Securities Law - OCA

The appellant appealed from an order dismissing its motion to stay or dismiss a proposed Ontario class proceeding for secondary market misrepresentation under Part XXIII.1 of the Securities Act.

The respondent, an Ontario resident, had purchased the issuer's shares on the New York Stock Exchange, and a parallel securities proceeding based on substantially the same alleged misrepresentations was already underway in the United States.

The court held that Ontario had jurisdiction simpliciter because the alleged statutory tort was committed in Ontario where disclosure documents were required to reach Ontario shareholders.

However, applying comity-based forum non conveniens principles, the court concluded Ontario should decline jurisdiction over foreign-exchange claims because the U.S. and U.K. regimes tie jurisdiction to the place of trading, parallel proceedings already existed, and Ontario jurisdiction would be opportunistic in light of negligible Canadian trading.

In three related securities class action appeals, the court reconsidered whether a statutory secondary-market misrepresentation claim under s. 138.3 of the Securities Act is time-barred unless leave is obtained within the s. 138.14 limitation period.

The court overruled Timminco and held that, for purposes of s. 28 of the Class Proceedings Act, 1992, the statutory claim is asserted when the representative plaintiff pleads the statutory cause of action, the supporting facts, and an intention to seek leave within a timely commenced class proceeding.

The court also upheld the motion judge's interpretation of the s. 138.8 leave standard as screening out hopeless claims, while holding that the Green certification decision erred in failing to consider certifying common negligent misrepresentation issues other than reliance.

The plaintiffs' appeal in Green was allowed in part and the defendants' appeals in Silver and Celestica were dismissed.

The appellant challenged summary judgment enforcing a disciplinary costs award made by a securities self-regulatory organization after professional misconduct proceedings.

The issue was whether the organization could sue a former member in breach of contract to recover the unpaid costs award, and whether s. 9 of the Recognition Order barred that remedy by treating costs like fines or settlements.

The court held that prior authority recognizing contractual enforcement of disciplinary sanctions applied equally to costs awards, and that the plain wording of s. 9 was limited to fines and settlements.

The appeal was dismissed and appeal costs were awarded to the respondent.

The proposed representative plaintiff in a class proceeding alleged misrepresentations by the defendant, Canadian Solar Inc., in its secondary market disclosure.

The defendant's shares traded only on the NASDAQ exchange, not in Canada.

The defendant appealed a motion judge's finding that it was a 'responsible issuer' under s. 138.1 of the Securities Act.

The Court of Appeal dismissed the appeal, holding that the definition of 'responsible issuer' does not require the issuer's securities to be publicly traded in Canada, provided the issuer has a real and substantial connection to Ontario.

The plaintiffs brought a proposed class action against mutual fund managers for permitting market timing, which allegedly caused losses to long-term investors.

The defendants had previously entered into settlement agreements with the Ontario Securities Commission (OSC) regarding the same conduct.

The motion judge dismissed the certification motion, finding the OSC proceedings were the preferable procedure.

The Divisional Court allowed the plaintiffs' appeal.

The Court of Appeal dismissed the defendants' appeal, holding that the OSC proceedings were regulatory and lacked participatory rights for investors, and therefore did not fulfill the access to justice goals of the Class Proceedings Act.

The class action was deemed the preferable procedure.

The Ontario Securities Commission appealed a decision dismissing its application to continue directions freezing two offshore funds under s. 126(5) of the Securities Act.

The Commission argued for a new 'contextual reasonableness' standard rather than the established three-part RBC test.

The Court of Appeal affirmed that the RBC test—requiring a strong prima facie case of a Securities Act breach, a close connection between the misconduct and the assets, and evidence of potential dissipation—remains the appropriate standard, though it should be applied flexibly.

The Court found no error in the application judge's conclusion that the Commission failed to establish a prima facie case of a breach of the Act linked to the frozen funds.

The appeal was dismissed.

The respondent, a former registered representative of the Investment Dealers Association of Canada (IDA), resigned from the IDA.

Over a year later, the IDA instituted disciplinary proceedings against him.

The respondent challenged the IDA's jurisdiction over former members.

The Ontario Securities Commission (OSC) upheld the IDA's jurisdiction, finding that s. 21.1(3) of the Securities Act did not limit disciplinary jurisdiction to current members.

The Divisional Court overturned this decision, finding it unreasonable.

On appeal, the Court of Appeal held that the standard of review for the OSC's decision was reasonableness and that the OSC's interpretation of the Securities Act was reasonable.

The appeal was allowed, and the OSC's decision was restored.

The appellant corporation appealed an order requiring it to indemnify a former director for costs and fines incurred in Ontario Securities Commission proceedings.

The director had admitted to the OSC that he failed to disclose a material change regarding a disputed contract, but maintained he honestly and reasonably believed the contract was not in jeopardy.

The Court of Appeal dismissed the appeal, holding that under s. 124(3) of the Canada Business Corporations Act, the corporation bears the onus of proving the director did not act honestly and in good faith, or lacked reasonable grounds to believe his conduct was lawful.

The application judge made no error in finding the corporation failed to meet this burden.

The Ontario Securities Commission sought leave to appeal a Superior Court judgment that overturned the respondent's convictions for ten counts of tipping under the Securities Act.

The Superior Court had ordered a new trial based on the trial judge's inadequate assessment of the key witness's credibility and failure to consider each count independently.

The Court of Appeal refused leave to appeal, finding that the proposed grounds of appeal involved the application of well-established legal principles and did not raise questions of law essential in the public interest or for the due administration of justice as required by s. 131 of the Provincial Offences Act.

