Furtak et al. v. Ontario Securities Commission

[Indexed as: Furtak v. Ontario Securities Commission]

Ontario Reports

Ontario Superior Court of Justice

Divisional Court, Swinton, Harvison Young and Lococo JJ.

November 13, 2018

143 O.R. (3d) 183 | 2018 ONSC 6616

Case Summary

Securities regulation — Offences — Sanctions — Appellants developing set of contracts and offering them to third parties as tax planning vehicle — Commission finding that set of contracts constituted "investment contract" and therefore fell within definition of "security" — Commission finding that appellants breached Securities Act by selling security without being registered and without filing prospectus — Commission imposing trading and market participation bans ranging from six to ten years, administrative penalties ranging from $25,000 to $75,000, disgorgement orders and costs — Sanctions decision reasonable — Securities Act, R.S.O. 1990, c. S.5.

Securities regulation — Ontario Securities Commission — Standard of review — Standard of review of commission's decision that set [page184] of contracts constituted "investment contract" and fell within definition of "security" being reasonableness.

Securities regulation — "Security" — Appellants developing set of contracts and offering them to third parties as tax planning vehicle — Commission finding that set of contracts constituted "investment contract" and therefore fell within definition of "security" — Standard of review of commission's decision being reasonableness — Decision reasonable.

The appellants developed and offered to third parties a set of contracts (the "Strictrade offering"). The Strictrade offering had the following components: (1) a licence agreement, under which a participant purchased a licence for the use of computerized trading software; (2) a credit agreement, by which one of the appellant F's companies financed 100 per cent of the licence fee in exchange for annual payments of 9.5 per cent interest and one per cent loan maintenance fee; and (3) a software trading and services report agreement with another of F's companies, under which the participant would pay the company a 4.5 per cent fee to host and run the trading software. The company would then use the participant's software licence to trade in financial instruments and would pay the participant $1 per trading report generated by the software, to a maximum of $950 per unit annually. The maximum payable would increase by 4.25 per cent in each succeeding year. After five years, the participant would be entitled to a "software performance bonus" of 60 per cent of all trading report payments made. The set of contracts was marketed as a tax planning vehicle, intended to permit participants to take advantage of business tax deductions. The commission found that the set of contracts constituted an "investment contract" and therefore fell within the definition of "security" in the Securities Act. The appellants were found to have breached the Act by selling a security without being registered and without filing a prospectus. The commission imposed trading and market participation bans ranging from six to ten years, administrative penalties ranging from $25,000 to $75,000, disgorgement orders and costs. The appellants appealed the merits decision and the sanctions decision.

Held, the appeal should be dismissed.

The standard of review of the commission's decision that the set of contracts constituted an "investment contract" and therefore fell within the definition of a "security" was reasonableness. The commission found that the elements of an investment contract were (1) an investment of money; (2) with an intention or an expectation of profit; (3) in a common enterprise in which the fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the investment or of third parties; and (4) whether the efforts made by those other than the investor are the undeniably significant ones -- essential management efforts which affect the failure or success of the enterprise. The commission applied that test to the facts in this case and reasonably found that the set of contracts was an investment contract.

In its sanctions decision, the commission rejected the appellants submission that this was an appropriately conducted exercise in testing the jurisdiction of the commission with a novel business project by people who were amenable to regulation. The commission noted that F had a prior regulatory history with the commission, in which he was removed from the capital markets for six months for unlawfully selling investments that included software licences and that F had not taken any steps to make refunds to any investors for their participation in the Strictrade offering. Among other factors, the commission also considered the appellants' extensive marketing efforts, the misleading nature of the scheme, the [page185] net amount received from investors and the appellants' failure to consider the impact of their conduct on participants. The commission committed no reversible error, and the sanctions decision was reasonable.

Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9, 329 N.B.R. (2d) 1, 64 C.C.E.L. (3d) 1, EYB 2008-130674, J.E. 2008-547, [2008] CLLC Â220-020, 170 L.A.C. (4th) 1, 372 N.R. 1, 69 Imm. L.R. (3d) 1, 291 D.L.R. (4th) 577, 69 Admin. L.R. (4th) 1, 95 L.C.R. 65, D.T.E. 2008T-223, 164 A.C.W.S. (3d) 727, apld

McLean v. British Columbia (Securities Commission), [2013] 3 S.C.R. 895, [2013] S.C.J. No. 67, 2013 SCC 67, 347 B.C.A.C. 1, 452 N.R. 340, 2013EXP-3911, J.E. 2013-2131, EYB 2013-230152, 366 D.L.R. (4th) 30, [2014] 2 W.W.R. 415, 53 B.C.L.R. (5th) 1, 64 Admin. L.R. (5th) 237, 235 A.C.W.S. (3d) 290; Pacific Coast Coin Exchange of Canada Ltd. v. Ontario (Securities Commission), 1977 37 (SCC), [1978] 2 S.C.R. 112, [1977] S.C.J. No. 117, 80 D.L.R. (3d) 529, 18 N.R. 52, 2 B.L.R. 212, [1977] 2 A.C.W.S. 1064; Poonian v. British Columbia Securities Commission, [2017] B.C.J. No. 1029, 2017 BCCA 207, 98 B.C.L.R. (5th) 319, [2017] 10 W.W.R. 91, 413 D.L.R. (4th) 594, 280 A.C.W.S. (3d) 204, consd

