David Andrew Hausman

Staff of the Ontario Securities Commission alleged that the Manulife Dealers failed to establish adequate controls and supervision, resulting in clients paying excess fees on certain investment products and mutual funds.

The Manulife Dealers self-reported the inadequacies, cooperated with Staff, and entered into a no-contest settlement agreement.

The Commission approved the settlement, finding it in the public interest given the dealers' prompt self-reporting, extensive cooperation, voluntary payments of $495,000 and $25,000 for costs, and an $11.7 million compensation plan for affected clients.

The plaintiffs sued a discount broker, Interactive Brokers Canada Inc., in negligence after a trader they authorized to manage their corporate account lost over $1.8 million.

The plaintiffs alleged the broker breached its 'know your client' and 'gatekeeper' obligations by failing to investigate 'red flags' regarding the trader's status as an unregistered investment advisor.

The court dismissed the action, finding the broker complied with all regulatory requirements for opening a corporate account and was entitled to rely on the corporate resolution granting the trader authority.

The court also noted that even if liability were found, the plaintiffs failed to mitigate their damages after discovering the initial losses.

The Ontario Securities Commission approved a no-contest settlement agreement between Staff and the TD Entities regarding alleged inadequacies in internal compliance systems that resulted in investors being charged inappropriate mutual fund fees.

The TD Entities self-reported the issues, undertook to pay over $13 million in compensation to harmed investors, and agreed to make voluntary payments of $650,000.

The Panel found the settlement to be in the public interest, emphasizing the importance of self-reporting, remediation, and improved compliance systems.

Mercer International Inc. applied to the Ontario Securities Commission for a simultaneous hearing with the Québec Bureau de décision et de révision to consider whether AbitibiBowater's take-over bid for Fibrek Inc. should be cease traded.

The Commission acknowledged it had jurisdiction to hear the application, as Fibrek is a reporting issuer in Ontario and the bid affected Ontario shareholders.

However, the Commission declined to exercise its jurisdiction, noting that the Bureau was already seized of the matter, the applicable securities laws were substantially similar, and a simultaneous hearing would not advance the harmonization and co-ordination of securities regulatory regimes.

The application was dismissed.

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.

Staff of the Ontario Securities Commission brought a hearing under section 127 of the Securities Act regarding Magna International Inc.'s proposed plan of arrangement to collapse its multiple voting share structure.

Staff alleged the management information circular lacked sufficient information and the transaction was contrary to the public interest.

The Commission found the proposed transaction was not abusive, but concluded the circular failed to provide shareholders with sufficient disclosure to make an informed decision, particularly given the lack of a board recommendation and the transaction's nature as a related party transaction.

The Commission ordered that the circular be amended to include specific material information, including financial analysis and alternatives considered by the special committee, before the shareholder vote could proceed.

The appellant, a major unitholder in a real estate investment trust, sought declarations that the trust's trustees were removed from office by written consents and therefore lacked authority to close a private placement.

The application judge dismissed the application, finding that even if the consents were valid, the trustees continued in office until replaced and acted within the ordinary course of business by closing the previously agreed-upon private placement.

The Court of Appeal dismissed the appeal, declining to interpret the hypothetical effect of the written consents and agreeing that the trustees were contractually bound to close the transaction, which constituted acting within the ordinary course of business.

NorthWest Value Partners Inc. applied for a hearing and review of two decisions of the Toronto Stock Exchange (TSX) regarding InterRent Real Estate Investment Trust: a decision accepting notice of a private placement without requiring unitholder approval, and a decision allowing InterRent to postpone its annual meeting.

On preliminary motions, the Ontario Securities Commission granted intervenor status to CLV Group Inc., denied NorthWest's request for disclosure of the subscribers' names, and concluded it would defer to the TSX's decision on the private placement as NorthWest failed to establish grounds for intervention under the Canada Malting test.

The Commission also dismissed the request to review the meeting date decision because it was filed outside the 30-day statutory time limit.

NorthWest Value Partners Inc. applied for a hearing and review of two decisions of the Toronto Stock Exchange (TSX) regarding InterRent Real Estate Investment Trust.

The TSX had allowed a private placement to proceed without unitholder approval and permitted a delay in the annual meeting.

The Ontario Securities Commission granted intervenor status to CLV Group Inc. but denied it to Mike McGahan.

The Commission declined to order disclosure of the private placees' names to protect their privacy.

Applying the Canada Malting test, the Commission deferred to the TSX Listing Committee Decision, finding no grounds to intervene.

The application to review the TSX Meeting Date Decision was dismissed as it was filed out of time.

The Ontario Securities Commission held a hearing to consider a settlement agreement between Staff and Research In Motion Limited (RIM) and several of its directors and officers regarding the improper backdating and repricing of stock options over a ten-year period.