The appellants appealed a trial judgment finding them liable for prospectus misrepresentation under s. 130(1) of the Securities Act.

The trial judge had held that the appellants had a continuing obligation to disclose poor intra-quarterly financial results before the closing of their initial public offering, and that their failure to do so rendered an implied representation of objective reasonableness in their financial forecast false.

The Court of Appeal allowed the appeal, holding that the Act distinguishes between material facts and material changes, and imposes no continuing obligation to disclose material facts after a prospectus receipt is issued.

The Court further held that the trial judge erred in implying a representation of objective reasonableness and in failing to apply the business judgment rule to management's assessment of the forecast.

The appellant brokerage firm suspended all activity in the respondents' accounts pursuant to a contractual refusal clause, citing concerns over the principal's criminal record and potential regulatory scrutiny.

The trial judge found the refusal clause ambiguous, implied a requirement for reasonable notice, and awarded damages to the respondents for disrupted transactions.

The Court of Appeal allowed the appeal, holding that the refusal clause was unambiguous and permitted the broker to refuse instructions without notice when acting in good faith for its own protection.

The court found that implying a notice requirement contradicted the plain language of the agreement and the commercial reality of a broker's gatekeeper function.

The damages award was set aside.

The Ontario Securities Commission found the respondent guilty of insider trading and imposed a 15-year suspension of his registration, along with a costs award of $186,052.30.

The Divisional Court upheld the liability finding but reduced the suspension to four years and remitted the costs award with specific procedural instructions.

The Court of Appeal allowed the Commission's appeal, restoring the 15-year suspension on the basis that the Commission's decision was reasonable and entitled to deference.

The Court of Appeal also remitted the costs issue to the Commission, but without the Divisional Court's specific procedural instructions, requiring only that the process be fair.

The appellant brought a motion before the Court of Appeal.

The court dismissed the motion and ordered no costs, as the responding party did not request them.

The Crown appealed a summary conviction appeal judge's reduction of a fine imposed on the respondent for insider trading.

The respondent had traded shares of a junior mining company while possessing undisclosed material facts, avoiding significant losses.

The Court of Appeal held that the phrase 'by reason of the contravention' in s. 122(4) of the Securities Act does not require the Crown to prove the direct effect of the non-disclosure on the market price, but simply means the loss was avoided by virtue of the insider engaging in the impugned trading.

The Court also held that shares not beneficially owned by the respondent should not be included in the loss avoided calculation.

Despite correcting the legal interpretation, the Court upheld the $2,000,000 fine imposed by the appeal judge.

The plaintiff, an experienced investor, invested in special warrants and special shares of two private companies on the advice of his broker.

The broker failed to warn him of the risks associated with these investments, including the risk that the planned initial public offerings might never take place.

The plaintiff lost his entire investment and sued the broker and her firm for negligence.

The trial judge found the defendants liable but reduced the damages by 50% due to the plaintiff's contributory negligence in signing subscription agreements without reading them.

The defendants appealed.

The Court of Appeal dismissed the appeal, upholding the trial judge's findings that the broker breached her duty to warn and that her misrepresentation precluded the defendants from relying on the subscription agreements to raise an estoppel.

The appellants suffered losses in their margin accounts with a securities dealer and sued the dealer.

They later sought to amend their claim to add the Investment Dealers Association of Canada (IDA) as a defendant, alleging negligence in its regulatory oversight.

The motions judge dismissed the motion, finding no reasonable cause of action.

The Court of Appeal dismissed the appeal, holding that the IDA, as a voluntary regulator, owes its duty to the public at large rather than to individual investors, and that policy considerations such as indeterminate liability negate any prima facie duty of care.

The appellant, an investor who purchased shares in the secondary market, sought to certify a class proceeding against the issuer, underwriters, and auditors for negligent misrepresentation in a prospectus.

The motions judge dismissed the action, finding the pleadings failed to disclose a reasonable cause of action as they did not establish a special relationship giving rise to a duty of care.

The Court of Appeal upheld the dismissal, agreeing that the pleadings lacked material facts to support a duty of care owed to secondary market purchasers by the auditors or underwriters.

The trustees of a public unit trust unilaterally amended the Declaration of Trust to create a unitholder rights plan in response to a hostile takeover bid by the respondent.

The respondent, who owned 20.3% of the units, challenged the amendment.

The application judge declared the rights plan and the amendment null and void, finding they contravened the anti-dilution proviso of the Declaration.

The Court of Appeal dismissed the trustees' appeal, agreeing that the amendment violated the anti-dilution clause and required a 75% unitholder vote.

The appellants, a lawyer and his law firm, appealed a Divisional Court decision dismissing their application for judicial review.

They challenged the jurisdiction of the Ontario Securities Commission (OSC) to reprimand the lawyer for allegedly making misleading statements while representing a client.

The appellants argued that such conduct must be dealt with exclusively through quasi-criminal proceedings or by the Law Society.

The Court of Appeal dismissed the appeal, holding that the Securities Act provides the OSC with a flexible range of remedial options, including administrative reprimands under s. 127.

The Court also affirmed that the OSC has jurisdiction to reprimand lawyers acting in their professional capacity, provided that solicitor-client privilege is respected.

The appellants brought an action against the respondents, who were compliance officers and directors/officers of an investment firm, alleging negligence, fraud, breach of contract, and breach of fiduciary duty related to improvident investments.

The respondents successfully moved to strike the claims against them on the basis that they owed no duty of care to the appellants.

On appeal, the Court of Appeal set aside the order to strike, holding that the claims were novel and the determination of whether a duty of care existed required a full factual record applying the Anns/Kamloops test, rather than being decided at the pleadings stage.