OCMT 2019

Staff of the Ontario Securities Commission alleged that Money Gate Mortgage Investment Corporation (MGMIC), Money Gate Corp. (MGC), Morteza (Ben) Katebian, and Payam Katebian engaged in unregistered trading, illegal distributions, and fraud.

The Commission found that MGMIC, Ben, and Payam engaged in the business of trading in securities without registration and distributed securities without a prospectus or valid exemptions.

Furthermore, the Commission concluded that all four respondents perpetrated a fraud on investors by failing to disclose the true nature of MGMIC's operations, failing to abide by lending parameters, and improperly diverting loan advances to the benefit of the respondents or their controlled companies.

Staff of the Ontario Securities Commission sought an inter-jurisdictional enforcement order against the respondent following his conviction in Germany for illegal market manipulation.

The respondent had engaged in a 'pump and dump' scheme, artificially inflating the price of shares he held and selling them for a substantial profit.

The Commission found that the statutory threshold under s. 127(10) of the Securities Act was met based on the foreign conviction.

Concluding that severe sanctions were necessary to protect Ontario's capital markets and provide deterrence, the Commission ordered permanent market bans against the respondent, including permanent prohibitions on trading, acquiring securities, and acting as a director or officer of any issuer.

The respondent entered into a settlement agreement with the Alberta Securities Commission, admitting to acting as an unregistered adviser and making misleading statements regarding the sale of securities.

Staff of the Ontario Securities Commission sought an inter-jurisdictional enforcement order under s. 127(10) of the Securities Act.

The Commission found that the statutory threshold was met and that it was in the public interest to issue a reciprocal order.

The respondent was prohibited from becoming or acting as a registrant in Ontario until February 15, 2029, mirroring the non-monetary sanctions imposed in Alberta.

The Applicants sought a hearing and review of a decision by the Director of the Ontario Securities Commission refusing to issue a receipt for The Bitcoin Fund's prospectus.

The Director had refused the receipt on the grounds that bitcoin is an illiquid asset under NI 81-102 and that issuing the receipt was not in the public interest due to concerns about valuation, safeguarding of assets, and auditability.

The Commission set aside the Director's decision, finding that Staff failed to prove bitcoin is an illiquid asset given the evidence of substantial trading volumes on regulated exchanges.

The Commission also found that the Applicants had taken reasonable steps to mitigate operational risks through the fund's static buy-and-hold structure, the use of a regulated index for valuation, and the engagement of professional custodians and auditors.

The Director was ordered to issue a receipt for the prospectus.

Staff of the Ontario Securities Commission applied to revoke a confidentiality order made during a privilege motion brought by the respondent.

The panel had previously dismissed the privilege motion, finding that solicitor-client privilege did not apply.

As privilege was the sole basis for the confidentiality order, and the respondent did not oppose the application, the Commission found it would not be prejudicial to the public interest to revoke the order.

The application was granted, and the exhibits, submissions, and transcripts from the privilege motion were ordered to be made public.

Staff of the Ontario Securities Commission sought an inter-jurisdictional enforcement order under s. 127(10) of the Securities Act against the respondents, following an order by the Nova Scotia Securities Commission (NSSC).

The NSSC had found that the respondents engaged in unregistered trading, illegal distribution of securities, and unfair practices.

The Commission found that the threshold under s. 127(10) was met and that it was in the public interest to issue a protective order under s. 127(1).

The Commission issued an order substantially similar to the NSSC order, with an additional prohibition against trading derivatives to protect Ontario investors.

The respondent brought a motion to halt a section 127 enforcement proceeding, alleging that the Ontario Securities Commission lacked jurisdiction due to institutional bias.

The respondent argued that the Commission's overlapping functions as policy-makers, adjudicators, and board members, particularly regarding the allocation of funds received from a prior settlement agreement, created a reasonable apprehension of bias.

The Commission dismissed the motion, finding that the overlapping functions were statutorily authorized by the Securities Act and did not go beyond what was permitted.

The Commission also found no evidence to overcome the presumption of impartiality or to justify interfering with Staff's discretion in choosing the venue for enforcement.

Staff of the Ontario Securities Commission sought an inter-jurisdictional enforcement order under subsection 127(10) of the Securities Act reciprocating sanctions imposed by the British Columbia Securities Commission (BCSC).

The BCSC had found that the respondents perpetrated a fraud and imposed permanent and long-term market bans.

The Commission found that the statutory test was met and that it was in the public interest to issue an order substantially replicating the BCSC's non-monetary sanctions to protect Ontario investors.

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

The respondents brought a preliminary motion seeking the panel chair's recusal for bias, which was dismissed as it merely reflected disagreements with findings from the merits hearing.

The Commission found that the respondents raised over $267,000 from investors through fraudulent misrepresentations and misappropriated the funds for personal use.

The Commission ordered permanent market bans with limited carve-outs for personal registered accounts, administrative penalties totaling $650,000, full disgorgement of $267,203, and costs of $267,806.59 apportioned among the respondents.

The Ontario Securities Commission approved a settlement agreement between Staff and Royal Bank of Canada (RBC) regarding allegations of supervisory inadequacies in RBC's foreign exchange (FX) trading business from 2011 to 2013.

Staff alleged that RBC failed to promote a culture of compliance, allowing FX traders to inappropriately share confidential customer information with competitors in electronic chat rooms.

RBC acknowledged the conduct was contrary to the public interest, engaged in significant remediation efforts, and agreed to make a voluntary payment of $13,552,000 and pay $800,000 in costs.

