OCMT 2020

Staff of the Ontario Securities Commission sought a reciprocal protective order against the respondent under s. 127(1) of the Securities Act, based on a prior decision of the British Columbia Securities Commission.

The BCSC had found that the respondent created and operated a shell company to conceal his involvement and provided misleading information to US regulators.

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.

The Commission granted the order, imposing market prohibitions substantially similar to those ordered in British Columbia, with modifications to reflect differences in Ontario securities law, including a prohibition on trading derivatives.

Staff of the Ontario Securities Commission alleged that Kuber Mortgage Investment Corporation and Sutharsan Kunaratnam engaged in unregistered trading by selling approximately $26 million worth of preferred shares to 200 investors without an available exemption.

The parties entered into a settlement agreement, which included a $400,000 administrative penalty, $30,000 in costs, a reprimand, and undertakings to remediate the conduct.

The Commission approved the settlement, finding it fell within a range of reasonable outcomes and was in the public interest.

The merits hearing in this proceeding was interrupted by the COVID-19 pandemic.

The Commission suspended in-person hearings and invited submissions on how to proceed.

Staff proposed submitting the remainder of its evidence in writing, while two respondents requested an adjournment.

The Commission declined to adjourn the hearing, finding that proceeding in writing was permissible, efficient, and caused no prejudice to the respondents.

The Commission ordered Staff to file its remaining evidence in writing, after which the respondents could request cross-examination by videoconference.

Staff of the Ontario Securities Commission brought a motion to amend the Amended Statement of Allegations to add a request for a disgorgement order against the individual respondents, and to adjourn the commencement of the merits hearing to allow time to serve one of the respondents.

The Commission found that Staff's inadvertent omission of the disgorgement request did not constitute exceptional circumstances justifying a lengthy adjournment.

However, because Staff committed to completing its case in six days, the Commission was able to adjust the hearing schedule to allow the required notice period for the amendment motion without delaying the conclusion of the merits hearing or disrupting the scheduled testimony of a participating respondent.

During a merits hearing, the Chair of the Panel was announced as the incoming Acting Chair and CEO of the Ontario Securities Commission.

The Panel raised the issue of whether this created a reasonable apprehension of bias, given the Chair's future management responsibilities over Staff.

After receiving submissions, the Panel concluded that a reasonable and informed person might perceive a bias in favour of Staff.

The Chair recused himself from the remainder of the merits hearing and a pending disclosure motion, and the hearing proceeded with the remaining two Panel members.

Staff of the Ontario Securities Commission and the respondent audit firm jointly submitted a settlement agreement for approval regarding the respondent's audits of two investment funds.

The respondent admitted to failing to conduct its audits in accordance with generally accepted auditing standards, including failing to obtain sufficient audit evidence, lacking professional skepticism, and failing to complete required engagement quality control reviews.

The Commission approved the settlement, finding it in the public interest, and ordered the respondent to be reprimanded, pay an administrative penalty of $3.5 million, and pay costs of $500,000.

Staff of the Ontario Securities Commission alleged that MOAG Copper Gold Resources Inc. and its directors, Gary Brown and Bradley Jones, violated a temporary cease trade order by issuing and selling approximately US$7.4 million in convertible debentures to Taiwan residents.

The Commission found that the issuance of both new debentures for cash and rolled debentures in exchange for forbearance of repayment constituted trades in securities.

The Commission further found that Brown and Jones engaged in acts in furtherance of these trades, thereby contravening Ontario securities law.

Staff of the Ontario Securities Commission brought a motion seeking an order requiring BDO Canada LLP to deliver further and better witness summaries prior to a merits hearing.

Staff argued the summaries failed to disclose the substance of the anticipated evidence and did not properly identify the documents to which the witnesses would refer.

The Commission dismissed the motion, finding that at the pre-hearing stage, the summaries could not be deemed deficient on their face, particularly given BDO's concession that certain broad language in the summaries was nominal and of no real value.

Following a merits decision finding that the respondent engaged in illegal insider trading, the Ontario Securities Commission held a hearing in writing to determine sanctions and costs.

The respondent, an experienced professional trader, had induced a legal assistant to provide material non-public information about pending corporate acquisitions, realizing a profit of $128,000.

The Commission found the misconduct to be serious, deliberate, and motivated solely by profit.

The Commission ordered a 15-year ban on the respondent's participation in the capital markets, an administrative penalty of $300,000, disgorgement of $128,000, and costs of $47,500.