Other cases referred to

Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Assn., [2011] 3 S.C.R. 654, [2011] S.C.J. No. 61, 2011 SCC 61, 2011EXP-3798, J.E. 2011-2083, 424 N.R. 70, 339 D.L.R. (4th) 428, 28 Admin. L.R. (5th) 177, 52 Alta. L.R. (5th) 1, [2012] 2 W.W.R. 434, 519 A.R. 1, 208 A.C.W.S. (3d) 434; Canada (Canadian Human Rights Commission) v. Canada (Attorney General), [2018] S.C.J. No. 31, 2018 SCC 31, 2018EXP-1674, EYB 2018-295338; Cartaway Resources Corp. (Re), [2004] 1 S.C.R. 672, [2004] S.C.J. No. 22, 2004 SCC 26, 238 D.L.R. (4th) 193, 319 N.R. 1, [2004] 8 W.W.R. 62, J.E. 2004-954, 195 B.C.A.C. 161, 28 B.C.L.R. (4th) 1, 14 Admin. L.R. (4th) 190, 130 A.C.W.S. (3d) 192; Cheng v. Ontario (Securities Commission), [2018] S.C.C.A. No. 98; Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission), [2001] 2 S.C.R. 132, [2001] S.C.J. No. 38, 2001 SCC 37, 199 D.L.R. (4th) 577, 269 N.R. 311, J.E. 2001-1203, 146 O.A.C. 201, 29 Admin. L.R. (3d) 1, 14 B.L.R. (3d) 1, 105 A.C.W.S. (3d) 972; Finkelstein v. Ontario (Securities Commission) (2018), 139 O.R. (3d) 161, [2018] O.J. No. 489, 2018 ONCA 61, 421 D.L.R. (4th) 278, 292 A.C.W.S. (3d) 314; Furtak (Re), 2016 ONSEC 35, 2016 LNONOSC 682, 39 OSCB 9731; Furtak (Re), 2017 LNONOSC 241, 40 OSCB 4272; Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, 211 D.L.R. (4th) 577, 286 N.R. 1, [2002] 7 W.W.R. 1, J.E. 2002-617, 219 Sask. R. 1, 10 C.C.L.T. (3d) 157, 30 M.P.L.R. (3d) 1, 112 A.C.W.S. (3d) 991; Kolibash v. Sagittarius Recording Co., 626 F. Supp. 1173 (S.D. Ohio 1986); Miller v. Ontario (Securities Commission), [2018] S.C.C.A. No. 97; Ontario (Securities Commission) v. Lett, [2006] O.J. No. 751 (Div. Ct.); Phillips v. Ontario (Securities Commission) (2016), 135 O.R. (3d) 771, [2016] O.J. No. 6488, 2016 ONSC 7901, 2017 BCLG Â79,201, 2017 OCLG Â52,014, 2017 CCLR Â201,358 (Div. Ct.) [Leave to appeal to C.A. refused, M47383 (April 21, 2017)]; Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, [2012] 2 S.C.R. 283, [2012] S.C.J. No. 35, 2012 SCC 35, 2012EXP-2624, J.E. 2012-1380, EYB 2012-208930, 432 N.R. 1, 100 C.P.R. (4th) 204, 347 D.L.R. (4th) 235, 38 Admin. L.R. (5th) 1, 216 A.C.W.S. (3d) 219; SEC v. W.J. Howey Co., 328 U.S. 293 (1946); State v. Hawaii Market Center, Inc., 485 P.2d 105, 52 Haw. 642 (1971); Sunshine Kitchens v. Alanthus Corp., 403 F. Supp. 719 (S.D. Fla. 1975); Synergy Group (2000) Inc. v. Alberta (Securities Commission), [2011] A.J. No. 704, 2011 ABCA 194, 337 D.L.R. (4th) 726, 87 B.L.R. (4th) 175, 510 A.R. 172, 203 A.C.W.S. (3d) 869; Universal Settlements International Inc. (Re), 2006 LNONOSC 824, 29 OSCB 7871; Walton v. Alberta (Securities Commission), [2014] A.J. No. 909, 2014 ABCA 273, 580 A.R. 218, [page186] [2014] 11 W.W.R. 314, 2 Alta. L.R. (6th) 46, 376 D.L.R. (4th) 448, 116 W.C.B. (2d) 85

Statutes referred to

Copyright Act, R.S.C. 1985, c. C-42

Securities Act, R.S.O. 1990, c. S.5, ss. 1(1)(n), 9(1) [as am.], 25(1) [as am.], 53(1) [as am.], 129.2

APPEAL from a merits decision and a sanctions decision of the Ontario Securities Commission.

Julia Dublin, for appellants.

Jennifer M. Lynch and Christina Galbraith, for respondent.

The judgment of the court was delivered by

LOCOCO J.: —

I. Introduction

[1] The appellants were involved in developing and offering to third parties a set of contracts (the offering being referred to as the "Strictrade offering"). The contracts included a licence for use of computerized trading software. The licensor fully financed the licence fee. The contracts also included a services agreement, under which a related company agreed with the third party participant to (i) host the trading software and (ii) trade in financial instruments using the participant's software licence. The set of contracts was marketed as a tax-planning vehicle, intended to permit participants to take advantage of business tax deductions, in consultation with their own tax advisers. According to the appellants, the set of contracts is not a "security" that is subject to regulatory oversight under the Securities Act, R.S.O. 1990, c. S.5.

[2] A panel of the Ontario Securities Commission disagreed. The commission decided that the set of contracts is an "investment contract" and therefore a "security", the sale of which is subject to regulation under the Securities Act.

[3] The appellants appeal two commission decisions. In the "merits decision" (reported at Furtak (Re), 2016 ONSEC 35, 2016 LNONOSC 682, 39 OSCB 9731), the commission found that the appellants breached the Securities Act by selling a security without being registered to do so and without filing a prospectus. In the "sanctions decision" (reported at Furtak (Re), 2017 LNONOSC 241, 40 OSCB 4272), the commission reprimanded the appellants and imposed various sanctions, including trading bans, administrative monetary penalties, disgorgement of proceeds and costs. [page187]

[4] For the reasons below, I would dismiss the appeal against both decisions.

II. Background

[5] The central figure in the Strictrade offering was the appellant Edward Furtak, a Bermuda resident who has a background in computerized models for trading in financial futures and currencies markets. Under the Strictrade offering, third party participants entered into contracts with Mr. Furtak's companies, the appellants Axton 2010 Finance Corp. ("Axton") and Strict Trading Inc. ("Strict Trading", and, collectively with Axton, the "Furtak companies"), both incorporated in the British Virgin Islands.

[6] As set out in more detail in the merits decision (at paras. 4-12), the set of contracts making up the Strictrade offering had the following components:

(1) A licence agreement with Axton, under which a participant purchased a licence for the use of computerized trading software. The licences were sold in units of $10,000, each unit entitling the participant to use the software up to a maximum of $50,000 in trading capital.

(2) A credit agreement, by which Axton financed 100 per cent of the licence fee in exchange for annual payments of 9.5 per cent interest and one per cent loan maintenance fee.

(3) A software trading and services report agreement with Strict Trading, under which the participant would pay Strict Trading a 4.5 per cent fee to host and run the trading software. Strict Trading would then use the participant's software licence to trade in financial instruments. Strict Trading would pay the participant $1 per trading report generated by the software, to a maximum of $950 per unit annually. The maximum payable would increase by 4.25 per cent in each succeeding year. After five years, the participant would be entitled to a "software performance bonus" of 60 per cent of all trading report payments made.