The misconduct resulted in an undisclosed benefit of approximately $66 million and misleading public disclosure.

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

The settlement included substantial financial contributions to RIM, administrative penalties totaling $8 million, costs of $1.05 million, reprimands, and various prohibitions and educational requirements for the individual respondents.

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 Requesting Parties sought a hearing and review by the Ontario Securities Commission of the TSX's filing of amendments to the Universal Market Integrity Rules (UMIR) and the Director's acceptance of that filing.

Market Regulation Services Inc. (RS) brought a motion to quash the request, arguing it was moot, premature, and that the RS Hearing Panel had jurisdiction to decide the issues in the first instance.

The Commission held that there was no reviewable decision under sections 8 or 21.7 of the Securities Act, though it retained overriding supervisory jurisdiction under section 21(5).

The Commission declined to exercise its discretion to hear the matter, finding that the application was premature and would unduly fragment the ongoing RS disciplinary proceeding.

The Commission remitted the matter back to the RS Hearing Panel to determine the validity of the UMIR amendments.

Staff of the Ontario Securities Commission brought a motion to adjourn the respondents' Constitutional Motions until the hearing on the merits.

The respondents' motions challenged the constitutionality of section 11 of the Securities Act and the use of compelled evidence, seeking a stay of proceedings.

The Commission granted Staff's motion, holding that Charter challenges and requests for a stay of proceedings should generally not be decided in a factual vacuum.

The Commission found that a complete factual record, which could only be developed at the hearing on the merits, was necessary to properly assess whether the respondents' Charter rights were violated and what remedies might be appropriate.

Staff of the Ontario Securities Commission brought a motion to defer the hearing of Constitutional Motions brought by the respondents until the hearing on the merits.

The respondents sought to challenge the constitutionality of the investigation provisions of the Securities Act and the manner in which Staff obtained and used an investigation order.

The Commission granted Staff's motion, finding that Charter challenges should generally be decided on a complete factual record rather than in a factual vacuum.

The Commission concluded that the constitutional issues could not be fairly or completely resolved without regard to the contested facts and anticipated evidence that would be presented at the hearing on the merits.

The respondents requested that the Commission's Confidential Reasons and Decision dated May 18, 2007 be redacted to remove their names and identifying information prior to public release, relying on the confidentiality provisions in section 16 of the Securities Act.

Staff argued that subsection 17(6) permitted disclosure in connection with a proceeding and opposed a broad sealing order, but did not object to anonymizing the parties.

The Commission held that while it had the authority to release the reasons unredacted, it would exercise its discretion to release a redacted version until the commencement of the hearing on the merits.

Staff of the Ontario Securities Commission brought a motion to adjourn the respondents' Constitutional Motions until the hearing on the merits.

The respondents had filed motions challenging the constitutionality of section 11 of the Securities Act and the manner in which an investigation order was obtained and used, alleging violations of their Charter rights.

The Commission held that the Constitutional Motions should be dealt with in the course of the hearing on the merits because a determination in advance would deprive the Commission of the complete factual basis necessary for a proper consideration of the alleged Charter violations.

Staff's motion was granted and the Constitutional Motions were deferred to the hearing panel.

The appellant appealed an order of the Superior Court of Justice.

The Court of Appeal found no error in the reasons of the lower court judge and dismissed the appeal, fixing costs at $1,000.

The appellants brought an application in Ontario for a declaration that assignments of mining licences relating to Mongolian properties were null and void.

The motion judge stayed the application, finding no real and substantial connection to Ontario.

The Court of Appeal dismissed the appeal, holding that the connection to Ontario was weak and that any declaratory or injunctive order would likely be unenforceable in Mongolia under the rules of private international law regarding foreign land.

The Special Committee of Financial Models Company Inc. applied for orders under sections 104(1) and 127(1) of the Securities Act to cease-trade a take-over bid by a significant shareholder, Katotakis.

The Special Committee alleged the bid did not comply with Part XX of the Act and was contrary to the public interest because it relied on locked-up shares to meet minority approval thresholds for a follow-on transaction and improperly relied on a valuation exemption.

The Ontario Securities Commission dismissed the application, finding no technical breach of Rule 61-501 and no abuse of the capital markets, as the transaction was not artificial and did not defeat the reasonable expectations of shareholders given the prior disclosure of the shareholder agreement.

The appellants appealed from a judgment granting summary judgment and dismissing a motion to set aside a default judgment.

The Court of Appeal allowed the appeal, finding that there were triable issues regarding margin requirements, the respondent's conduct, and the 'Know Your Client Rule'.

The court also set aside the default judgment against one of the appellants, finding an arguable defence on the merits regarding undue influence and the respondent's obligation to ensure she understood the indemnity.