The Commission found the settlement to be in the public interest.

The Ontario Securities Commission approved a settlement agreement between Staff and The Toronto-Dominion Bank regarding allegations of supervisory inadequacies in TD's foreign exchange trading business from 2011 to 2013.

Staff alleged that TD failed to promote a culture of compliance, allowing traders to inappropriately share confidential customer information with competitors.

TD acknowledged the conduct and agreed to a voluntary payment of $9,300,900 and $800,000 in costs.

The Commission found the settlement to be in the public interest, noting TD's significant remediation efforts and exemplary cooperation.

The Ontario Securities Commission approved a no-contest settlement agreement between Staff and International Capital Markets Pty.

Ltd. (ICM), an Australian over-the-counter derivatives issuer.

Staff alleged that ICM breached the registration and prospectus requirements of the Securities Act by opening accounts for Ontario investors to trade contracts for differences without being registered or filing a prospectus.

ICM agreed to cease doing business in Ontario, return funds to investors, and pay US$4 million reflecting revenue generated, plus C$650,000 to advance the Commission's mandate and C$25,000 in costs.

The Commission found the settlement to be in the public interest given ICM's exemplary cooperation and the inadvertent nature of the misconduct.

Ava Trade Ltd., a British Virgin Islands-based entity, opened and operated approximately 1400 accounts for Ontario investors to trade contracts for differences (CFDs) without being registered or filing a prospectus.

Staff of the Commission and Ava Trade reached a settlement agreement acknowledging these breaches of the Securities Act.

The Commission approved the settlement, which included an administrative penalty of $550,000, disgorgement of $3.7 million, and costs of $25,000, finding it to be in the public interest.

The Ontario Securities Commission approved a settlement agreement with CoinLaunch Corp., an unregistered crypto-asset service provider.

CoinLaunch admitted to engaging in the business of trading in securities without registration by marketing and promoting two security token offerings (BCZERO and ECOREAL).

The Commission found the tokens constituted investment contracts.

The settlement included a $30,000 administrative penalty, disgorgement of $12,233.06, $10,000 in costs, and a five-year ban on trading or acquiring securities.

Staff of the Commission and Caldwell Investment Management Ltd. (CIM) jointly submitted a settlement agreement for approval.

CIM admitted to failing to meet its best execution obligations over a four-year period by directing trades to a related firm, resulting in higher commission rates and bond spreads for its clients.

CIM also admitted to making misleading statements, having inadequate policies, and providing insufficient information to its Independent Review Committees.

The Commission approved the settlement, which included an administrative penalty of $1.8 million, costs of $250,000, and terms and conditions on CIM's registration requiring an independent consultant to review its policies.

The applicant sought a hearing and review of an IIROC hearing panel's decisions on merits and sanctions.

The IIROC panel had found that the applicant engaged in personal financial dealings with a client and made false and misleading representations to his firm, resulting in a two-year suspension, fines, and disgorgement.

The Commission dismissed the application, finding that while the IIROC panel erred in its analysis of the transition rules regarding a repealed rule, the rule remained applicable to the applicant's conduct.

The Commission found no other errors of law or incorrect principles in the IIROC panel's findings of fact, its conclusion that the applicant's statements were false and misleading, or its sanctions order.

Staff of the Ontario Securities Commission alleged that the respondents engaged in unregistered trading, illegal distribution, and fraud in relation to the sale of shares in Natural Bee Works Apiaries Inc. The Commission found that the respondents made fraudulent misrepresentations to investors, including false claims about an imminent NASDAQ listing, a $200 million line of credit, and substantial assets.

The respondents also misused investor funds for personal expenses.

The Commission concluded that all respondents committed fraud, and that Ms. Chickalo and the company engaged in unregistered trading and illegal distribution.

The Commission declined to make separate findings for misleading statements and prohibited listing representations to avoid overlapping contraventions.

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 decision of the British Columbia Securities Commission.

The BCSC had found that the respondent engaged in unregistered advising, made misrepresentations, and perpetrated a fraud, resulting in massive harm to investors.

The OSC found that it was in the public interest to issue a reciprocal order to protect Ontario capital markets.

The OSC permanently prohibited the respondent from trading in securities, acquiring securities, and acting as a director, officer, registrant, or promoter.

In an enforcement proceeding against BDO Canada LLP for alleged failures to comply with generally accepted auditing standards (GAAS) during its audits of Crystal Wealth Management Systems Limited, BDO brought a motion seeking further disclosure from Staff of the Ontario Securities Commission.

BDO sought disclosure of files relating to compliance reviews of Crystal Wealth conducted by OSC and BCSC Staff, as well as documents pre-dating January 1, 2012.

The Commission dismissed the motion, finding that the compliance reviews were not relevant to the allegations against BDO, as they served a different purpose and were not connected to BDO's compliance with GAAS.

The Commission also found no basis to require disclosure of documents older than three years before the impugned audits.

Staff of the Ontario Securities Commission sought an inter-jurisdictional enforcement order against the respondent under subsections 127(1) and 127(10) of the Securities Act.

The respondent had previously pleaded guilty to five counts of fraud over $5,000 under the Criminal Code for misappropriating investor funds intended for a biofuel venture.

The Commission found that the criminal convictions arose from a course of conduct related to securities.

Concluding that a permanent ban was necessary to protect investors, the Commission ordered permanent market bans against the respondent, subject to a limited carve-out allowing him to trade in certain registered and tax-free savings accounts.