[7] In the merits decision, the commission described the net effect of the various payments that the set of contracts required as follows: (i) the contracts required participants to pay a total of 15 per cent in interest and fees to Axton and Strict Trading annually, in advance (at para. 6); (ii) the annual trading report payments from Strict Trading would not be due until the participant paid the next year's advance payments of interest and fees (at para. 94); (iii) participants would not see a positive return [page188] unless they continued in the program for five years and received the software performance bonus (at paras. 34 and 83); (iv) the only meaningful potential return to participants would be from tax deductions, which were not generally worthwhile for those who were not in the 40 per cent tax bracket (at paras. 34 and 83).

[8] As described in the merits decision, the other appellants were involved in varying roles in marketing the Strictrade offering. The appellant Lorne Allen incorporated the appellant Strictrade Marketing Inc. ("Strictrade Marketing") to market the Strictrade offering (merits decision, at para. 16). Mr. Allen and the appellant Ronald Olsthoorn gave a total of 43 group presentations about the offering to over 1,000 financial professionals in various cities in Canada and one city in the United States. Mr. Allen also gave individual presentations to 60-80 financial professionals (merits decision, at para. 19).

[9] The appellant Trafalgar Associates Limited ("Trafalgar") provided administrative and financial support for the offering (merits decision, at paras. 21 and 105). Mr. Olsthoorn and Mr. Furtak each had a 50 per cent interest in Trafalgar (merits decision, at para. 13). Trafalgar was registered with the commission as an exempt market dealer. Mr. Olsthoorn was registered as Trafalgar's ultimate designated person and chief compliance officer. Mr. Furtak was an approved shareholder of Trafalgar, but was not registered to sell securities. Other than Trafalgar and Mr. Olsthoorn, none of the appellants was registered with the commission during the period of the Strictrade offering (merits decision, at paras. 17-18).

[10] According to the appellants, the substance of the contractual arrangements between the participants and the Furtak companies was that the participants were acquiring a business asset (the software licence) from Axton, which the participants then contracted out to a service provider, Strict Trade. The participants' return (net of interest and fees) was in the form of (i) trading report payments resulting from Strict Trade's use of the software; (ii) the software performance bonus; and (iii) business tax deductions (that would be unavailable for investment expenses), taken in consultation with their own tax advisers.

[11] Marketing of the Strictrade offering focused on the benefits to be derived by participants from certain tax deductions (merits decision, at para. 12), consistent with the commission's finding (at paras. 34 and 83) that tax benefits constituted the only meaningful potential return to participants. In that regard, the commission notes (at para. 33) that consistent with statements made in presentations to potential participants, Mr. Allen and Mr. Olsthoorn described the Strictrade offering as permitting the [page189] participants to generate income by doing little more than making their annual payments and filing their tax returns.

[12] Units in the Strictrade offering were ultimately sold to eight participants, including Mr. Olsthoorn. The marketing of the Strictrade offering was voluntarily suspended in late 2013, after the commission staff commenced a formal investigation. On March 30, 2015, the commission staff issued a statement of allegations that formed the basis for the commission hearings (merits decision, at para. 1).

III. Commission's Findings

[13] The Securities Act provides that unless an exemption applies, (i) a person is not permitted to engage in (or hold themselves out as engaging in) the business of trading in securities unless registered with the commission to do so (s. 25(1)); and (ii) a person is not permitted to engage in a distribution of securities unless a prospectus for those securities is filed with the commission (s. 53(1)). A security is defined in s. 1(1)(n) as including "any investment contract". As well, under s. 129.2, if a company has not complied with Ontario securities law, the company's director or officer who authorized, permitted or acquiesced in the non-compliance is deemed also to have not complied with Ontario securities law.

[14] At the commission hearing, the appellants conceded that no prospectus was filed with respect to the Strictrade offering, consistent with the appellants' position that the set of contracts was not a security (merits decision, at para. 23). In addition, Mr. Olsthoorn and Trafalgar conceded that "know your client" information was not collected nor was an investor suitability assessment conducted for potential participants, as would be required for the sale of securities through a commission registrant. In addition, as previously noted, none of the other appellants was registered with the commission during the period of the Strictrade offering. As well, the appellants did not rely on any exemption from registration (merits decision, para. 103).

[15] In that context, the commission's merits decision considered and decided the following issues relevant to this appeal:

(1) Investment contract: As a threshold issue, was the set of contracts an "investment contract" and therefore a "security"?

Applying the test for an "investment contract" set out in Pacific Coast Coin Exchange of Canada Ltd. v. Ontario (Securities Commission), 1977 37 (SCC), [1978] 2 S.C.R. 112, [1977] S.C.J. No. 117, the commission decided that the set of contracts was an investment contract and therefore a security. [page190]

(2) Prospectus: Did the appellants breach the prospectus requirements of the Securities Act?

Having found that the set of contracts was a security and given the appellants' involvement in the Strictrade offering as described in the merits decision, the commission concluded that the appellants breached the Securities Act by distributing the Strictrade offering without filing a prospectus. Trafalgar argued that it was in a different position than the other appellants, since it did not have a direct role in marketing the Strictrade offering. The commission rejected that argument, finding that Trafalgar played an active role by providing administrative and financial support for the offering, thereby acting in furtherance of trades in securities.

(3) Registration: Did the appellants breach the registration requirements of the Securities Act?

The commission found that Mr. Furtak, Axton, Strictrade Trading, Mr. Allen and Strictrade Marketing breached the registration requirements by engaging in the business of trading in securities without being registered. The commission also found that Trafalgar and Mr. Olsthoorn, by their participation in the Strictrade offering, did not meet their obligations as registrants. In particular, they failed to comply with applicable requirements relating to know your client, know your product and investor suitability.

(4) Director/officer responsibility: Did Messrs. Furtak, Allen and Olsthoorn authorize, permit or acquiesce in their respective companies' non-compliance with Ontario securities law?

The commission concluded that they did, thereby failing to comply with Ontario securities law in their role as directors and officers of those companies.

[16] In the sanctions decision, the commission reprimanded the appellants and imposed various sanctions, including trading bans, administrative monetary penalties, disgorgement of proceeds and costs. The sanctions imposed varied among the appellants based on factors that included their respective roles in the Strictrade offering and the extent of their previous experience in the securities industry.

