OCMT 2014

The Ontario Securities Commission alleged that the Respondents engaged in unregistered trading and advising in commodity futures contracts, made misleading statements to Staff, and acted contrary to the public interest.

The Respondents operated a trading school and assisted students in opening trading accounts with specific brokers, receiving undisclosed referral commissions.

Khan also traded on behalf of clients in managed accounts and provided live trading advice.

The Commission found that the Respondents breached the registration requirements of the Commodity Futures Act, made untrue statements during the investigation, and breached a prior undertaking, all of which constituted conduct contrary to the public interest.

Following a merits decision finding that the respondents engaged in unregistered advising and made misleading statements to Staff, the Ontario Securities Commission held a hearing on sanctions and costs.

The Commission ordered 15-year trading and acquisition bans against the respondents, administrative penalties of $200,000 against Doulis and $100,000 against Liberty, and disgorgement of $37,317 CAD and $8,454 USD.

The respondents were also ordered to pay $198,619.78 in costs.

The applicant, who was the subject of an ongoing administrative proceeding before the Ontario Securities Commission, brought a motion for disclosure of certain investigation notes prepared by Commission Staff.

The applicant sought to use the notes in parallel civil proceedings.

The Commission found that the notes relating to a bank were compelled evidence under section 13 of the Securities Act, and the applicant failed to meet the heavy burden of demonstrating that disclosure was in the public interest.

The Commission also found that the notes relating to three witnesses were voluntary evidence subject to the implied undertaking rule.

The Commission held that the applicant failed to demonstrate a superior public interest in disclosure that would outweigh the need to protect the integrity of the ongoing investigation and the privacy of the witnesses.

The motion was dismissed.

Staff of the Ontario Securities Commission sought an order imposing market conduct restrictions against the respondent following his criminal conviction for 15 counts of fraud over $5,000.

The respondent had misappropriated approximately $6.6 million from investors while employed as a financial consultant.

The Commission found that the respondent's conduct would have constituted a breach of the Securities Act and that it was in the public interest to protect Ontario investors and capital markets.

The Commission ordered permanent market conduct restrictions, including permanent bans on trading, acquiring securities, and acting as a director or officer of any issuer.

Staff of the Ontario Securities Commission brought an application for inter-jurisdictional enforcement under s. 127(10) of the Securities Act, seeking market conduct restrictions against the respondents based on a settlement agreement they entered into with the Alberta Securities Commission.

The respondents had admitted to illegal distributions and making misleading statements in Alberta.

The Commission proceeded by way of a written hearing, which the respondents did not attend.

The Commission found it was in the public interest to impose market conduct restrictions in Ontario substantially similar to those agreed to in Alberta, including trading bans and director/officer bans.

Staff of the Ontario Securities Commission sought an inter-jurisdictional enforcement order against the respondent under s. 127(10) of the Securities Act, based on a settlement agreement the respondent entered into with the Alberta Securities Commission.

The respondent had admitted to engaging in a course of conduct relating to securities that resulted in a false and misleading appearance of trading activity and an artificial price.

The Commission found it was in the public interest to protect Ontario investors and capital markets by imposing market conduct restrictions consistent with the Alberta settlement.

The respondent was ordered to cease trading in and acquiring any securities until February 20, 2019.

The respondents Miller, Azeff, and Bobrow brought non-suit motions to dismiss certain allegations of insider trading and tipping at the close of Staff's case.

The Commission dismissed Miller's motions regarding Masonite and Dynatec, but granted his motion to strike an allegation regarding Dynatec as barred by the six-year limitation period.

Bobrow's motion regarding MDSI was granted as Staff failed to make out a prima facie case.

Azeff's motions regarding Dynatec and MDSI were dismissed, as Staff's evidence gave rise to reasonable inferences supporting the allegations.

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.

The Ontario Securities Commission heard several procedural motions in a section 127(10) proceeding against the respondents.

The panel dismissed a respondent's motion to sever his case, finding substantial commonality in the allegations and no undue prejudice.

The panel also dismissed requests to vary the severance order and to adjourn the hearing pending an appeal.

Staff's motion for directions on the scope of admissible evidence was dismissed, with the panel declining to review witness statements a priori but cautioning against re-litigating matters decided in U.S. proceedings.

A motion to call a specific witness was also dismissed.

Staff of the Ontario Securities Commission and Ernst & Young LLP sought approval of a no-contest settlement agreement relating to Ernst & Young's audits of Sino-Forest Corporation and Zungui Haixi Corporation.

The Commission approved the settlement, noting it was the first no-contest settlement in Ontario.

Ernst & Young agreed to make a voluntary payment of $8 million, of which $2.1 million was allocated to costs, and to cooperate with Staff's ongoing investigations.

The Commission found the settlement fair and reasonable, emphasizing the auditor's gatekeeper role and the significant remedial actions taken.

The Applicant sought a hearing and review of a 2007 settlement agreement with Market Regulation Services Inc. (now IIROC) in which he admitted to trading violations and paid a $25,000 fine.

