OCMT 2011

Following a merits decision finding that Coventree Inc. and its senior officers, Geoffrey Cornish and Dean Tai, failed to disclose material changes in breach of the Securities Act, the Ontario Securities Commission held a hearing to determine sanctions and costs.

The Commission emphasized the fundamental importance of timely disclosure to the integrity of capital markets.

While noting mitigating factors such as the respondents' lack of intent to mislead and their cooperation with Staff, the Commission imposed significant administrative penalties to achieve specific and general deterrence.

Coventree was ordered to pay a $1 million penalty and $250,000 in costs, while Cornish and Tai were each ordered to pay a $500,000 penalty and were prohibited from acting as directors or officers of a reporting issuer for one year.

The respondent, George Schwartz, brought a motion to exclude and seal his compelled evidence, arguing that it was obtained after the predominant purpose of the Commission's investigation became penal, relying on the Supreme Court of Canada's decision in R. v. Jarvis.

The Commission dismissed the motion, finding that the proceeding was administrative under section 127 of the Securities Act, not quasi-criminal under section 122.

The Commission held that compelled evidence is admissible against a respondent in an administrative proceeding, and that the protections against self-incrimination apply to subsequent criminal or quasi-criminal proceedings, not administrative ones.

The request to seal the evidence and hold an in camera hearing was also denied.

The Ontario Securities Commission held a merits hearing regarding allegations that the respondents operated a fraudulent advance fee scheme involving securities of TBS New Media Ltd. and TBS New Media PLC.

The respondents solicited investors to sell their shares at a premium, requiring them to pay advance fees purportedly for security deposits and non-resident taxes.

The Commission found that the respondents traded in securities without registration and engaged in fraudulent conduct, depriving investors of approximately US$146,760.

The respondents failed to appear at the hearing, and the Commission proceeded in their absence after finding that reasonable efforts were made to serve them.

The Ontario Securities Commission found that the respondents, Richard Mellon and Alex Elin, engaged in a fraudulent investment scheme involving the sale of shares in two mining companies, Karp and Legacy.

The respondents operated a boiler room that targeted European investors, raising over $350,000.

The Commission concluded that the respondents traded in securities without registration, made illegal distributions without a prospectus, and made prohibited representations that the securities would be listed on a stock exchange.

The allegations regarding undertakings as to future value were dismissed.

A sanctions and costs hearing was ordered.

The respondents brought a motion challenging the jurisdiction of a newly constituted panel to hear and decide the issues of sanctions and costs, arguing that the panel that heard the merits must also hear the sanctions.

The Commission dismissed the motion, finding that the Secretary has the authority to assign a new panel for the sanctions hearing, which is a separate hearing within the proceeding.

The Commission also found that proceeding before a new panel would not result in procedural unfairness, as the new panel would have access to the merits decision and transcripts, and the sanctions hearing involves forward-looking issues distinct from the retrospective merits hearing.

The respondent brought a motion to revoke or vary a previous decision denying an adjournment of the merits hearing, citing medical reasons.

The respondent was represented by an unlicensed agent (a law student).

The Commission first determined that a law student cannot act as an agent in a contested motion before an administrative tribunal under the Law Society Act and LSUC By-Laws.

On the merits of the adjournment motion, the Commission found no new information to justify varying the original decision under section 144 of the Securities Act.

The motion was dismissed, with the Commission noting the significant delay in the proceedings and prejudice to the unitholders and Staff.

The applicant applied under section 144 of the Securities Act to revoke a 2008 Commission order approving a settlement agreement regarding allegations of tipping.

The applicant argued that Staff failed to disclose an ongoing investigation into a key witness for breaching a cease trade order, which would have undermined the witness's credibility and altered the applicant's decision to settle.

The Commission found it had jurisdiction to hear the application but dismissed it on the merits.

The Commission held that the applicant's decision to settle was voluntary, unequivocal, and informed, and that Staff had fulfilled its disclosure obligations by orally informing the applicant's counsel of the investigation.

