Administrative Law - OCMT

The Ontario Securities Commission alleged that TeknoScan Systems Inc. and three of its officers and directors perpetrated a securities fraud and made misleading statements to investors regarding a share purchase transaction.

The Capital Markets Tribunal found that the respondents perpetrated a fraud on preferred shareholders who opted into the transaction by omitting fundamental and essential facts from a notice, rendering it objectively dishonest and misleading.

The Tribunal also found that TeknoScan made a materially misleading statement to shareholders, and that the individual respondents authorized, permitted, or acquiesced in this breach.

Allegations of making misleading statements to the Commission were dismissed.

Following a merits decision finding the respondents engaged in a massive crypto asset fraud involving the sale of tokens falsely represented as backed by gold, the Capital Markets Tribunal held a sanctions hearing.

The Tribunal ordered permanent market participation bans, administrative penalties totaling $4.5 million, and disgorgement of over US $51 million in misappropriated investor funds.

The Tribunal declined to order disgorgement of profits from real estate sales due to a lack of causal link.

Costs of $667,605.27 were awarded to the Commission.

The Ontario Securities Commission alleged that Phemex Limited and Phemex Technology Pte.

Ltd. operated an online crypto asset trading platform that sold securities to Ontario investors without being registered and without filing a prospectus.

The Capital Markets Tribunal found that the Crypto Contracts and Crypto Futures offered on the platform were investment contracts and therefore securities.

The Tribunal concluded that the respondents breached sections 25(1) and 53(1) of the Securities Act by engaging in the business of unregistered trading and distributing securities without a prospectus.

A case management hearing was directed to prepare for a sanctions and costs hearing.

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 allegations against the respondents for breaches of the Securities Act.

The Commission found that the respondents engaged in unregistered trading and illegal distribution of securities by selling previously unissued shares to foreign investors through a non-existent investment bank.

The corporate respondents, directed by a de facto officer, perpetrated a fraud by making false statements and depleting investor funds for personal expenses.

The individual respondent, as a director and officer, was deemed to have authorized, permitted, or acquiesced in the corporations' non-compliance with Ontario securities law.

The Commission concluded that the respondents breached the Act and acted contrary to the public interest.

Staff of the Ontario Securities Commission sought sanctions against the respondents following their criminal convictions for fraud, unregistered trading, and illegal distribution of securities in connection with a boiler room operation.

Relying on the inter-jurisdictional enforcement provisions in s. 127(10) of the Securities Act, the Commission found it was in the public interest to impose sanctions.

The Commission ordered permanent market bans against the respondents, permanent director and officer bans, and joint and several disgorgement of $205,000, representing the funds illegally obtained from investors.

The applicants brought motions to quash summonses issued by Staff of the Ontario Securities Commission to two lawyers, compelling them to attend examinations.

Staff argued the summonses were part of an ongoing investigation into insider tipping and trading.

The applicants argued the summonses were an improper attempt to conduct pre-hearing discovery of witnesses who would testify at the upcoming merits hearing.

The Commission found that the real purpose of the summonses was to prepare for the merits hearing, which is an inappropriate use of Staff's investigative powers.

The motions were granted and the summonses were quashed.

The Ontario Securities Commission held a merits hearing regarding allegations that the respondents engaged in unregistered trading, illegal distribution of securities, and fraud in relation to a foreign exchange trading investment scheme.

The Commission found that the respondents raised approximately $1.8 million from investors without being registered and without filing a prospectus.

Furthermore, the directing minds of the corporate respondent used investor funds to pay earlier investors and for personal expenses, perpetrating a fraud.

The Commission concluded that the respondents breached multiple sections of the Securities Act and acted contrary to the public interest.

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

The Commission imposed permanent trading and director/officer bans on the respondents, with limited carve-outs for RESPs.

The Commission also ordered administrative penalties of $300,000 for Elin and $400,000 for Mellon, and joint disgorgement of $353,229.19.

Staff's request for costs was denied due to an unexplained 18-month delay in the proceedings.

The respondent Wing brought a motion seeking an order that Staff of the Ontario Securities Commission make proper and meaningful disclosure by preparing separate disclosure briefs for each category of allegations.

Wing argued that Staff's provision of an electronic database containing over 370,000 records was a 'dump truck' disclosure that failed to meet the Stinchcombe standard.

The Commission dismissed the motion, finding that Staff had met its disclosure obligations by providing a reasonably searchable and accessible database, and that perfect disclosure is not required in complex cases involving large volumes of material.

A related motion for confidentiality was also dismissed as premature.

The Respondents in a securities fraud proceeding brought a motion seeking disclosure of certain internal documents from Commission Staff, including drafts, internal commentary, and documents evidencing Staff's decision to commence proceedings.

