OCMT 2021

Staff of the Ontario Securities Commission and the respondent jointly submitted a settlement agreement for approval following the respondent's guilty plea to unregistered trading in the Ontario Court of Justice.

The respondent had formed a purported hedge fund and engaged in trading without registration, though he believed the business was legitimate and was himself deceived by a co-founder who lost the investors' funds.

The Commission approved the settlement, which included a $60,000 disgorgement order and a 10-year ban on trading and acting as a director or officer, finding the terms fell within a reasonable range and served the public interest.

The respondents raised approximately $170,600 from 90 investors through a fraudulent scheme involving a purported cryptocurrency mining company.

The Ontario Securities Commission found that the investments were 'securities' and that the respondents engaged in unregistered trading and illegal distribution.

The respondents made false representations about the business, use of funds, and expected returns, and misappropriated the funds for personal use.

The individual respondent also misled Staff and breached confidentiality during the investigation.

The Commission ordered permanent market bans, disgorgement of $170,600, an administrative penalty of $500,000, and costs of $100,000.

Staff of the Ontario Securities Commission alleged that Threegold Resources Inc. distributed convertible debentures without a prospectus, engaged in unregistered trading, and breached a cease trade order.

The Commission found that Threegold distributed $310,000 in debentures to 19 investors without a prospectus or applicable exemption, and did so while a cease trade order was in effect.

However, the Commission dismissed the allegation of unregistered trading, finding that the capital raising was ancillary to Threegold's mineral exploration business and did not cross the line into the business of trading.

The Commission imposed permanent trading and acquisition bans against Threegold.

The applicant, a registered investment advisor, sought a stay of a Commission decision dismissing his application for a review of two IIROC decisions, pending his appeal to the Divisional Court.

The Commission declined to grant a stay pending the disposition of the appeal, noting that the Divisional Court is better placed to assess the merits of the appeal and control the appeal process.

However, the Commission granted a temporary 60-day stay, subject to strict supervision conditions, to allow the applicant to bring a stay motion before the Divisional Court.

Staff of the Ontario Securities Commission alleged that the respondents obstructed an investigation into their raising of funds through a crypto asset token.

The respondents sent an email to subscribers advising them not to comply with Commission summonses and disparaging the Commission's mandate.

The Commission found that the respondents were responsible for the conduct, which successfully obstructed the investigation.

The Commission held that it was not required to seek a contempt order under s. 13(1) of the Securities Act, and that the respondents' conduct engaged the animating principles of the Act and was abusive of the capital markets, warranting a sanctions and costs hearing under s. 127.

Staff of the Ontario Securities Commission and the respondent entered into a settlement agreement regarding allegations that the respondent engaged in the business of trading and advising in securities and acted as an investment fund manager without registration.

The respondent raised approximately $25 million from investors over a 10-year period through a limited partnership.

The respondent had reasonably relied in good faith on legal advice that registration was not required.

The Commission approved the settlement agreement, which included a voluntary payment of $1,600,000, costs of $100,000, and an undertaking not to apply for registration for one year, finding it to be in the public interest.

Wilks Brothers, LLC applied for a review of a decision by TSX Inc. granting exemptive relief to Calfrac Well Services Ltd. The relief allowed Calfrac to retroactively correct a shareholder vote related to its recapitalization, in which votes from an ineligible shareholder (AIMCo) were inadvertently included.

The Commission found that Wilks had standing to bring the application as it was directly affected by the TSX decision.

However, the Commission dismissed the application on the merits, finding that the TSX did not consider irrelevant grounds, did not impose an illegal condition, did not overlook material evidence, and appropriately considered the public interest.

The Commission concluded that the agreement to rescind AIMCo's subscription was not an issuer bid under NI 62-104.

The Mutual Fund Dealers Association of Canada (MFDA) Staff applied to the Ontario Securities Commission for a hearing and review of an MFDA hearing panel decision.

The MFDA panel had permanently banned the respondent from the industry and ordered costs, but declined to impose a financial penalty for his misappropriation of $39,270 from a client's line of credit, citing his inability to pay and the fact that the bank reimbursed the client.

The Commission found that the MFDA panel erred in law and principle by permitting the respondent to retain the benefit of his misconduct, relying on irrelevant mitigating factors, and overemphasizing his inability to pay.

The Commission substituted its own decision, varying the MFDA order to include a fine of $52,270, representing disgorgement of the retained misappropriated funds plus an administrative penalty.

Staff of the Ontario Securities Commission sought to extend a temporary cease trade order against the respondents, who were allegedly operating a crypto-asset investment scheme in breach of registration and prospectus requirements.

The Commission found sufficient evidence of conduct that may be harmful to the public interest, noting the respondent's admission that the crypto-assets continued to circulate and that he was engaging with a potential new investor.

The temporary order was extended until 14 days after the release of the merits decision in a related proceeding.

