OCMT 2023

The applicant brought a motion to stay a sanctions order issued by the Canadian Investment Regulatory Organization (CIRO) pending a review application before the Capital Markets Tribunal.

The applicant also requested a confidential hearing and redactions to the adjudicative record due to sensitive mental health information.

The Tribunal dismissed the stay motion, finding the applicant failed to establish irreparable harm, as he had not been registered in the industry for over five years and provided no medical evidence that a stay would prevent harm to his health.

The Tribunal granted the confidentiality requests in part, ordering specific medical details redacted from the record while maintaining the public nature of the hearing transcript.

A portion of the applicant's brief referencing privileged settlement discussions was also struck.

Staff of the Ontario Securities Commission brought a motion for a further and better witness summary from the respondent, Oscar Furtado.

Furtado had provided an amended witness summary stating he would testify generally in accordance with his compelled interview transcripts and refer to documents in Staff's disclosure.

The Capital Markets Tribunal found the amended witness summary deficient under Rule 27(3) of the Tribunal's Rules of Procedure.

The Tribunal held that stating the witness would testify 'generally in accordance with' transcripts created ambiguity about the scope of evidence, failing to disclose its substance.

Furthermore, the broad reference to Staff's disclosure did not sufficiently identify the documents to be referred to.

The Tribunal ordered Furtado to deliver a further and better witness summary.

Staff of the Ontario Securities Commission brought a motion to summarily dismiss the respondent's motion to stay the enforcement proceeding for abuse of process.

The respondent alleged that Staff failed to adequately protect privileged documents obtained during a related criminal investigation.

The Tribunal held that the applicable standard for summary dismissal of a stay motion is the 'tenable case' standard, and that the Supreme Court's decision in Haevischer does not apply outside the criminal context.

The Tribunal found that Staff failed to establish that the respondent's motion had no reasonable prospect of success, as the alleged breach of privilege could potentially undermine the integrity of the justice system even if it did not compromise the fairness of the hearing.

Staff's motion was dismissed.

Binance Holdings Limited applied to the Capital Markets Tribunal under s. 144(1) of the Securities Act to revoke an investigation order issued by the Ontario Securities Commission under s. 11.

The Tribunal directed a preliminary hearing on whether it had jurisdiction to grant the relief sought.

Applying principles of statutory interpretation, the Tribunal concluded that the 2022 amendments to the Securities Act separated the Commission's executive and adjudicative functions, and that the word 'Commission' in s. 144(1) does not include the Tribunal.

Consequently, only the Commission, exercising its executive function, can revoke its own s. 11 order.

The application was dismissed for lack of jurisdiction.

Staff of the Ontario Securities Commission alleged that the respondents engaged in unregistered trading, illegal distribution of securities, and made false or misleading statements in connection with raising funds for a hotel redevelopment project.

The Capital Markets Tribunal found that the respondents distributed securities without a prospectus and breached a temporary cease trade order.

However, the Tribunal dismissed the allegations of unregistered trading, finding that the capital raising was ancillary to the underlying hotel business, and dismissed the allegations of false statements because no trading relationship existed.

The Tribunal also found the respondents engaged its public interest jurisdiction by failing to segregate funds and maintain accurate records.

Following a merits decision finding that the respondents engaged in illegal distribution of securities, unregistered trading, securities fraud, and improper revenue recognition, the Capital Markets Tribunal determined the appropriate sanctions and costs.

The Tribunal ordered disgorgement totaling $4.91 million, administrative penalties totaling $3.175 million, and significant market restrictions, including permanent bans for the GBR parties and multi-year bans for the First Global parties.

The Tribunal also ordered the respondents to pay costs totaling $1,080,285, apportioned based on their respective roles and the time spent investigating and litigating the various contraventions.

The respondents, David and Natasha Sharpe, brought motions to stay the enforcement proceeding against them, alleging abuse of process.

They argued that the Ontario Securities Commission improperly filed their compelled testimony in a court application for a receiver without obtaining a section 17 order under the Securities Act, thereby prejudicing their right to a fair hearing and bringing the administration of justice into disrepute.

The Capital Markets Tribunal dismissed the motions, finding that the public availability of the compelled evidence did not prejudice their right to a fair hearing, as any potential witness tainting could be addressed through cross-examination.

Furthermore, the Tribunal concluded that the Commission's conduct, while based on a mistaken interpretation of the law, was not in bad faith and did not constitute the rare and exceptional circumstances required to justify a stay of proceedings.

The respondent, Marc Judah Bistricer, brought a motion seeking additional disclosure from Staff of the Ontario Securities Commission regarding documents obtained during its investigation.

Staff alleged that the respondents engaged in abusive short selling and other transactions contrary to the animating principles of the Securities Act.

Bistricer sought documents relating to similar transactions by others and all materials obtained under section 11 investigation orders.

The Capital Markets Tribunal dismissed the motion, finding that the disclosure request was too vague and imprecise.

Furthermore, even interpreting the request generously, the Tribunal held that the requested documents were irrelevant, as the standard for the respondents' conduct is not determined by the prevalence of similar conduct by others in the market, and Staff's disclosure obligation does not extend to all materials obtained during an investigation.

Staff of the Ontario Securities Commission alleged that Steer Technologies Inc. published misleading news releases regarding its COVID-19 contact-tracing platform and failed to correct forward-looking information.

The individual respondents admitted to failing to ensure the accuracy of the releases and authorizing a relationship with a company publishing biased promotional articles.

The Capital Markets Tribunal approved the settlement agreement, finding the agreed sanctions, including financial payments, governance reviews, and director bans, achieved specific and general deterrence and were in the public interest.