Furthermore, the undisclosed information regarding the witness's unintentional breach of the cease trade order was not crucial and would not have likely affected the outcome of the proceedings.

The Ontario Securities Commission held a sanctions hearing regarding four respondents who acted as salespersons for Maitland Capital Ltd., a boiler room operation that fraudulently raised approximately $5.5 million from investors.

The respondents admitted to their involvement and cooperated with Staff.

The Commission found that the respondents breached the Securities Act by making prohibited representations to vulnerable investors.

To protect the public interest and deter future misconduct, the Commission ordered the respondents to cease trading in securities for three years (with limited RRSP exceptions), disgorge the full amount of their sales commissions totaling over $82,000, and permanently prohibited them from telephoning residences to trade securities.

Administrative penalties were not imposed on two respondents due to mitigating factors, including age and limited financial resources.

Staff of the Ontario Securities Commission alleged that the respondents engaged in a fraudulent investment scheme involving foreign exchange (Forex) trading.

The respondents raised approximately $29 million from over 1,700 Ontario investors, many of whom borrowed funds through RRSP loans.

The Commission found that the respondents diverted approximately $20 million to uses other than Forex investments, including significant transfers to themselves, and paid fictitious profits to investors to attract new funds.

The Commission concluded that all respondents engaged in fraudulent conduct, unregistered trading, and an illegal distribution of securities, and acted contrary to the public interest.

Following a merits decision finding the respondents engaged in unregistered trading and advising, misled Commission staff, and breached a temporary cease trade order, the Commission held a sanctions and costs hearing.

The Commission ordered a 15-year trading ban and a 15-year director/officer ban against the respondents, with a carve-out allowing the individual respondent to trade in his personal accounts.

The Commission declined to impose an administrative penalty because no investor funds were raised and no investors were harmed.

The respondents were ordered to pay $45,278.75 in costs.

CI Financial Corp. applied for a hearing and review of decisions by the Toronto Stock Exchange (TSX) requiring CI to submit a resolution ratifying the continuation of its Shareholder Rights Plan to a two-tiered vote of all shareholders and independent shareholders.

CI argued the TSX lacked jurisdiction to impose conditions on the mid-term vote.

The Ontario Securities Commission found that the mid-term ratification was not a 'transaction' involving the issuance or potential issuance of securities under the TSX Manual.

Therefore, the TSX lacked jurisdiction to impose conditions on the vote.

The TSX decisions were set aside, allowing only independent shareholders to vote on the plan's continuation.

Deutsche Bank Securities Limited applied to the Ontario Securities Commission for a hearing and review of a decision by an IIROC Hearing Panel that dismissed its motion to stay a Notice of Hearing.

The applicant argued that IIROC lacked jurisdiction because it could not compel evidence from non-members, thereby denying the applicant the right to make full answer and defence.

The Commission dismissed the application, finding that the IIROC Hearing Panel correctly applied the law by reserving the stay decision until the extent of any prejudice could be assessed at a hearing on the merits.

The Commission also held that the application was premature.

Following a merits decision finding the respondents engaged in a fraudulent boiler room investment scheme that raised over US $2.2 million from investors, the Ontario Securities Commission held a hearing to determine sanctions and costs.

The Commission ordered permanent trading and market prohibitions against all respondents, with a limited RRSP carve-out for one respondent.

The individual respondents were ordered to pay administrative penalties ranging from $100,000 to $350,000, reflecting their respective roles in the fraud.

The Commission also ordered disgorgement of the funds obtained from investors, totaling over $2.1 million, and apportioned Staff's hearing costs of $85,758.94 among the respondents.

The monetary sanctions were ordered to be allocated for the benefit of third parties, including the defrauded investors.

Staff of the Ontario Securities Commission applied for a temporary order against the respondents, alleging they engaged in unregistered advising and made misleading statements to Staff.

