Securities Law - OCMT

The Ontario Securities Commission sought sanctions against Nova Tech Ltd and its founder following a merits decision finding they engaged in unregistered trading, illegal distribution of securities, and breached a temporary cease trade order.

The respondents solicited Ontario investors for foreign exchange and crypto asset trading without registration or a prospectus, and evaded a Tribunal order by instructing investors on how to bypass jurisdictional restrictions.

The Capital Markets Tribunal ordered permanent market participation and director/officer bans, a $2.5 million administrative penalty, $31,000 in disgorgement, and $193,333.52 in costs, citing the egregious nature of the misconduct and the need for specific and general deterrence.

Riot Platforms, Inc., the largest shareholder of Bitfarms Ltd., applied to the Capital Markets Tribunal for an order under s. 127(1) of the Securities Act to cease trade a shareholder rights plan adopted by Bitfarms.

The plan featured a 15% trigger, which was below the 20% threshold established in the take-over bid regime.

Riot did not allege a contravention of Ontario securities law but argued the plan was contrary to the public interest.

The Tribunal clarified the standard for intervening without a contravention, holding that an applicant must demonstrate the conduct undermines clearly discernible animating principles of securities law in a real and substantial way, with a public dimension.

The Tribunal found that the 15% trigger undermined the predictability and certainty of the take-over bid regime.

As Bitfarms failed to demonstrate exceptional circumstances justifying the departure from the 20% threshold, the Tribunal concluded it was in the public interest to cease trade the plan.

The Ontario Securities Commission alleged that the respondents engaged in an illegal distribution of Canopy Growth Corporation shares and that Cormark and Kennedy failed to deal fairly, honestly, and in good faith with Canopy, or alternatively, acted contrary to the public interest.

The allegations centered on a series of transactions involving a private placement, a securities loan agreement, and short sales executed when Canopy was added to the TSX composite index.

The Capital Markets Tribunal dismissed all allegations, finding that the transactions did not constitute an illegal distribution under the extended definition, Canopy was not a client of Cormark or Kennedy, and the respondents did not mislead Canopy or otherwise engage the Tribunal's public interest jurisdiction.

The Ontario Securities Commission alleged that the respondents created and sold a crypto asset called GXToken without registration or a prospectus.

The Capital Markets Tribunal found that the GXTokens were investment contracts and therefore securities.

The Tribunal concluded that the respondents engaged in unregistered trading and illegal distribution of securities contrary to the Securities Act.

The respondents were ordered to pay administrative penalties, disgorge funds obtained from the non-compliance, and pay costs, in addition to being subject to market participation and director/officer bans.

The Ontario Securities Commission sought approval of a settlement agreement with Edward Gong, who admitted to unregistered trading and securities fraud in connection with a pyramid scheme that raised hundreds of millions of dollars.

Gong's company had previously pled guilty to criminal charges and was fined approximately $1 million.

The Capital Markets Tribunal approved the settlement, permanently banning Gong from trading in securities, acting as a director or officer of most issuers, and acting as a registrant or promoter, finding the terms reasonable and in the public interest.

The Ontario Securities Commission alleged that Bridging Finance Inc. and its principals, David and Natasha Sharpe, along with Chief Compliance Officer Andrew Mushore, engaged in multiple frauds and conflicts of interest involving the misappropriation of investor funds.

The Capital Markets Tribunal found that David and Natasha Sharpe perpetrated frauds relating to loans to entities associated with Sean McCoshen, Ninepoint Partners LP, and Gary Ng, diverting millions of dollars for their personal benefit and to facilitate the purchase of Bridging shares.

The Tribunal also found that Mushore participated in the Ninepoint fraud.

Furthermore, the Tribunal concluded that the respondents obstructed the Commission's investigation by making false statements, creating false paper trails, intimidating witnesses, and permitting surreptitious monitoring of a compelled interview.

Bridging was found to have failed to address conflicts of interest, for which the Sharpes were deemed liable as directing minds.

The applicant sought a review of a Canadian Investment Regulatory Organization (CIRO) decision finding that he engaged in unapproved outside business activities and securities-related business by recommending and facilitating the sale of syndicated mortgage investments.

The Capital Markets Tribunal dismissed the application, finding no error in the CIRO Panel's conclusions that the applicant's conduct constituted trading and an unapproved outside business activity.

The Tribunal also upheld the sanctions imposed, which included a permanent prohibition from conducting securities-related business, a $300,000 fine, and $30,000 in costs.

The Capital Markets Tribunal held a sanctions hearing after finding that the respondent breached a 2004 order permanently banning him from acting as a director or officer of an issuer and from trading in securities for 15 years.

The Tribunal ordered permanent market participation bans, disgorgement of over $3.2 million and US$10.7 million, administrative penalties totaling $1,000,000, and $300,000 in costs.

The Tribunal found the respondent's conduct to be a flagrant and recurrent breach of a Tribunal order, warranting significant specific and general deterrence.

The respondents in an enforcement proceeding brought a motion challenging the adequacy of the Commission's witness summaries and seeking further disclosure, including unredacted transcripts and attachments to a letter from a foreign regulator.

The Tribunal found that some witness summaries lacked sufficient precision regarding the documents to be relied upon and ordered the Commission to provide revised summaries.

The Tribunal dismissed the request for unredacted transcripts, finding the redacted information irrelevant, but ordered the disclosure of the letter attachments and a table of concordance for exhibits.

The respondents brought a motion for an order requiring Staff of the Ontario Securities Commission to make meaningful disclosure of documents relevant to the specific allegations against them.