[17] One member of the commission panel, Vice-Chair Grant Vingoe, dissented from the sanctions decision in one narrow respect. He agreed that the trading bans should prevent the appellants from soliciting new participants, and that none of [page191] the existing participants should be required to commit additional funds (sanctions decision, at para. 79). However, he would have included a limited exception from the trading bans with respect to the remaining three participants. The exception would have allowed each of those participants "to affirmatively consent to [commission] Staff to the continuation of their investments . . . to enable them to consider terminating the arrangements at a time they consider beneficial in each of their circumstances" (sanctions decision, at para. 80). The participants electing to remain would continue to make and receive payments until they decided to terminate their participation in accordance with the contractual terms (sanctions decision, at para. 93). The vice-chair's concern was that the remaining participants may be disadvantaged by a complete trading ban (including the loss of potential tax benefits), and should therefore be permitted the opportunity to make an informed choice whether to continue their involvement (sanctions decision, at para. 95). In the case of Mr. Olsthoorn (one of the three remaining investor participants), the vice-chair's exception would provide that Mr. Olsthoorn's limited participation would continue "only after all his financial obligations under the Sanctions Order have been fully satisfied" (sanctions decision, at para. 97).

IV. Issues to be Determined

[18] The appellants appeal the merits decision and the sanctions decision pursuant to s. 9(1) of the Securities Act. The appellants argue that the commission erred in finding that the set of contracts met the legal test for an "investment contract". They say that the applicable standard of review for the commission's legal finding is correctness. The appellants also argue that the commission erred in making factual findings and drawing inferences that were not supported by the evidence, applying the review standard of palpable and overriding error. As well, the applicants say that the commission erred in its imposition of sanctions against the appellants, applying the review standard of reasonableness.

[19] Commission staff's position is that the standard of review is reasonableness, for the investment contract finding as well as for the other findings that the appellants challenge. The commission staff says that the reasonableness standard has been met in each case.

[20] The issues to be determined are as follows:

(1) Standard of review: What is the applicable standard of review? [page192]

(2) Investment contract: Applying the applicable standard of review, did the commission err in finding that the set of contracts is an "investment contract"?

(3) Factual findings: Applying the applicable standard of review, did the commission err in making factual findings and inferences not supported by the evidence?

(4) Sanctions: Applying the reasonableness standard of review, did the commission err in the sanctions imposed on the appellants?

[21] Each of these issues is addressed below.

V. Standard of Review

[22] What is the applicable standard of review?

[23] In Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9, at para. 45, the Supreme Court of Canada held that on a judicial review of an adjudicative tribunal's decision, the standard of review is a choice between correctness and reasonableness. The analysis to determine which standard applies is "contextual" and "dependent on the application of a number of relevant factors, including: (1) the presence or absence of a privative clause; (2) the purpose of the tribunal as determined by interpretation of enabling legislation; (3) the nature of the question at issue; and (4) the expertise of the tribunal" (Dunsmuir, at para. 64). Dunsmuir also provides the following guidance as to the applicable standard of review:

(1) A standard of reasonableness generally applies to "questions of fact, discretion and policy as well as questions where legal issues cannot be easily separated from the factual issues . . . while many legal issues attract a standard of correctness. Some legal issues, however, attract the more deferential standard of reasonableness" (at para. 51).

(2) A correctness standard will apply to (i) constitutional questions (at para. 58); (ii) "true questions of jurisdiction and vires . . . where the tribunal must explicitly determine whether its statutory grant of power gives it the authority to decide a particular matter" (at para. 59); (iii) questions regarding the jurisdictional lines between two or more competing and specialized tribunals (at para. 61); and (iv) a question of law that is of central importance to the legal system and outside the specialized expertise of the decision maker (at para. 55). [page193]

(3) The more deferential reasonableness standard generally applies (i) "where a tribunal is interpreting its own statute or statutes closely connected to its function, with which it will have particular familiarity"; and (ii) where an administrative tribunal has developed particular expertise in the application of a general common law or civil law rule in relation to a specific statutory context (at para. 54).

(4) The principles underlying the development of the reasonableness standard are described in the following terms (at para. 47):

[C]ertain questions that come before administrative tribunals do not lend themselves to one specific, particular result. Instead, they may give rise to a number of possible, reasonable conclusions. Tribunals have a margin of appreciation within the range of acceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

[24] In subsequent decisions, the Supreme Court has been more definitive in stating that an administrative decision-maker's interpretation of its home or closely connected statutes "should be presumed to be a question of statutory interpretation subject to deference on judicial review": see Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Assn., [2011] 3 S.C.R. 654, [2011] S.C.J. No. 61, 2011 SCC 61, at para. 34; McLean v. British Columbia (Securities Commission), [2013] 3 S.C.R. 895, [2013] S.C.J. No. 67, 2013 SCC 67, at para. 21; and Canada (Canadian Human Rights Commission) v. Canada (Attorney General), [2018] S.C.J. No. 31, 2018 SCC 31, at para. 27.

[25] As indicated in McLean (at para. 22), the presumption in favour of reasonableness review where the tribunal is interpreting its home or closely connected statutes may be rebutted in the following situations: (i) the determination falls within one of the "long recognized . . . categories of questions" referred to in Dunsmuir that "warrant review on a correctness standard"; and (ii) where "a contextual analysis" indicates that a correctness review is warranted. The Supreme Court comprehensively restated this formulation in Canadian Human Rights Commission (at para. 28), as follows:

The [reasonableness] presumption may be rebutted and the correctness standard applied where one of the following categories can be established: (1) issues relating to the constitutional division of powers; (2) true questions of vires; (3) issues of competing jurisdiction between tribunals; and [page194] (4) questions that are of central importance to the legal system and outside the expertise of the decision maker. . . . Exceptionally, the presumption may also be rebutted where a contextual inquiry shows a clear legislative intent that the correctness standard be applied[.]

[Citations omitted; emphasis in original]

[26] In McLean, the Supreme Court decided that reasonableness was the appropriate standard for review of the British Columbia Securities Commission's determination that it was acting within the applicable limitation period when the commission imposed a trading ban against an individual in the public interest. In that case, the appellant argued (among other things) that this determination fell within the exceptional category of being a question of central importance to the legal system and outside the expertise of the decision maker. In rejecting that argument, the Supreme Court indicated as follows (at para. 33), relying on Dunsmuir, at para. 47:

[T]he choice between multiple reasonable interpretations will often involve policy considerations that we presume the legislature desired the administrative decision maker -- not the courts -- to make. Indeed, the exercise of that interpretative discretion is part of an administrative decision maker's "expertise".

