CITATION: Loman v. Ontario Securities Commission, 2015 ONSC 4083
DIVISIONAL COURT FILE NO.: 580/13 DATE: 20150625
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
SWINTON, D. L. CORBETT AND POMERANCE JJ.
BETWEEN:
KEVIN LOMAN Appellant
– and –
ONTARIO SECURITIES COMMISSION Respondent
Kevin J. Richard and Martin G. Mendelzon, for the Appellant
Derek J. Ferris, for the Respondent
HEARD at Toronto: June 23, 2015
POMERANCE J.
[1] On February 21, 2013, the Ontario Securities Commission released a decision finding several individuals liable for contraventions of the Ontario Securities Act R.S.O. 1990, c S.5. The contraventions arose out of the sale of shares of Majestic Supply Co. and Suncastle Developments Corporation. At the time of the trades, none of the individuals were registered with the Ontario Securities Commission. Neither company had filed a prospectus. The unregistered and illegal trading in the shares violated ss.25 and 53 of the Act.
[2] The appellant, Kevin Loman, is one of the persons found to have engaged in unregistered and illegal trading of Majestic shares. On November 29, 2013, the Commission directed that the Appellant be subject to the following sanctions:
• A 10 year prohibition on the trading and acquisition of securities with no exemptions under the OSA;
• A 10 year prohibition on being an officer or director of any issuer (with an exception for issuers that are wholly owned by the Appellant or his immediate family and who do not issue securities to the public or engage in the trading of securities);
• A $75,000 administrative penalty;
• A $145,250 disgorgement order; and
• Costs in the amount of $30,000.
[3] The appellant challenges the Commission’s findings, as well as the fitness of the sanctions imposed.
[4] The standard of review is one of reasonableness.
[5] On the evidence before the Commission, it was reasonable for it to conclude that the appellant engaged in acts in furtherance of trade in shares. This issue does not hinge on statutory interpretation. It hinges on the findings of fact made by the Commission. It found that the appellant had: 1) provided subscription agreements to investors to execute; 2) distributed Majestic promotional materials; 3) met with individual investors for the purpose of soliciting or enabling investments; and 4) received commissions in respect of sales of Majestic shares to Alberta investors. These findings amply justified the conclusion that the appellant was engaged in acts furthering trade in Majestic securities.
[6] The appellant concedes that, if the factual findings are upheld, the determination of liability should not be disturbed. He takes issue, however, with the finding that he received commissions for his trading activity. The appellant says that the Commission failed to adequately explain the basis for this finding in its reasons.
[7] We disagree. The basis for the finding is clear, given the evidence before the Commission, and the reasons as a whole.
[8] At the hearing, a document was introduced by a senior investigator. The document, which was entitled “Kevin Loman transactions”, had been distributed to investors at a shareholders meeting in 2008. It listed the names of investors solicited by the appellant, the amounts of their investments, and the amounts paid to the appellant by the companies. The amounts listed in the document corresponded exactly to the amounts invested, as confirmed by witness testimony, subscription agreements and the shareholders list. On its face, the document purported to record payment of commissions for the appellant’s solicitation of investments.
[9] The appellant admitted to receiving $145,250 from Majestic and Suncastle, but testified that the payment was made in connection with the acquisition of Asset Protection Insurance. The Commission rejected this assertion as incredible. Once the appellant’s explanation was rejected, there was nothing to rebut the common sense inference that flowed inexorably from the document, namely, that the appellant was paid for his role in facilitating trade of the shares.
[10] The Commission’s reasons are more than adequate. A tribunal is not required to undertake a painstaking review of every item of evidence that it has considered. In this case, the reasons are clear and intelligible. There is no basis for interfering with the Commission’s factual findings, or its ultimate conclusions on liability.
[11] The appellant challenges the sanctions imposed by the Commission on various bases. We find that the Commission erred by misapprehending the facts relating to sanctions imposed on the appellant by the Alberta Securities Commission.
[12] The appellant was registered with the ASC as a mutual fund salesperson from 2003-2005. In 2006-2007, he continued to trade in Alberta, despite the fact that he was not registered. In 2009, the appellant entered into a settlement agreement with the ASC, whereby he was subject to a three year ban.
[13] In this case, the Commission attached considerable weight to the “previous ban” imposed in Alberta. It stated at para. 119:
While Loman was not involved in a management capacity with Majestic or Suncastle like the other individual Respondents, he was a former registrant with the ASC, has been subject to bans in the past and should be held to a higher standard because of his experience. [emphasis added].
[14] Similarly, in paragraph 148, the Commission ruled that the “previous” ban called for a heightened sanction:
The seriousness of his misconduct is heightened by the fact that Loman was previously subject to sanctions of the ASC and continued to engage in the misconduct noted above, which suggests that a strong deterrent message is necessary for Loman and like-minded individuals.
[15] These passages reflect error. The Alberta sanctions were not imposed until 2009, after the unregistered trading in Majestic shares took place. The Alberta sanction could not have deterred the Majestic trades because it had not yet occurred. The Commission’s reasons demonstrate that this misapprehension affected the sanctions imposed in relation to bans and the administrative penalty.
[16] Counsel for the Commission urged that we should not interfere, arguing that the sanctions were reasonable despite the error. We cannot be certain that the Commission would have imposed the same sanctions had it properly apprehended the timing of the Alberta ban. It is not for us to override the Commission’s discretion.
[17] Therefore, the appeal is allowed to the extent that the 10 year prohibition on trading; the 10 year prohibition on being an officer or director; and the administrative penalty of $75,000, are set aside. The matter is remitted back to the Commission for a fresh determination on those issues.
[18] Given the divided success of the parties, but the respondent’s success on the more complex issues, we direct that costs be paid by the appellant to the Commission in the amount of $7,500.
___________________________ POMERANCE J.
SWINTON J.
D. L. CORBETT J.
Released: June 25, 2015
CITATION: Loman v. Ontario Securities Commission, 2015 ONSC 4083
DIVISIONAL COURT FILE NO.: 580/13 DATE: 20150625
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
SWINTON, D. L. CORBETT AND POMERANCE JJ.
BETWEEN:
KEVIN LOMAN
Appellant
– and –
ONTARIO SECURITIES COMMISSION
Respondent
REASONS FOR JUDGMENT
POMERANCE J.
Released: June 25, 2015