The Commission applied the Stinchcombe standard of disclosure, requiring Staff to disclose all relevant information gathered during the investigation.

However, the Commission dismissed the motion with respect to internally-generated documents evidencing Staff's analysis, commentary, or opinions (Staff work product), finding them irrelevant to the issues to be decided at the merits hearing.

The motion was allowed in part for documents gathered during the investigation and communications between Staff and the Respondents, subject to privilege.

The respondent, a directing mind of a mutual fund manager, pled guilty to criminal fraud and admitted to contravening Ontario securities law by misappropriating investor funds and authorizing payments to himself.

Following an agreed statement of facts, a sanctions hearing was held.

The Commission ordered permanent trading and registration bans, a reprimand, and disgorgement of $320,000, rejecting the respondent's argument that he lacked the ability to pay.

Staff of the Ontario Securities Commission sought to extend a temporary cease trade order against the respondent.

The respondent opposed the extension, arguing that the allegations justifying the temporary order were not included in the recently filed Statement of Allegations.

The Commission found sufficient evidence of potentially harmful conduct to justify an extension, but declined to extend it indefinitely.

The temporary order was extended for a finite period to allow Staff an opportunity to amend the Statement of Allegations to include the conduct that gave rise to the temporary order.

During a merits hearing, Staff of the Ontario Securities Commission and the respondent presented an Agreed Statement of Facts in which the respondent admitted to unregistered trading and illegal distribution in contravention of the Securities Act.

The Commission ordered that all prior evidence be withdrawn and replaced with the Agreed Statement of Facts, declared the merits hearing concluded, and scheduled a sanctions hearing.

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

The respondents had raised over $10 million from offshore investors, misappropriating the funds for personal use and high-risk enterprises.

The Commission ordered permanent market bans against the respondents, an administrative penalty of $500,000 each, joint and several disgorgement of $8,892,906, and $250,000 in costs.

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

The individual respondent, who misappropriated over $4.6 million from investors in a fraudulent foreign exchange scheme, was permanently banned from the capital markets.

The Commission ordered disgorgement of $4,672,779.98, an administrative penalty of $750,000 to ensure specific and general deterrence, and $200,000 in costs.

The applicant, Weizhen Tang, brought an application to permit him to trade in foreign currencies under supervision on behalf of himself and consenting investors, despite an existing temporary cease trade order.

Staff of the Ontario Securities Commission sought to extend the temporary cease trade order pending related criminal proceedings.

The Commission found that the applicant had admitted to serious allegations, including failing to disclose losses, creating misleading account statements, and dissipating all invested funds in what Staff alleged was a Ponzi scheme.

The Commission dismissed the application to permit trading, finding it would pose an unacceptable risk of further harm to investors and capital markets, and extended the temporary cease trade order.

The applicants sought to file a Notice of Hearing under s. 127 of the Securities Act to reprimand Commission Staff and rectify alleged past non-compliance related to the delayed issuance of a prospectus receipt.

The Secretary returned the draft notice, stating only Staff could bring a s. 127 hearing.

The applicants moved for directions.

The Commission declined to decide whether a third party could ever seek a s. 127 hearing, finding that even if they could, the relief sought here was punitive and retrospective.

Relying on the Supreme Court's decision in Asbestos, the Commission held that s. 127 is a regulatory provision intended to be preventive and prospective, not to remedy alleged past misconduct or harm to private parties.

The Independent Financial Brokers of Canada (IFBC) applied for a review of the Ontario Securities Commission's decision to approve an amendment to a Mutual Fund Dealers Association (MFDA) by-law.

The MFDA and Commission Staff challenged the panel's jurisdiction and the IFBC's standing.

The hearing panel dismissed the application, finding it lacked jurisdiction under sections 21.7, 21.1(4), and 144 of the Securities Act to review a policy decision made by the Commission as a whole.

Furthermore, the panel held that the IFBC, as an industry lobby group, was not 'directly affected' or 'affected' by the by-law approval, and therefore lacked standing to bring the application.

Hahn Investment applied for a hearing and review of a decision by the Investment Industry Regulatory Organization of Canada (IIROC) refusing to vary or cancel certain trades in Exchange Traded Funds (ETFs) made on October 14, 2008.

Hahn Investment argued the trades were unreasonable due to significant divergence between the underlying values of the indices and the traded prices.

The Ontario Securities Commission dismissed the application, finding that IIROC correctly applied its policies and procedures, did not overlook material evidence, and that new evidence regarding the underlying security of one ETF was not compelling enough to change the outcome.

The Commission emphasized the need for deference to SRO decisions, particularly those involving technical expertise and time-sensitive market rulings.