(Emphasis in original)

[27] In McLean, the appellant also argued that the presumption of reasonableness review had been rebutted on the basis that "a correctness standard was appropriate because of a statutory scheme under which both an administrative tribunal and the courts had concurrent jurisdiction at first instance in interpreting the relevant statute" (at para. 23), relying on Rogers Communications Inc. v. Society of Composers, Authors and Music Publishers of Canada, [2012] 2 S.C.R. 283, [2012] S.C.J. No. 35, 2012 SCC 35. The court rejected that argument (McLean, at para. 24), noting that unlike in Rogers, the commission in McLean was solely tasked with determining the legal matter in issue at first instance.

[28] While the Supreme Court in McLean does not further comment on the Rogers decision, other potentially distinguishing considerations are evident upon further review of that decision. For example, in Rogers, at paras. 19-20, the court makes it clear that its reasoning would be restricted to instances in which the matter over which a court and a tribunal share concurrent jurisdiction is a pure question of law. The court's reasoning would not apply if the matter is a question of mixed fact and law, given the deference afforded in the securities context to the tribunals' fact-finding function. As well, the court in Rogers (at para. 19) is careful to restrict the application of its reasoning to the intellectual [page195] property regime under the Copyright Act, R.S.C. 1985, c. C-42, which the court characterizes as being "quite unlike the scheme under which the vast majority of judicial reviews arise". The court goes on to state as follows:

Nothing in these reasons should be taken as departing from Dunsmuir and its progeny as to the presumptively deferential approach to the review of questions of law decided by tribunals involving their home statute or statutes closely connected to their function.

[29] At the appeal hearing, appellants' counsel argued that in determining the review standard for the commission's legal finding that the set of contracts is an "investment contract", the presumption in favour of reasonableness is rebutted for number of reasons, notably as follows:

(1) It goes to the commission's threshold jurisdiction to sanction conduct under the Securities Act.

(2) It is a matter of central importance to the legal system that falls outside the commission's specialized expertise. "Investment contract" is not a specialized term of securities legislation such as "material change" or "insider". Pacific Coast Coin, the leading case on the interpretation of the term "investment contract", is a decision of the Supreme Court of Canada.

(3) The Securities Act creates alternative criminal and administrative penalties for contraventions of Ontario securities laws. The question of whether a set of contracts is an investment contract could be assessed at first instance by a criminal court, a civil court or the commission.

[30] I do not find the appellants' arguments to be persuasive, for the following reasons:

(1) By arguing that the issue is one of threshold jurisdiction, the appellants are relying on the Dunsmuir exception for "true questions of jurisdiction and vires" (at para. 59). As Dunsmuir and subsequent decisions make clear, this exception is meant to be narrow in scope, restricted to situations "where the tribunal must explicitly determine whether its statutory grant of power gives it the authority to decide a particular matter" (Dunsmuir, at para. 59). In decisions subsequent to Dunsmuir, the Supreme Court not only confirmed the narrow scope of this exception, but also called into question whether it exists at all as a separate category of exception (without deciding the issue): see Alberta Teachers, at para. 34; McLean, at para. 25; and Canadian Human [page196] Rights Commission, at paras. 31-39. There is no doubt that the commission had the authority in this case to decide the issue of whether a set of contractual arrangements constitutes an "investment contract". On previous occasions, determinations of this nature have been made by securities commissions, and subsequently reviewed on a reasonableness standard: see Ontario (Securities Commission) v. Lett, [2006] O.J. No. 751 (Div. Ct.), at paras. 2 and 9-10; and Synergy Group (2000) Inc. v. Alberta (Securities Commission), [2011] A.J. No. 704, 2011 ABCA 194, 337 D.L.R (4th) 726, at paras. 24 and 30. Clearly, the elusive exception for true questions of vires does not apply to the commission's "investment contract" finding in this case.

(2) I am equally unconvinced by the appellants' position that this determination was a matter of central importance to the legal system and falls outside the commission's specialized expertise. The principles to be applied in determining whether this exception applies in the securities regulatory context were canvased by the Supreme Court in McLean (at paras. 26-33) and applied by this court in Phillips v. Ontario (Securities Commission) (2016), 135 O.R. (3d) 771, [2016] O.J. No. 6488, 2016 ONSC 7901 (Div. Ct.), at paras. 35-37, leave to appeal to C.A. refused, M47383 (April 21, 2017). The narrow and exceptional nature of this exception was also the subject of recent comment by the Supreme Court in Canadian Human Rights Commission, at paras. 42-43. Applying the reasoning in McLean and subsequent cases, I am left in no doubt that this exception does not apply to rebut the presumption of reasonableness review for the commission's "investment contract" finding.

(3) To rebut the presumption of reasonableness review, the appellants also rely on the fact that under the Securities Act, either the commission or a court may determine at first instance whether a set of contractual arrangements constitutes an "investment contract". The appellants rely on the British Columbia Court of Appeal decision in Poonian v. British Columbia Securities Commission, [2017] B.C.J. No. 1029, 2017 BCCA 207, 413 D.L.R. (4th) 594, which in turn relied on the Supreme Court of Canada's decision in Rogers. I do not agree that the reasoning in Rogers assists the appellants on this appeal. Notably, I agree with commission staff that the question of whether the set of contracts is an investment contract is a mixed question of fact and law, rather than a pure question of law. On that basis, the reasoning in Rogers [page197] would not apply in this case (see Rogers, paras. 19-20, discussed above). As well, given that Poonian is not binding authority in Ontario and without commenting on its merits, Poonian should not be taken as expanding the application of Rogers beyond the scope of the Supreme Court's reasoning in that case: see Finkelstein v. Ontario (Securities Commission) (2018), 139 O.R. (3d) 161, [2018] O.J. No. 489, 2018 ONCA 61, at para. 38-40.[^1]

[31] Accordingly, reasonableness is the standard of review that applies to the commission's decision that the set of contracts is an investment contract.

[32] In the appellants' factum and their counsel's oral submissions, they refer to "palpable and overriding error" as the standard of review that applies to findings of fact. I do not agree that this standard of review is applicable in the context of judicial review of an adjudicative tribunal's decision.

[33] In Housen v. Nikolaisen, [2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, 2002 SCC 33, the Supreme Court of Canada considered the standard of review that applied to a trial judge's finding of negligence in the context of motor vehicle litigation. The Supreme Court held (at para. 36) that since negligence is a mixed question of fact and law, the standard of review for the trial judge's finding of negligence was palpable and overriding error, as it would be in that context for a pure question of fact. The court also stated that a correctness standard would apply if the decision being reviewed is a pure question of law (at para. 8). As well, the court indicated that an error of law subject to a correctness review would include circumstances in which it is clear that the trial judge made some inextricable error in principle with respect to the characterization of a legal standard or its application (at paras. 33-37). However, the Supreme Court noted (at para. 36) that the reviewing court "must be cautious . . . in finding that a trial judge erred in law in his or her determination of negligence [being a mixed question of fact and law], as it is often difficult to extricate the legal questions from the factual".

