Citation and Court Information
CITATION: Kadonoff v. OSC, 2023 ONSC 6027
DIVISIONAL COURT FILE NO.: 100/23
DATE: 20231026
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
Before: Sutherland, Leiper and Centa JJ.
BETWEEN:
Kenneth Kadonoff Appellant
– and –
Ontario Securities Commission and Chief Executive Officer, OSC Respondent
Counsel: Eli Lederman, Brian Kolenda and Madison Robins, Solomiya Zakharchuk for the Appellant Andrew Faith and Ryan Lapensee, for the Respondents
HEARD at Toronto: October 16, 2023
Reasons for Judgment
Leiper, J.
Introduction
[1] The Appellant, Kenneth Kadonoff, appeals a finding of the Ontario Securities Commission ("OSC") that he engaged in fraudulent conduct pursuant to s. 126.1 of the Securities Act, and the penalty imposed by the Capital Markets Tribunal in that proceeding.[^1]
[2] The Panel found that Mr. Kadonoff (and the two other Respondents) approved fraudulent transfers of cash from one investment fund to pay investor distributions and dealer fees in another fund. At the time of the cash transfers, Mr. Kadonoff acted as in-house legal counsel and interim President to the fund manager, Solar Income Fund Inc. ("SIF Inc."). He was also a 30% shareholder in SIF Inc.
[3] Mr. Kadonoff submits that the Panel erred in several respects in their decisions on both the merits and in imposing sanctions.
[4] The OSC responds that but for one exception, this appeal does not raise any errors in fact or in law but amounts to a request to have this court re-weigh the evidence, which is not the test on appeal.
[5] The OSC acknowledges that one correction is available on appeal. This is based on its acknowledgement that the amount it sought to attribute to Mr. Kadonoff from the investigator witnesses' methodology evidence was $45,298 and not $51,361. This correction affects the finding on the merits and the amount ordered to be disgorged by Mr. Kadonoff as part of the sanctions.
[6] For the reasons that follow, and subject to the correction to the amount attributed to Mr. Kadonoff's actions, I dismiss the appeal.
Standard of Review on Appeals under the Securities Act
[7] This is an appeal under sections 9 and 10 of the Securities Act. As such, appellate standards of review apply. The standard of correctness applies to questions of law. On questions and fact and credibility, the standard is palpable and overriding error: Housen v. Nikolaisen, 2002 SCC 33, [2002] S.C.R. 235, at para. 10.
[8] Where the evidence supports the inferences drawn by the decision-maker below, it is not for the court on appeal to second-guess those inferences or to reweigh the facts: Housen, at para. 23.
[9] Where the decision-maker has applied the law to the facts it has found, or inferred, and errs by failing to apply the correct legal principle to those facts, this amounts to an extricable error in law which is subject to correctness: Housen, at paras. 26-28; Quadrexx Hedge Capital Management Ltd. v. OSC, 2020 ONSC 4392, 151 O.R. (3d) 709, at para. 80.
[10] This appeal raises several issues, some of fact and others of law or mixed fact and law. For each issue, I consider and discuss the standard of review.
The Issues on Appeal
[11] Mr. Kadonoff raises four issues on appeal:
a. Did the Panel err in law by refusing to consider evidence to undermine the finding that Mr. Kadonoff acted fraudulently?
b. Did the Panel err in law by finding that Mr. Kadonoff had not established a due diligence defence under s. 126.1 of the Securities Act?
c. Did the Panel err in its formulation and application of the defence of reasonable reliance on legal advice?
d. Did the Panel err by imposing a disproportionate, overly punitive penalty?
[12] I will discuss each issue in turn.
Did the Panel err in law by refusing to consider evidence to undermine the finding that Mr. Kadonoff acted fraudulently?
[13] The Panel found that Mr. Kadonoff, as part of the management committee for SIF Inc., acted fraudulently by approving the transfer of money from one fund operated by SIF Inc. to another. The Panel made similar findings against the other Respondents, SIF Inc., and directors Allan Grossman and Charles Mazzacato.
[14] By way of background, SIF Inc. was founded to earn profits relative to Ontario's "Feed-In Tariff Program", which provided a guaranteed price for electricity generation. SIF Inc. created investment funds, SIF#1 and SIF#2, which paid management fees to SIF Inc.