In 2013, an IIROC hearing panel dismissed identical allegations against the Applicant's supervisor, finding the trading did not contravene the rules.

The Commission found it had jurisdiction to review the matter and granted an exemption from the 30-day time limit.

Applying the Canada Malting test, the Commission concluded the subsequent decision constituted new and compelling evidence.

Finding it manifestly unfair to allow the settlement to stand, the Commission set aside the settlement approval, ordered the Applicant's disciplinary record expunged, and directed IIROC to repay the $25,000 fine.

The Ontario Securities Commission held a sanctions hearing for a respondent who admitted to trading without registration and illegal distribution of securities in relation to a Ponzi scheme.

While Staff sought a disgorgement order of $207,641 and an administrative penalty of $50,000, the Commission declined to impose monetary sanctions.

The Commission found that the respondent was unaware the investment was a Ponzi scheme, was genuinely remorseful, and had no ability to pay due to her age and financial circumstances.

Non-monetary sanctions, including a 15-year trading ban, were imposed.

Following a merits decision finding the respondents engaged in a fraudulent Ponzi scheme, unregistered trading, and other contraventions of Ontario securities law, the Commission held a hearing to determine sanctions and costs.

The Commission ordered permanent market participation bans against the respondents, administrative penalties of $600,000 each against the corporate and individual respondents (excluding the bankrupt entity), and disgorgement of over $3 million.

The respondents were also ordered to pay $200,000 in costs.

Following a merits hearing where the respondents were found to have engaged in unregistered trading and illegal distribution of securities, the Commission held a hearing to determine sanctions and costs.

The respondents, who acted as salespersons for a real estate limited partnership, raised over $5 million from investors over several years.

The Commission considered the seriousness of the breaches, the respondents' experience, and the need for specific and general deterrence.

The Commission ordered market bans of five years for one respondent and three years for the other, along with administrative penalties, disgorgement of commissions earned, and joint and several liability for hearing costs.

The respondents brought a motion to revoke or vary an investigative order issued under section 11 of the Securities Act.

The respondents argued that the Commission lacked jurisdiction to issue the order because its purpose was to enforce a sanctions order, which they claimed was not part of the due administration of Ontario securities law.

The Commission dismissed the motion, finding that the enforcement of sanctions is an essential object of the Act and that Staff may use investigative orders to gather information about potential asset transfers intended to negate sanctions.

The moving parties sought an adjournment of a scheduled merits hearing regarding insider trading and tipping allegations, arguing that their expert consultant had lost approximately 600 hours of work product.

Staff opposed the adjournment and brought a cross-motion to sever the matter against one respondent if the adjournment was granted.

The Commission dismissed the adjournment motion, finding that the expert consultant was sufficiently prepared to assist counsel with cross-examinations and that the matter, which had been outstanding for four years, needed to proceed in a timely manner.

The cross-motion for severance was also dismissed.

Staff of the Ontario Securities Commission applied for an inter-jurisdictional enforcement order against the respondents under subsection 127(10) of the Securities Act, based on a prior order of the British Columbia Securities Commission (BCSC).

The BCSC had found that the respondents engaged in an illegal distribution of securities and perpetrated a fraud by promising risk-free, high rates of return to investors.

The Commission found that the respondents' conduct would have constituted a breach of Ontario securities law had it occurred in Ontario.

Concluding that it was necessary to protect Ontario investors and the integrity of the capital markets, the Commission granted the application and imposed permanent market conduct restrictions on the respondents, including permanent bans on trading and acquiring securities, and acting as a director or officer of any issuer or registrant.

Staff of the Ontario Securities Commission brought an application for an inter-jurisdictional enforcement order against the respondent under s. 127(10) of the Securities Act.

The respondent was previously sanctioned by the British Columbia Securities Commission for making misrepresentations with the intention of trading in securities.

The Commission found that it was in the public interest to protect Ontario investors and capital markets by imposing market conduct restrictions on the respondent.

The Commission ordered permanent bans on trading, acquiring securities, and acting as a director, officer, registrant, investment fund manager, or promoter.

Following a merits hearing where the respondents were found to have engaged in unregistered trading, illegal distributions, and fraud in connection with a forex trading Ponzi scheme, the Ontario Securities Commission held a hearing to determine sanctions and costs.

The Commission ordered permanent market and director/officer bans, significant administrative penalties, and disgorgement against the principal architects of the fraud.

For respondents who acted as referrers and were not found to have engaged in fraud, the Commission ordered five-year market and director/officer bans, administrative penalties, and disgorgement of commissions received.

Costs were apportioned among the respondents based on their level of participation and cooperation.

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

The respondents raised over $1.2 million from investors by issuing promissory notes, promising high returns and falsely claiming that half of the funds would be secured in GICs.

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

The respondents traded and distributed these securities without registration or a prospectus, and no exemptions applied.

Furthermore, the respondents committed fraud by making false representations to investors and misappropriating funds to pay off prior debts and third parties.

The individual respondents, as directors and officers, were deemed liable for the corporate respondent's breaches.