[34] As previously indicated, the principles relating to the standard that applies upon judicial review of an adjudicative tribunal's decision are set out in Dunsmuir, as interpreted by subsequent case law. That case law makes it clear that the standard [page198] of review in that context is a choice between correctness and reasonableness (Dunsmuir, at para. 45). For a question of fact, the standard of review is clearly reasonableness, as it would generally be for a mixed question of fact and law (Dunsmuir, at para. 51). It does not assist the analysis on this appeal to consider another standard of review that applies in a different context.

VI. Investment Contract

[35] Applying the reasonableness standard of review, did the commission err in finding that the set of contracts is an "investment contract"?

[36] In order to determine whether the set of contracts is an investment contract, the commission considered and applied the test set out by the Supreme Court of Canada in Pacific Coast Coin. In that decision, the Supreme Court relied on certain U.S. decisions that interpreted the term "investment contract" in the context of U.S. securities law, notably the U.S. Supreme Court decision in SEC v. W.J. Howey Co., 328 U.S. 293 (1946) and the decision of the Hawaii Supreme Court in State v. Hawaii Market Center, Inc., 485 P.2d 105, 52 Haw. 642 (1971). In the merits decision (at paras. 66-68), the commission summarized the salient aspects of the Pacific Coast Coin decision as follows:

Counsel agree that the leading test for "investment contract" in Canada is articulated in Pacific Coast Coin Exchange v Ontario Securities Commission, 1977 37 (SCC), [1978] 2 SCR 112. These elements can be described as

1. an investment of money,

2. with an intention or an expectation of profit,

3. in a common enterprise in which the fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the investment or of third parties,

4. whether the efforts made by those other than the investor are the undeniably significant ones -- essential managerial efforts which affect the failure or success of the enterprise.

The courts apply these elements to a given set of facts in the context of the purposes of the [Securities] Act, which include the protection of the investing public. In Pacific Coast Coin, the Supreme Court of Canada considered substance over form as well as the economic realities of the enterprise (at 127).

The Supreme Court in Pacific Coast Coin referred to State of Hawaii, Commissioner of Securities v Hawaii Market Center, Inc., 485 P 2d 105 (1971), in which the Supreme Court of Hawaii articulated the risk capital approach to the definition of "investment contract":

The salient feature of securities sales is the public solicitation of venture capital to be used in a business enterprise. . . . This subjection of the investor's money to the risks of an enterprise over which he [page199] exercises no managerial control is the basic economic reality of a security transaction.

(at 109)

[37] In the merits decision, the commission considered whether the four elements of the Pacific Coast Coin test applied to the Strictrade offering. The commission found that the test had been satisfied, with the result that the set of contracts constituted an investment contract, and therefore a security.

[38] The appellants challenge the commission's analysis with respect to the application of the Pacific Coast Coin test, particularly (i) the first element, and (ii) the third and fourth elements, considered together.

[39] With respect to the first element, the appellants challenge the commission's finding that the participants' initial payments of a total of $513,000 in interest and fees were sufficient to constitute an "investment of money", without consideration of the transactions' substance. In the merits decision (at para. 78), the commission justified this approach, on the basis that "[t]he purpose of the payment and aspects of the economic arrangements are addressed in the other elements of the test".

[40] With respect to the third and fourth elements, the appellants challenge the commission's conclusion that by passively providing funds to the Furtak companies, the participants were in a common enterprise with them, dependent to a significant extent on their managerial efforts affecting the enterprise's success or failure. The appellants say that the participants were far from passive, deciding on the size of the software licence they wished to acquire as a business asset and contracting the license out to earn a return, in consultation with their own tax advisers. The appellants also say that other than the risk of counterparty insolvency, the participants had no interest in how the Furtak companies used the funds the participants provided. According to the applicants, the participants were not looking to make money from the Furtak companies' use of the participants' contributed funds, as would be the case if the participants were dependent on the managerial efforts of others to a significant extent. To support their position, the appellants referred to Canadian and U.S. case law, including potential competing visions of "common enterprise" and "expectation of profit" in Kolibash v. Sagittarius Recording Co., 626 F. Supp. 1173 (S.D. Ohio 1986) and Sunshine Kitchens v. Alanthus Corp., 403 F. Supp. 719 (S.D. Fla. 1975).

[41] I am not persuaded by the appellants' arguments. In the merits decision (at paras. 76-97), the commission addressed the various elements of the test for an "investment contract" as set [page200] out in Pacific Coast Coin. I consider the approach the commission took and the conclusions it reached to be reasonable, meeting the required standard of review.

[42] In that regard, I note once again the Supreme Court's comments in Dunsmuir (at para. 47) that questions that come before an administrative tribunal "may give rise to a number of possible, reasonable conclusions". When applying the reasonableness review standard, the reviewing court's legitimate concern is (i) the "justification, transparency and intelligibility" of the decision-making process; and (ii) whether the decision "falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law". Consistent with McLean (at para. 33), those principles presumptively apply to a tribunal's application of legal principles in its home or closely connected statutes, as they would to questions of fact. As noted in McLean (at para. 40)"under reasonableness review, [reviewing courts] defer to any reasonable interpretation adopted by an administrative decision maker even if other reasonable interpretations may exist" (emphasis in original).

[43] In reaching the conclusion that the commission's investment contract finding meets the reasonableness review standard, I recognize that the Supreme Court in Pacific Coast Coin did not break down the test for an "investment contract" into four components as neatly as the commission does in the merits decision. The elements of the test, as articulated by the commission, are not airtight compartments, as the commission recognizes in the merits decision (at para. 91). Many of the same considerations may well apply to more than one aspect of the test. In my view, however, the commission's formulation captures the essence of the test as set out in Pacific Coast Coin, providing an appropriate basis for analysis.

[44] In particular, I consider it reasonable for the commission to have concluded that the first element of the test was met by the participants' upfront payments of interest and fees to the Furtak companies, without further analysis at that stage relating to the substance of the transactions. The commission comprehensively considers the substance of the transactions elsewhere in the merits decision, in particular in the analysis of the other aspects of the "investment contract" test. I am satisfied that the commission met the reasonableness standard in its consideration of the transactions' substance and economic reality, consistent with the Supreme Court's direction in Pacific Coast Coin. I am also satisfied that in the application of all aspects of the "investment contract" test, the commission articulated its conclusions in a manner consistent with the principles in Dunsmuir and [page201] other case law, including the requirement for "justification, transparency and intelligibility" in decision making.

