Jennifer M. Lynch

This appeal concerns the interpretation and application of section 76(5)(e) of the Securities Act regarding insider trading and tipping liability for successive tippees.

The appellants received material non-public information about a takeover bid for Masonite International Corporation through a chain of tippers.

The core issue is whether successive tippees who did not have actual knowledge that their source was in a special relationship with the issuer "ought reasonably to have known" this fact.

The Court of Appeal upheld the Ontario Securities Commission's findings against Miller but reversed the Divisional Court's decision to overturn findings against Cheng, restoring the OSC's liability and sanctions determinations.

The respondent, Benedict Cheng, brought a motion claiming solicitor-client privilege over certain evidence, including memos written by the company's Chief Operating Officer (COO), who was also a licensed lawyer.

The respondent argued that the COO acted as the company's Chief Legal Officer and provided personal legal advice.

The Ontario Securities Commission dismissed the motion, finding that the COO's role was operational, not legal, and that no solicitor-client relationship existed between the COO and the respondent or the company.

Consequently, the communications were not protected by solicitor-client privilege.

Staff of the Ontario Securities Commission issued a Statement of Allegations against the respondents.

Prior to the hearing on the merits, the respondent brought a motion asserting solicitor-client privilege over certain evidence.

Staff brought a cross-motion to defer the privilege issue to the merits hearing, arguing prematurity and questioning whether a non-merits panel had jurisdiction to make pre-hearing evidentiary rulings.

The Commission held that it has jurisdiction to determine pre-hearing evidentiary issues, including privilege, and that doing so promotes efficiency.

Applying the Mega-C factors, the Commission concluded the privilege motion was discrete, necessary for a fair hearing, and not premature.

Staff's cross-motion was dismissed and the privilege motion was ordered to proceed.

The Ontario Securities Commission approved a settlement agreement between Staff and Home Capital Group Inc. (HCG) and three of its former executives.

The respondents admitted to misleading investors by failing to timely disclose the termination of several brokers and brokerages due to falsified loan applications, which caused a decline in mortgage originations.

The settlement included a $10 million payment by HCG for the benefit of a proposed class action, $500,000 in costs, and administrative penalties totaling $2 million against the individual respondents, who were also reprimanded and prohibited from acting as directors or officers of reporting issuers for varying periods.

The Ontario Securities Commission approved a settlement agreement with Sentry Investments Inc. and Sean Driscoll regarding failures to comply with National Instrument 81-105 – Mutual Fund Sales Practices.

The respondents admitted to sales practices involving prohibited payments and gifts to registered dealers, as well as systemic supervisory failures.

The settlement included a significant administrative fine for Sentry, a $100,000 reparation payment by Driscoll, and a ban on Driscoll acting as a director or officer of a registrant until completing regulatory compliance courses.

The Commission found the agreed sanctions were within a reasonable range of appropriateness and in the public interest.

Enforcement Staff of the Ontario Securities Commission applied for an order authorizing the disclosure of investor lists, promissory notes, banking records, and payment instruments to the Ministry of the Attorney General's Civil Remedies for Illicit Activities Office (CRIA).

The respondents had previously settled fraud allegations and agreed to disgorge funds, of which over $930,000 had been collected.

The Commission found it was in the public interest to authorize the disclosure without notice under s. 17(2.1) of the Securities Act, as the records were necessary for CRIA to run a claims process and distribute the recovered funds to the defrauded investors.

The moving parties sought an extension of time under s. 21(5) of the Courts of Justice Act to bring a motion to set aside or vary a decision dismissing their request to stay sanctions imposed by the Ontario Securities Commission for insider trading.

The Divisional Court dismissed the motion, finding that the moving parties failed to form the requisite intention to appeal within the four-day window, provided no satisfactory explanation for the delay, and that an extension would prejudice the public interest in protecting capital markets.

The court also found no apparent merit to the underlying motion.

The moving parties sought to introduce new evidence on a motion to vary a decision refusing to stay an order of the Ontario Securities Commission.

The new evidence related to steps taken by IIROC regarding the moving parties' conditional registration in Quebec.

The Divisional Court struck the new evidence, finding it did not meet the Palmer test for fresh evidence as it was not relevant to the decisive issue of whether the motions judge erred in refusing the stay, and it did not meet the reliability criterion.

The applicants moved the Ontario Securities Commission for an order requiring Enforcement Staff to disclose information and materials obtained through investigative powers subsequent to a sanctions order.

The applicants argued that Stinchcombe disclosure obligations applied as the proceeding was ongoing.

The Commission dismissed the application, finding it had no statutory authority to make the order sought because the proceeding before the Commission had been completed and it had no further jurisdiction under section 127 of the Securities Act.

The applicants, claiming to be victims of a Ponzi scheme, sought a disclosure order under section 17 of the Securities Act to obtain transcripts and materials from a Commission investigation.

They sought these materials to assist in a civil action against their former lawyers, alleging breach of fiduciary and professional duties during the investigation.

The Commission found that, unlike typical cases where disclosure is sought against the subjects of an investigation, the applicants sought disclosure against their own lawyers regarding their conduct before the Commission.

Finding no appreciable confidentiality interest remaining and no risk to the concluded investigation, the Commission held it was in the public interest to authorize disclosure of the section 13 transcripts and related communications.

