registration, distributed securities without a prospectus, and that White, Qureshi, and WNBC engaged in unregistered advising.

No exemptions were available as the investors did not qualify as accredited investors.

The Commission concluded that the respondents' conduct, which included making false promises and misleading statements about returns, was contrary to the public interest and harmful to the integrity of Ontario's capital markets.

Staff of the Ontario Securities Commission brought a motion seeking to disclose testimony compelled from the respondent, Irwin Boock, during an SEC investigation to his co-respondents in an OSC administrative proceeding.

Boock opposed disclosure, relying on an undertaking by Staff that the evidence would not be used in the OSC proceeding and an ethical wall would be maintained.

The Commission held that the undertaking restricted Staff's use of the evidence but did not prevent its disclosure to co-respondents, who are entitled to full disclosure of relevant information to make full answer and defence.

The Commission also found that compelling the testimony and disclosing it did not violate Boock's Charter rights against self-incrimination, as the proceeding was regulatory, not criminal.

Disclosure to the co-respondents was ordered, while Staff was directed to maintain the ethical wall.

The moving parties brought a motion to revoke or vary a direction issued by the Ontario Securities Commission freezing the assets of the offshore funds.

The moving parties argued the direction contradicted a Superior Court decision refusing a Mareva injunction in a related civil proceeding.

The Commission dismissed the motion, finding that the regulatory proceeding is separate from the civil litigation and that the public interest favoured preserving the assets pending a Superior Court hearing to continue the direction.

Following a merits hearing where the respondents were found to have engaged in a boiler room operation, illegally distributing securities and using high-pressure sales tactics, the Commission held a sanctions and costs hearing.

The Commission ordered permanent cease trade and director/officer bans against the corporate respondent and its principals, and a 10-year ban against a salesperson.

The respondents were ordered to disgorge the full $2.75 million obtained from investors.

Administrative penalties totaling $625,000 and costs of approximately $160,000 were also ordered.

TSX Inc. sought intervenor status in a hearing and review requested by the respondent regarding a decision of Market Regulation Services Inc. (RS).

The respondent had challenged the validity of the Universal Market Integrity Rules (UMIR) and the TSX's delegation of market regulation to RS.

The Commission granted TSX limited intervenor status, finding that the TSX had a direct interest in the proceeding because its market regulation and enforcement regime was being challenged, and that its participation would be useful without unfairly prejudicing the existing parties.

The respondents brought a motion challenging the standing of the Investment Dealers Association (IDA) or its staff to apply for a hearing and review of an IDA disciplinary hearing panel decision under section 21.7 of the Securities Act.

The Commission dismissed the motion, finding that the IDA is a 'person directly affected' by the decision of its independent hearing panel and therefore has standing to seek a review.

The Commission held that this interpretation is consistent with the IDA's regulatory mandate and the purposive interpretation of the Act.

The Ontario Securities Commission held a hearing on the merits regarding allegations that the respondents traded and distributed securities without registration or a prospectus.

The respondents solicited investments in promissory notes via the internet, promising high returns.

The Commission found that the respondents breached sections 25(1) and 53(1) of the Securities Act by trading and distributing securities without registration or a prospectus, and acted contrary to the public interest.

Following a merits decision finding that the respondents engaged in unregistered trading, illegal distributions, and high-pressure sales tactics, the Ontario Securities Commission held a hearing to determine sanctions and costs.

The Commission found the respondents' conduct to be egregious, involving misrepresentations to investors and breaches of prior Commission orders.

The Commission ordered permanent and 20-year trading bans, director and officer bans, and telephoning prohibitions.

Administrative penalties of $200,000 each were imposed on First Global and Grossman, and $20,000 on Shuman.

The respondents were also ordered to pay costs totaling $62,573.74.

Staff of the Ontario Securities Commission sought to extend a temporary cease trade order prohibiting short selling in the common equity securities of certain financial sector issuers interlisted in the United States.

The initial order was issued to prevent regulatory arbitrage following emergency orders by the United States Securities and Exchange Commission.

The Commission found it in the public interest to extend the order to parallel the SEC's extensions, thereby promoting fair and orderly markets in Ontario.

The temporary cease trade order was extended with amendments.

The respondents brought a motion for a stay of proceedings, alleging that Staff of the Ontario Securities Commission failed to conduct a fair investigation, misrepresented facts to obtain a section 11 order, and failed to protect confidential information.

The Commission dismissed the motion for a stay, finding that the serious allegations against Staff could not be properly assessed on the limited affidavit evidence available on a preliminary motion.