[45] Without attempting to be comprehensive in addressing other concerns the appellants raised, I am satisfied that in the merits decision, the commission reasonably addressed the other aspects of the Pacific Coast Coin test, including in reaching its conclusions about the passive nature of the participants' involvement in the Strictrade transactions and their reliance on the Furtak companies to generate return in the form of trading report payments, the software performance bonus and potential tax benefits. In the merits decision, the commission referred to many of the same cases relating to the "investment contract" test that the appellants relied on, including the Kolibash and Sunshine Kitchens decisions. I am satisfied that the commission's conclusions, in its interpretation of this key aspect of its home statute, fell within a range of outcomes that are "possible, acceptable . . . [and] defensible" (Dunsmuir, at para. 47).

VII. Factual Findings

[46] Applying the reasonableness standard of review, did the commission err in making factual findings and drawing inferences not supported by the evidence?

[47] The appellants argue that the commission erred in making findings of fact and drawing inferences not supported by the evidence at the hearing, as well as by failing to consider evidence of material facts. The appellants say that in so doing, the commission committed reversible error, applying the applicable standard of review, which I have found to be reasonableness.

[48] In particular, the factual errors that the appellants allege include the following:

(1) Investment contract indicia: In its finding that the set of contracts was an investment contract, the commission failed to consider that none of the participants who testified stated that they were interested in or expected to profit from the Furtak companies' activities. All of them claimed business tax benefits unavailable for investment expenses, an indication that they were not relying on the Furtak companies' managerial efforts.

(2) Valuation of software licence: The commission erred in finding that a third party valuation of the software licence cited in the marketing material did not reflect the actual terms of the Strictrade offering. In making that finding, the commission relied on the evidence of a commission staff fact witness who had no expertise in the subject matter of the valuation. [page202]

(3) Trading capital: The commission erred in finding that there was no logical link between the amount of trading capital that could be used per licence and any actual activity in the Strictrade trading account. As a result, the commission drew an unwarranted negative inference about the Strictrade offering and the appellants.

(4) Delivery of software: The commission erred in concluding that the participants did not take possession of a business asset because the participants did not have the software installed on their computers. Among other things, that finding ignores how data ownership, usage and transfer occurs in the modern age.

(5) Tax matters: The commission made unwarranted findings relating to tax matters, which were beyond the jurisdiction or expertise of securities regulators. For example, the commission found that any tax benefits were not generally available for those who were not in the 40 per cent tax bracket and drew an unwarranted negative inference from the fact that a participant withdrew RRSP funds to participate in the Strictrade offering.

(6) Mr. Olsthoorn's conduct as a registrant:The commission erred in drawing a negative inference as to Mr. Olsthoorn's integrity, proficiency and conduct as a registrant, resulting from his participation in the Strictrade offering. The negative inference was unwarranted, given (among other things) his belief based on professional advice that the Strictrade offering was a tax-planning vehicle, rather than an offering of securities.

(7) Prior communications with commission staff: The commission erred in finding insincerity in the appellants' prior communications with commission staff dealing with iterations of offerings relating to software trading licences. There was no evidence of misleading or untrue statements to commission staff justifying those conclusions.

[49] In Finklestein (at para. 89), the Ontario Court of Appeal confirmed that in applying the reasonableness standard of review, factual errors may be grounds for overturning a tribunal's decision, but only if they go to a "core finding", the real issue being whether they are "fundamental to the reasonableness of the conclusion reached". Having considered the factual errors that the appellants allege, I agree with commission staff that the appellants have not demonstrated that the commission [page203] made factual errors that would impact its conclusion that the Strictrade set of contracts was an investment contract or that the appellants breached the Securities Act. As discussed further below, I have reached the same conclusion with respect to the sanctions that the commission imposed in the sanctions decision.

[50] Essentially, the appellants are asking this court to reweigh the evidence that the commission heard and reach different conclusions than the commission did. That is clearly not the role of a reviewing court, particularly in circumstances in which a specialized tribunal is considering matters relating to the interpretation and application of its home or closely connected statutes.

[51] The lynchpin of the merits decision is the commission's finding that the Strictrade set of contracts was an investment contract, and therefore a security. As previously indicated, I am satisfied that the commission met the reasonableness review standard in making that finding. In doing so, the commission refers to evidence that amply supports its conclusions. I am not satisfied that the alleged errors the appellants have cited, alone or collectively, would have altered that finding. In any case, in large measure, the appellants are asking this court to reweigh the hearing evidence by rejecting evidence that the commission evidently accepted, or accepting evidence that the commission did not find persuasive. As already indicated, that is not the role of a reviewing court.

[52] Once the commission found that the Strictrade set of contracts was a security, it reasonably followed that the appellants were in breach of the registration and prospectus requirement of the Securities Act. In the case of the appellants other than Mr. Olsthoorn and Trafalgar, that conclusion was amply justified by their direct involvement in the development and/or the marketing of the Strictrade offering without being registered and without filing a prospectus. In the case of Mr. Olsthoorn and Trafalgar, the commission reasonably found that they failed to comply with their obligations as commission registrants by their involvement in the Strictrade offering. In making the latter findings, I am satisfied in particular that the commission met the standard of reasonableness in considering Mr. Olsthoorn's compliance with the proficiency, suitability and other requirements that apply to commission registrants.

VIII. Sanctions

[53] Applying the reasonableness standard of review, did the commission err in the sanctions imposed on the appellants? [page204]

[54] As noted previously, in the sanctions decision, the commission reprimanded the appellants and imposed various sanctions, including trading bans, administrative monetary penalties, disgorgement of proceeds and costs. In particular, the sanctions included,

(1) as against Mr. Allen and Strictrade Marketing, trading and market participation bans of six year[s], an administrative monetary penalty of $25,000, disgorgement of commissions and costs of $139,510;

(2) as against Mr. Olsthoorn and Trafalgar, trading and market participation bans of eight years, an administrative penalty of $35,000, disgorgement of commissions and costs of $139,510; and

(3) as against Mr. Furtak, Axton and Strictrade Trading, trading and market participation bans of ten years, an administrative penalty of $75,000, disgorgement of commissions and costs of $186,014.