Joseph Debus, an investment advisor, applied for a review of an IIROC panel's decisions finding he engaged in unauthorized and discretionary trading, recommended unsuitable investments, and failed to disclose outside business activities.

He sought to introduce new evidence and argued he received ineffective assistance from his paralegal at the IIROC hearing.

The Ontario Securities Commission dismissed his requests for a third-party summons and an adjournment.

On the merits, the Commission found no miscarriage of justice regarding his representation or IIROC Staff's investigation.

The Commission concluded the IIROC panel made no material errors in law and that the sanctions imposed, including a nine-month suspension and fines, were appropriate.

The application for review was dismissed.

The applicant brought a motion seeking the recusal of the adjudicator on the basis of a reasonable apprehension of bias against him and his counsel.

The applicant alleged bias based on the manner in which the proceeding was conducted, the adjudicator's attitude towards his counsel's health issues, and alleged partiality towards the respondents.

The adjudicator applied the test for reasonable apprehension of bias and found that the applicant failed to meet the high threshold.

The motion for recusal was dismissed.

Staff of the Ontario Securities Commission and the respondent entered into a settlement agreement regarding allegations of illegal insider trading and tipping.

The respondent, while suspended from registration, obtained material non-public information about a cannabis company's expansion and traded on it, making a profit of $492.32, and tipped two clients.

The Commission approved the settlement, which included an eight-year market ban, disgorgement of profits, a $35,000 administrative penalty, and $5,000 in costs, finding it fell within a range of reasonable outcomes and was in the public interest.

The applicant sought a hearing and review of IIROC merits and sanctions decisions which found he inappropriately altered signed client documents and suspended his registration for 12 months.

The applicant argued the IIROC Panel erred by admitting unalleged misconduct, reversing the onus of proof, making improper inferences from circumstantial evidence, and imposing excessive sanctions.

The Ontario Securities Commission dismissed the application, finding the IIROC Panel's decisions were reasonable, applied the correct onus of proof, and appropriately relied on both direct and circumstantial evidence.

Staff of the Ontario Securities Commission and the respondents sought approval of a settlement agreement concerning allegations of unregistered trading and illegal distributions.

The respondents, foreign related parties, operated online trading platforms offering contracts for difference to Ontario investors without being registered or filing a prospectus.

The Commission approved the settlement agreement, which included a $600,000 administrative penalty, disgorgement of approximately $3 million USD, and $10,000 in costs, finding it to be in the public interest and within a range of reasonable outcomes.

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

The respondents had previously entered into a settlement agreement with the Alberta Securities Commission, admitting to breaches of the Alberta Securities Act involving misleading offering memoranda and undisclosed related party loans.

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

The Commission imposed market prohibitions on the respondents substantially similar to those agreed to in the Alberta settlement, with minor modifications to align with Ontario securities law.

The applicants sought an adjournment of the hearing of their application for a review of a Director's decision to engage in settlement discussions with Staff.

Staff consented to the request.

The Commission found that the request met the 'exceptional circumstances' test under Rule 29(1) of the Rules of Procedure, as the delay was for settlement purposes, the applicants' registrations remained suspended, and the request was timely.

The adjournment was granted.

Staff of the Ontario Securities Commission brought a motion seeking to waive service on the respondent, Threegold Resources Inc., and to proceed with a combined merits and sanctions hearing in writing.

The Commission found that Staff had exhausted all reasonable efforts to locate and serve the respondent, which had no active directors, officers, or business address.

The Commission waived the service and disclosure requirements, and ordered that the merits and sanctions hearings be combined and conducted in writing to ensure a just, expeditious, and cost-effective proceeding.

Staff of the Ontario Securities Commission and David Cartu sought approval of a settlement agreement regarding allegations that Cartu permitted two corporate entities to facilitate the sale of binary options to Ontario investors without registration.

Cartu admitted to the breaches and agreed to pay a $300,000 administrative penalty, $15,000 in costs, and to be subject to a seven-year market ban.

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

In an enforcement proceeding, the respondent Serrano brought a motion seeking disclosure of a Confidential Order and related reasons that redacted portions of a co-respondent's compelled interview transcripts.

Staff argued they were legally prohibited from identifying information relating to the Confidential Order and proposed an ex parte, in camera hearing to make submissions.

The Commission held that it had the inherent authority to control its own procedure and ordered a confidential phase of the hearing.

To address the inherent fairness concerns of excluding the respondents, the Commission appointed an amicus curiae to represent the interests of justice during the confidential phase.

The respondent, Sean Daley, requested an adjournment of a scheduled merits hearing before the Ontario Securities Commission.

He argued that he recently learned the Commission proceedings might impact his Law Society of Ontario license and that his family was experiencing COVID-19-related issues.

The Commission dismissed the motion, finding that the potential implications for his Law Society license were a separate issue that did not warrant delaying the proceeding.

Furthermore, the information provided regarding COVID-19 exposure was vague and insufficient to meet the high bar of exceptional circumstances required for an adjournment.