The dismissal was without prejudice to the respondents renewing their request at the hearing on the merits.

The Commission ordered Staff to produce a written itemized inventory of relevant documents it did not intend to disclose, along with the basis for withholding them.

The respondent breached a 2004 cease trade order by trading securities listed on U.S. exchanges through brokerage accounts located in Toronto.

The respondent believed in good faith, based on legal advice, that trading on U.S. exchanges was permitted regardless of the account location.

The Commission found the breach was inadvertent but emphasized that respondents are responsible for ensuring compliance with Commission orders.

The Commission imposed an administrative penalty of $25,000, ordered disgorgement of any profits from the divestiture of the securities, permanently prohibited trading with a limited RRSP carve-out, and ordered $15,000 in costs.

The respondent, a legal secretary at a law firm, engaged in illegal insider trading over a three-year period using confidential information about merger and acquisition transactions.

She made a profit of approximately $51,500.

Staff of the Ontario Securities Commission and the respondent entered into a settlement agreement.

The Commission approved the settlement agreement but required an amendment to increase the administrative penalty to $103,137.22 (twice the profit made) and to permanently ban the respondent from becoming a director or officer of any market participant, emphasizing the serious nature of insider trading.

The Ontario Securities Commission held a hearing to determine whether Rex Diamond Mining Corporation and its officers breached the Securities Act by failing to disclose material changes regarding the cancellation of its mining leases in Sierra Leone.

The Commission found that Rex failed to issue news releases and file material change reports when it received warning letters and notices that its leases were cancelled.

The Commission also found that Rex provided misleading disclosure in its public filings and provided an incomplete chronology to Market Regulation Services Inc. The CEO and CFO were found to have authorized, permitted, or acquiesced in these breaches, acting contrary to the public interest.

The Ontario Securities Commission held a hearing to consider a settlement agreement between Staff and Peter George Lee, former CFO of HIP Interactive Corporation.

Lee admitted to violating s. 122(1)(b) of the Securities Act by certifying false interim financial statements that concealed a $1.3 million inventory overstatement.

The Commission approved the settlement agreement, finding it in the public interest.

Lee was reprimanded, prohibited from acting as a director or officer of any reporting issuer or registrant for 15 years, and ordered to pay an administrative penalty of $13,000 and costs of $2,000.

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.

Staff of the Ontario Securities Commission brought a settlement agreement for approval regarding the respondent, a former registrant and CEO of Hucamp Mines Ltd. The respondent admitted to causing the issuance of materially misleading news releases regarding private placements and engaging in abusive trading practices, including market manipulation and wash trades.

The Commission approved the settlement agreement, finding the respondent's conduct egregious and harmful to investors.

Although no financial penalty or costs were ordered due to the respondent being an undischarged bankrupt, the Commission imposed a permanent ban on trading, acquiring securities, and acting as an officer or director of any issuer or registrant, concluding the sanctions were necessary for future investor protection and deterrence.

The respondents brought a motion for an order requiring Staff of the Ontario Securities Commission to make meaningful disclosure of documents relevant to the specific allegations against them.

Staff had provided a database containing over 4.3 million pages of documents obtained during a four-year investigation, without separating relevant from irrelevant material.

The Commission held that Staff had not satisfied its legal obligation to make meaningful disclosure simply by delivering the massive database.

Staff was ordered to apply reasonable judgment to identify and disclose the documents relevant to the specific allegations against each respondent, rather than foisting the obligation to sift through the material onto the respondents.

The Ontario Securities Commission held a hearing to consider a proposed Settlement Agreement between Staff and the respondent.

The respondent admitted to acting as an advisor and performing acts in furtherance of a trade without being registered, contrary to s. 25(1) of the Securities Act.

The Commission approved the settlement, noting the respondent's cooperation, the lack of harm to investors, and his efforts to correct his conduct.

The respondent was ordered to cease trading and acquiring securities for nine months, lost exemptions for nine months, and was ordered to pay $3,000 in costs.

Following a finding that the respondents engaged in an illegal scheme to induce vulnerable individuals to transfer locked-in RSPs into private companies, the Commission held a hearing on sanctions and costs.

The Commission ordered permanent cease trade orders, director and officer bans, and reprimands against the architects of the scheme.

The registrant involved had his registration terminated and was subject to a five-year cease trade order.

The respondents were ordered to pay costs totaling $108,000, apportioned based on their degree of responsibility.

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.