The Commission found sufficient evidence that the individual respondent was providing investment advice to Ontario clients for compensation without registration, and that he had been evasive and uncooperative during the investigation.

Concluding that the conduct may be harmful to the public interest, the Commission issued a temporary order requiring the respondents to cease trading in securities, with limited exceptions, and removing their access to exemptions under Ontario securities law pending a hearing on the merits.

The Ontario Securities Commission alleged that M P Global Financial Ltd. and its sole director, Joe Feng Deng, engaged in unregistered trading, unregistered advising, and an illegal distribution of securities by selling 'Guarantee Corporation Debentures' to over 150 investors, raising over $21 million.

The funds were purportedly for foreign currency trading, but significant amounts were lost or used to pay other investors.

The Commission found that the Debentures were investment contracts and therefore securities.

The respondents breached the registration and prospectus requirements of the Securities Act.

Mr. Deng was found liable as a director for the corporate breaches.

The allegations of unregistered advising were dismissed due to insufficient evidence.

The conduct was found to be contrary to the public interest.

The applicant, a small investment firm, sought a hearing and review of an IIROC Hearing Panel decision that imposed a $100,000 fine and $10,000 in costs for breaches of Universal Market Integrity Rules (UMIR) 5.2 and 7.1.

The applicant argued the penalty was unreasonable and disproportionate.

The Ontario Securities Commission found that the IIROC Hearing Panel erred in principle by failing to apply the principle of proportionality, as the $100,000 fine was disproportionate to the firm's small size and limited regulatory capital.

The Commission substituted its own decision, reducing the fine to $30,000 while maintaining the $10,000 costs order.

Following a merits decision finding that the respondents breached the registration requirements of the Securities Act by engaging in unregistered trading of IMAGIN securities, the Ontario Securities Commission held a hearing on sanctions and costs.

The Commission ordered that the individual respondent permanently cease trading in IMAGIN securities, be prohibited from acting as a director or officer of any issuer for 15 years, and be reprimanded.

The Commission declined to impose an administrative penalty, finding the other sanctions sufficient for deterrence.

The respondents were also ordered to pay $57,482.50 in costs, reduced from the requested amount to reflect their partial compliance efforts in paying filing fees.

Following a merits hearing where the respondents were found to have engaged in a fraudulent 'pump and dump' scheme involving Sulja Nevada securities, the Ontario Securities Commission held a sanctions and costs hearing.

The Commission ordered permanent market bans, disgorgement of $5.6 million, and administrative penalties of $750,000 each against the primary perpetrators, Vucicevich and DeVries.

Lesser market bans and administrative penalties were ordered against the other respondents based on their varying levels of culpability.

Costs were also awarded against the respondents.

Staff of the Ontario Securities Commission brought a proceeding against the respondent for making misleading statements and breaching a cease trade order.

The hearing proceeded in writing after the respondent failed to file materials.

Based on affidavit evidence, the Commission found that the respondent made misleading statements regarding his employment history and financial situation, contrary to section 122(1)(a) of the Securities Act.

The Commission also found that the respondent breached a prior sanctions decision and cease trade order by trading securities, contrary to section 122(1)(c) of the Act.

A sanctions hearing was ordered to be scheduled.

Staff of the Ontario Securities Commission brought allegations against Sulja Nevada, Kore Canada, and Andrew DeVries for their involvement in a 'pump and dump' scheme.

The Commission found that Sulja Nevada issued numerous false and misleading press releases to artificially inflate its stock price.

Concurrently, DeVries authorized the issuance of millions of treasury shares to nominee accounts, which were then sold into the market for a profit of approximately US $5.6 million.

The Commission concluded that DeVries engaged in unregistered trading, illegal distribution, and fraud.

Kore Canada was found to have engaged in market manipulation through its employees' nominee accounts.

Sulja Nevada was found to have made misleading and untrue statements in its press releases.