The applicants, David and Natasha Sharpe, sought to vary an earlier Tribunal decision that denied their request for disclosure in support of their pending motions to stay the proceeding for abuse of process.

They argued that the Supreme Court of Canada's recent decision in R v Haevischer, which established a 'manifestly frivolous' standard for summary dismissal of stay applications in criminal cases, changed the applicable law.

The Tribunal dismissed the application, finding that Haevischer applies specifically to criminal cases and summary dismissals of stay applications, not to disclosure requests in administrative proceedings where the onus lies on the party seeking disclosure.

Following a merits decision finding the respondents perpetrated securities fraud, engaged in unregistered trading, and distributed securities without a prospectus, the Capital Markets Tribunal determined the appropriate sanctions and costs.

The Tribunal ordered disgorgement of $43.61 million against the primary individual respondents, with a reduced amount of $13 million for a less culpable respondent.

Administrative penalties totaling $3 million were imposed, along with permanent market participation bans for most respondents and a costs award of $600,000 to the Commission.

The respondents moved to stay an enforcement proceeding and requested the Tribunal issue summonses to five members of OSC Staff to testify at the stay motion hearing.

The respondents sought evidence regarding the OSC's decision to include compelled evidence in a receivership application without a section 17 order.

The Tribunal dismissed the request, finding it was an impermissible attempt to re-litigate issues already decided in a previous motion for documentary disclosure, and that the respondents failed to establish a reasonable basis that the summonses would lead to relevant evidence of abusive conduct.

Miller Bernstein LLP applied for relief from the implied undertaking rule regarding voluntary evidence received by Staff of the Ontario Securities Commission.

Both parties requested that the application be kept confidential.

The Capital Markets Tribunal denied the request, finding that the criteria for a confidential hearing under Rule 22(2) were not met and that the implied undertaking rule did not necessitate a confidential hearing.

Staff of the Ontario Securities Commission brought motions seeking further witness summaries from the respondents and the dismissal of the respondents' stay motions.

The respondents argued that the scheduling of these motions should be delayed pending their application for judicial review of a previous Tribunal decision.

The Tribunal held that the judicial review application should not delay the proceeding.

The Tribunal scheduled the motion for further witness summaries to be heard orally, treated Staff's motion to dismiss the stay motions as withdrawn, and set a schedule for the exchange of materials for the stay motions.

The respondents, David and Natasha Sharpe, brought a motion to adjourn their motions for a stay of proceedings, the merits hearing, and related filing dates until their judicial review application of a prior Tribunal decision is determined by the Divisional Court.

The Capital Markets Tribunal dismissed the motion, finding that the pending judicial review application did not constitute an 'exceptional circumstance' under Rule 29(1) of the Tribunal's Rules of Procedure.

The Tribunal emphasized the public interest in proceeding expeditiously and noted that the mere filing of a judicial review application does not automatically warrant an adjournment.

Staff of the Ontario Securities Commission brought an application to extend a temporary cease trade order against Nova Tech Ltd, an offshore entity that appeared to be engaging in unregistered trading and illegal distribution of securities.

The respondent did not appear.

The Capital Markets Tribunal found sufficient evidence of ongoing harm to Ontario investors to justify extending the order.

However, the Tribunal declined Staff's request to extend the order indefinitely until the completion of a future enforcement proceeding.

Balancing factors including transparency, longevity of temporary orders, and control over Tribunal proceedings, the Tribunal extended the order until the earlier of 10 days after the issuance of a Statement of Allegations or 6 months after the extension order.

Staff of the Ontario Securities Commission brought a motion in writing for procedural relief, including proceeding without notice to one respondent, waiving service of the Notice of Hearing and Statement of Allegations on him, waiving service of future processes on all respondents, and dispensing with disclosure obligations.

The Tribunal found that Staff had exhausted all reasonable efforts to locate and serve the unserved respondent and that the other respondents had been validly served but failed to participate.

The Tribunal granted the requested relief, waiving future service and disclosure requirements to ensure a just, expeditious, and cost-effective proceeding.

Staff of the Ontario Securities Commission and respondent Stephen Kelley sought approval of a settlement agreement regarding allegations of unregistered trading, breaching a temporary cease trade order, and making misleading representations to investors in the Buffalo Grand Hotel project.

The Capital Markets Tribunal approved the settlement, finding it in the public interest.

Kelley agreed to a $15,000 administrative penalty, a two-year market participation ban, and to cooperate with Staff in ongoing proceedings against the remaining respondents.

The respondents raised $10 million from investors through secured debentures, representing that the funds would be used exclusively to finance a specific real estate project (Bayview Creek).

Instead, the respondents diverted approximately $3.39 million of the proceeds back to the corporate respondent and to other real estate projects controlled by the individual respondent.

The Capital Markets Tribunal found that the respondents engaged in a course of conduct that they knew perpetrated a fraud on investors, contrary to s. 126.1(1)(b) of the Securities Act.

Staff of the Ontario Securities Commission alleged that the respondent engaged in illegal insider trading contrary to s. 76(1) of the Securities Act.

The respondent obtained material non-public information about a proposed acquisition of a reporting issuer and traded on it, making a profit of $125,064.

The parties entered into a settlement agreement where the respondent admitted to the misconduct, agreed to pay an administrative penalty of $200,000, disgorge his profit, pay costs of $15,000, and be subject to a 5-year market access ban.

The Capital Markets Tribunal approved the settlement, finding the sanctions fell within a range of reasonable outcomes and achieved specific and general deterrence.