Staff had provided a database containing over 4.3 million pages of documents obtained during a four-year investigation, without separating relevant from irrelevant material.

The Commission held that Staff had not satisfied its legal obligation to make meaningful disclosure simply by delivering the massive database.

Staff was ordered to apply reasonable judgment to identify and disclose the documents relevant to the specific allegations against each respondent, rather than foisting the obligation to sift through the material onto the respondents.

The Ontario Securities Commission held a hearing to consider a proposed Settlement Agreement between Staff and the respondent.

The respondent admitted to acting as an advisor and performing acts in furtherance of a trade without being registered, contrary to s. 25(1) of the Securities Act.

The Commission approved the settlement, noting the respondent's cooperation, the lack of harm to investors, and his efforts to correct his conduct.

The respondent was ordered to cease trading and acquiring securities for nine months, lost exemptions for nine months, and was ordered to pay $3,000 in costs.

Following a finding that the respondents engaged in an illegal scheme to induce vulnerable individuals to transfer locked-in RSPs into private companies, the Commission held a hearing on sanctions and costs.

The Commission ordered permanent cease trade orders, director and officer bans, and reprimands against the architects of the scheme.

The registrant involved had his registration terminated and was subject to a five-year cease trade order.

The respondents were ordered to pay costs totaling $108,000, apportioned based on their degree of responsibility.

The Ontario Securities Commission held a hearing to consider whether the respondent, a mutual fund salesperson, breached the Securities Act and acted contrary to the public interest by recommending an aggressive leveraging strategy to his clients.

The Commission found that the respondent failed to comply with the know-your-client and suitability obligations under OSC Rule 31-505 and failed to deal fairly, honestly, and in good faith with his clients.

The respondent recommended excessive leveraging that was entirely unsuitable given the clients' financial circumstances, risk tolerance, and investment objectives.

However, the Commission dismissed the allegation that the respondent gave undertakings relating to the future value of the investments in breach of section 38(2) of the Act.

A sanctions hearing was ordered to follow.

The Ontario Securities Commission held a hearing to consider a settlement agreement between Staff and the respondent, who had previously been subject to cease trade orders.

The respondent admitted to breaching the prior orders by engaging in unauthorized discretionary trading and defrauding investors of substantial funds, for which he was also criminally convicted and sentenced to imprisonment.

The Commission approved the settlement agreement, finding that permanently restricting the respondent from registering, trading, or acting as an officer or director of any issuer was in the public interest.

The Applicant, a mutual funds salesperson, sought a hearing and review of a Director's decision refusing to transfer his registration to a new employer.

The Applicant had been terminated for cause by his previous employer, a bank, for misappropriating Air Miles coupons for his own and his wife's benefit over a five-year period.

The Commission conducted a hearing de novo and found that the Applicant's conduct demonstrated a standard of business conduct below that required of a securities industry professional.

The Commission concluded that the Applicant lacked the trustworthiness and integrity required of a registrant and denied the request to transfer his registration.

The Ontario Securities Commission held a hearing to consider a settlement agreement between Staff and the respondent, a former senior investment banker.

The respondent admitted to breaching the tipping prohibition under s. 76(2) of the Securities Act by disclosing confidential material information regarding ten corporate transactions to a close friend, who subsequently engaged in illegal insider trading.

The Commission approved the settlement agreement, finding the sanctions, which included permanent bans from the securities industry and a $250,000 payment towards investigation costs, to be in the public interest and within acceptable parameters.

Staff of the Ontario Securities Commission sought to extend a temporary cease trade order against the respondents, who were alleged to have engaged in unregistered trading and illegal distributions of securities.

Only one respondent appeared at the hearing, unrepresented, and contested the extension but provided no evidence.

The Commission admitted hearsay evidence from Staff's investigator, finding it appropriate at an early stage of the proceeding.

Applying the reverse onus under s. 127(8) of the Securities Act, the Commission found the respondent failed to provide satisfactory information to show why the order should not be extended.

The temporary cease trade order was extended against all respondents.

The Ontario Securities Commission held a hearing on the merits regarding allegations that Limelight Entertainment Inc. and its principals and salespersons engaged in unregistered trading and illegal distributions of securities.

The Commission found that the respondents raised approximately $2.75 million from investors across Canada and internationally using high-pressure sales tactics, without being registered and without filing a prospectus.

The respondents purported to rely on the accredited investor exemption, but the vast majority of investors did not qualify.

The Commission also found that the respondents made prohibited representations regarding the future listing of shares, filed misleading reports, misled Commission Staff during the investigation, and breached temporary cease trade orders.

The conduct was found to be egregious and contrary to the public interest.

A sanctions hearing was ordered to be scheduled.

Staff of the Ontario Securities Commission sought to extend a temporary cease trade order against the respondent pending the completion of an investigation into potentially illegal distributions and market manipulation involving several companies.

The Commission found sufficient evidence of conduct potentially harmful to the public interest to justify extending the order.

However, the Commission granted the respondent a restricted personal trading carve-out, subject to strict reporting conditions, as the investigation was ongoing and no Statement of Allegations had yet been issued.

The Ontario Securities Commission held a hearing to consider whether to approve a settlement agreement between Staff and the respondent, a former director and officer of Philip Services Corp. The respondent admitted to failing to ensure that the company filed financial statements containing full, true, and plain disclosure regarding a restructuring charge, holding certificates, unrecorded liabilities, and a financing arrangement.

The Commission approved the settlement agreement as being in the public interest, imposing sanctions that included a 20-year director and officer ban, a 10-year trading ban, a reprimand, and $125,000 in costs.