[55] In the sanctions decision (at paras. 31-40), the commission outlines in general terms the approach it took to sanctions as well as the relevant factors it considered. The commission outlined its general approach in the following terms (at para. 31):

We accept the approach to sanctions as submitted by Staff as being a proportionate response and grounded in the public interest. Sanctions are required to respond to the features of the Strictrade Offering, the harm to investors and the future risks posed by the Respondents to the markets. We reject the Respondents' submission that this was an appropriately conducted exercise in testing the jurisdiction of the Commission with a novel business product by people who are amenable to regulation. The evidence does not support that narrative.

[56] The commission then went on to outline in general terms the factors relevant to sanctions in this case, including the following: (i) Mr. Furtak's prior regulatory history with the commission, in which he was removed from the capital markets for six months for unlawfully selling investments that included software licences (at para. 32); (ii) the fact that Mr. Furtak has not taken any steps to make refunds to any investors for their participation in the Strictrade offering (at para. 34); (iii) the appellants' extensive marketing efforts, the [at para. 35] "misleading nature of the scheme without commercial justification for its complex structure", the unsatisfactory nature of Mr. Furtak's prior discussions with commission staff relating to proposed vehicles to monetize trading software, and his awareness of the regulatory risks (at paras. 35-36); (iv) the fact that Mr. Furtak, Mr. Olsthoorn and [page205] Trafalgar were current or former commission registrants, who were expected to have a higher understanding of the regulatory framework and awareness of their responsibilities; (v) the net amount received from investors, being $216,538 (at para. 39); and (vi) the appellants' failure to consider the impact of their conduct on participants (at para. 40).

[57] Through their counsel, the appellants acknowledge that (i) the deferential reasonableness standard of review applies to the imposition of sanctions; and (ii) sanctions falling within the expertise of the tribunal are not to be overturned unless they are demonstrably unfit, based on some error of principle, or are otherwise unreasonable: Walton v. Alberta (Securities Commission), [2014] A.J. No. 909, 2014 ABCA 273, 376 D.L.R. (4th) 448, at para. 23, citing Cartaway Resources Corp. (Re), [2004] 1 S.C.R. 672, [2004] S.C.J. No. 22, 2004 SCC 26. They also acknowledge that when the commission is imposing sanctions to protect the public interest, specific and general deterrence are appropriate factors to consider: see Cartaway, at para. 4.

[58] Applying those principles, the appellants argue that the "severe" monetary and trading sanctions and costs the commission imposed were unreasonable and disproportionate to their conduct. Among other things, they argue that no identifiable public interest goals are served by the sanctions and costs imposed on them. They say that the sanctions imposed amount to "punishment masquerading as specific and general deterrence". As indicated by the Supreme Court of Canada in Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission), [2001] 2 S.C.R. 132, [2001] S.C.J. No. 38, 2001 SCC 37, at para. 42, the commission's public interest jurisdiction "is neither remedial nor punitive; it is protective and preventative, intended to be exercised to prevent likely future harm to Ontario's capital markets".

[59] The appellants also argue that to the extent that a trading ban is imposed, the ban should include the exception advocated by Vice-Chair Vingoe in his dissenting reasons for the sanctions decision, in order to permit the three remaining investor participants to continue to make and receive payments until they decide to terminate their participation. The appellants say that it is not reasonable to deprive them of the opportunity to make an informed choice to whether to continue their investment, to their potential financial disadvantage.

[60] I am not persuaded by the appellants' arguments that the commission fell into reversible error in its sanctions decision. I agree with commission staff that the sanctions that the commission imposed in this case fell within the broad discretion [page206] afforded to the commission to craft sanctions in the public interest, comfortably meeting the review standard of reasonableness. In determining the sanctions (including costs) that the commission imposed, the commission considered the appellants' varying circumstances, including their respective roles in the offering, previous involvement with securities matters and other relevant factors. I see nothing in the sanctions decision to support the position that the sanctions imposed were punitive in effect, rather than protective and preventative. In that regard, I am not persuaded that the commission made factual errors that were fundamental to the reasonableness of the sanctions imposed.

[61] With respect to the trading ban's scope, as previously indicated, Vice-Chair Vingoe would have allowed a limited exception from the trading ban to permit the three remaining investor participants to elect to continue their investment, in order to avoid being disadvantaged by an early termination of contractual rights (sanctions decision, at paras. 80-84). In the majority decision (at para. 65), the majority concluded that having found that the appellants breached the Securities Act in carrying out the Strictrade offering"it would send a confusing message to the markets and registrants if the Respondents were allowed to continue trading unabated or if the scheme was allowed to continue", involving an "unprecedented exercise of discretion by the Commission to permit an unlawfully promoted scheme to continue". The majority was also concerned that such an order "may also put the Commission in the position of advancing the alleged interests of individual investors ahead of the public at large".

[62] Among other things, the appellants took issue with the majority decision's reference to the "unprecedented" nature of an exception from the trading ban, given in particular Vice-Chair Vingoe's reliance on a previous commission decision in Universal Settlements International Inc. (Re), 2006 LNONOSC 824, 29 OSCB 7871 to support his position. The majority decision (at para. 66) considers Universal Settlements, however, distinguishing it on its facts. The majority therefore specifically considered and addressed the precedential value of that decision.

[63] Having considered both the majority reasons and the vice-chair's dissenting reasons for the sanctions decision, I have concluded that each of them provides a reasonable basis for the respective position on the scope of the trading ban. In both cases, the panel members carefully consider the relevant public interest considerations and reach conclusions that are "possible, acceptable . . . [and] defensible" (Dunsmuir, at para. 47). This court's role as a reviewing court does not include choosing between them. [page207] As noted in McLean (at para. 40)"under reasonableness review, [reviewing courts] defer to any reasonable interpretation adopted by an administrative decision maker even if other reasonable interpretations may exist" (emphasis in original). I see no basis for interfering with the sanctions imposed.

IX. Conclusion and Costs

[64] Accordingly, the appellants' appeal against both decisions is dismissed.

[65] The commission staff is entitled to its costs in the requested amount of $15,000, payable by the appellants jointly and severally within 30 days. The amount awarded is less than one quarter of the full amount set out in the commission staff's costs outline, and considerably less than the amount the appellants requested if successful. Appellants' counsel argued that the circumstances of this matter do not elevate it to "a matter of national importance" that justifies awarding costs to commission staff if successful. I am not aware of any such principle that would displace the presumptive outcome of costs following the event.

Appeal dismissed.

Notes

[^1]: Leave to appeal applications pending: Miller v. Ontario (Securities Commission), [2018] S.C.C.A. No. 97 and Cheng v. Ontario (Securities Commission), [2018] S.C.C.A. No. 98.