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.

Staff of the Ontario Securities Commission sought an inter-jurisdictional enforcement order under s. 127(1) and s. 127(10) of the Securities Act against the respondents, based on an order from the Connecticut Department of Banking (CDB).

The CDB had found that the respondents engaged in unregistered trading and fraud.

The respondents argued that the CDB order should not be reciprocated because they were denied natural justice in the Connecticut proceeding, citing lack of disclosure, refusal of an adjournment, and reliance on deemed admissions.

The Commission rejected these arguments, finding no denial of natural justice.

The Commission concluded it was in the public interest to impose sanctions, ordering trading bans and prohibiting the individual respondent from acting as a director or officer.

However, the Commission declined to impose the permanent bans sought by Staff, finding insufficient evidence that the individual respondent used investor funds for personal benefit.

The applicants brought motions to quash summonses issued by Staff of the Ontario Securities Commission to two lawyers, compelling them to attend examinations.

Staff argued the summonses were part of an ongoing investigation into insider tipping and trading.

The applicants argued the summonses were an improper attempt to conduct pre-hearing discovery of witnesses who would testify at the upcoming merits hearing.

The Commission found that the real purpose of the summonses was to prepare for the merits hearing, which is an inappropriate use of Staff's investigative powers.

The motions were granted and the summonses were quashed.

The Court of Appeal released a costs endorsement following an appeal and cross-appeal.

The respondent, RSM Richter Inc., was the successful party and was awarded costs.

The court fixed the costs of all proceedings, including the motion, stay, appeal, and cross-appeal, at $50,000 inclusive of disbursements and taxes, payable by the appellant personally rather than by the estate.

The appellant faced allegations before the Ontario Securities Commission regarding an alleged Ponzi scheme.

He sought a third-party production order from a court-appointed receiver in an unrelated proceeding to obtain documents for his defence.

The motion judge granted partial production.

On appeal, the Court of Appeal held that the appellant was not an 'interested person' in the receivership because he sought the documents for a collateral purpose.

Furthermore, the Court found it inappropriate for the Superior Court to make interlocutory procedural orders regarding a proceeding pending before a tribunal.

The appeal was dismissed and the receiver's cross-appeal was allowed.

Following a merits decision finding the respondents engaged in unregistered trading, illegal distribution, and fraud, the Ontario Securities Commission held a sanctions and costs hearing.

The individual respondent, who misappropriated over $4.6 million from investors in a fraudulent foreign exchange scheme, was permanently banned from the capital markets.

The Commission ordered disgorgement of $4,672,779.98, an administrative penalty of $750,000 to ensure specific and general deterrence, and $200,000 in costs.

Staff of IIROC applied for a hearing and review of an IIROC Hearing Panel decision regarding Mark Allen Dennis.

The Hearing Panel had found that Dennis misappropriated $1,400,000 from a client and failed to cooperate with an investigation, but capped the fine for misappropriation at $1,000,000, interpreting the sanctioning rule as a penal provision requiring strict construction.

The Ontario Securities Commission allowed the application, finding that the Hearing Panel proceeded on an incorrect principle and erred in law.

The Commission held that IIROC's sanctioning powers are regulatory, not penal, and that 'profit' must be interpreted purposively to include any pecuniary advantage gained.

The Commission substituted its decision, imposing a fine of $1,450,000 for the misappropriation to ensure full disgorgement, alongside a permanent bar, a $25,000 fine for failing to cooperate, and $7,500 in costs.

The moving party sought production of documents and information held by a court‑appointed receiver in connection with an investigation related to alleged securities fraud proceedings before the Ontario Securities Commission.

The court considered whether the principles governing third‑party production established in R. v. O'Connor and R. v. McNeil applied to records held by a receiver acting as an officer of the court.

It held that although receivers generally are not required to disclose investigative materials beyond their reports, that protection cannot override an accused’s constitutional right to make full answer and defence.

Applying the O'Connor framework, the court required the moving party to demonstrate that the requested records were “likely relevant.” Only limited categories of documents met that threshold, including certain materials from lawyers, the accountant, and recovered emails, while most requests were rejected as speculative fishing expeditions.

Staff of the Ontario Securities Commission alleged that the respondents engaged in unregistered trading, illegal distribution, and fraud in relation to a foreign exchange investment scheme.

The individual respondent, a pastor, solicited millions of dollars from investors, promising high guaranteed returns with no risk.

The Commission found that the respondents traded and advised on securities without registration and distributed securities without a prospectus.

Furthermore, the Commission found that the individual respondent perpetrated a fraud by misappropriating investor funds for personal use and charities, and by deceiving investors about the success of the trading.

The individual respondent was also found to have made misleading statements to Staff during the investigation.

The respondent, who was self-represented, brought a motion seeking orders regarding Staff's disclosure obligations in an Ontario Securities Commission proceeding.

He requested that Staff separate relevant documents from irrelevant ones, disclose documents held by a Court-appointed receiver, and abridge timelines for disclosure.

The Commission dismissed the first two requests, finding that Staff had complied with its disclosure obligations and that the Commission lacked authority to order productions from the receiver.

However, recognizing the challenges faced by an unrepresented respondent, the Commission extended the minimum time requirements for disclosure of documents and witness lists by 10 days to provide greater predictability.