[15] Between 2013 and 2016, SIF Inc. was operated by a management committee. The management committee was also responsible for authorizing the movement of funds between the investment funds.
[16] SIF#1 raised public funds pursuant to an offering memorandum ("OM") and a declaration of trust signed in 2013.
[17] The OM described the business purposes of SIF#1 as follows:
a. Short term: "Over the next twelve months, raise capital through the offering" and "to acquire and/or develop and operate solar energy installations on land or on rooftops, to generate power to be sold under long-term power purchase agreements."
b. Long term: "To invest in Subsidiaries which will in turn invest in the acquisition, development, financing and operation of solar energy power installations...and other ancillary or incidental business activities."
[18] SIF#1 defined the term "Subsidiaries" as "any company, partnership, limited partnership, trust or other entity either controlled, directly or indirectly, by the Fund or in which the Fund holds more than 50% of the outstanding equity securities." The "Fund" was a reference to SIF #1.
[19] The OM included a use of funds table which disclosed how it would use investors' funds. SIF#1 proposed and carried out the creation of a subsidiary trust (SIF#1 Operating Trust) to conduct the fund's business.
[20] SIF#1 raised approximately $25.5M by January 15, 2014. It doubled its offering and eventually increased the amount of money raised to $57M.
[21] Between July 1, 2015, and May 5, 2016, SIF#1 transferred significant amounts of money to SIF#2. SIF#2 used this money to make distribution payments to its investors and to pay its exempt market dealers. The payments to SIF#2's investors and the payments to the exempt market dealers were the basis for Staff's fraud allegations against the Respondents, because the OM did not disclose to investors that SIF#1 would be used to fund SIF #2's obligations.
[22] The Panel found that SIF#1 transferred funds as follows:
a. the SIF#1 Operating Trust transferred approximately $5.31 million to the corresponding operating trust for SIF#2 (the SIF#2 Operating Trust);
b. the SIF#2 Operating Trust transferred approximately $1.66 million of these funds into SIF#2's bank account;
c. SIF#2 paid out $223,224.04 as improper investor distributions; and
d. SIF#2 paid $11,640 to exempt market dealers and $80,391 to a numbered Alberta corporation retained to provide marketing services to the exempt market dealers.
[23] The Panel concluded that Mr. Kadonoff had diminished involvement in the authorizing of the $223,224.04 for SIF#2 investor distributions. The Panel allocated responsibility to Mr. Kadonoff in the amount of $51,361. It also relied on that figure in assessing sanction, and ordered that Mr. Kadonoff disgorge $51,361.
[24] The Panel also found that:
a. The entire management team, to which Mr. Kadonoff belonged, was aware of the transfer of funds and the purpose of the transfers;
b. Mr. Kadonoff knew at the relevant time that SIF#2 was not raising any funds, had not obtained any loans to fund distributions, and was not earning any revenue;
c. A loan to SIF#2 from another party, CPE Inc., to pay distributions was "a small fraction" of the amount transferred from SIF#1 to SIF#2, and less than a quarter of the amounts paid out to investors by SIF#2.
d. Mr. Kadonoff signed a cheque in September of 2015 that permitted the distributions and thus, although he raised concerns about the propriety of the transfers at the time, he was either aware or reckless as to the diversion of funds and he facilitated the diversion of those funds;
e. The offering memorandum did not permit SIF#1 to loan funds to SIF#2 for the purpose of paying investor distributions; and
f. In advance of Mr. Kadonoff authorizing the August 2015 distribution, Mr. Kadonoff acknowledged in an email that SIF#2 "did not have the cash to pay distributions" and that he was "not comfortable" borrowing funds from SIF#1 to pay distributions.
[25] On appeal, Mr. Kadonoff argues that while the Panel was entitled to accept the evidence of the methodology from the OSC's investigator witness, the Panel erred in implementing that methodology. Mr. Kadonoff has proposed various adjustments to the $51,361 figure which are based on what the OSC proposed at the hearing that payments received by SIF#2 after the impugned transfers could notionally be deducted from the amount the Panel linked to Mr. Kadonoff's actions. As counsel for Mr. Kadonoff put it, this was an error in the "measurement of wrongdoing" which had an impact on both the legitimacy of the finding of breach of the Act, and on the sanctions imposed for that breach.
[26] I disagree. While I would give effect to one correction based on the summary of the evidence and the OSC submission to the Panel at the hearing, I am not persuaded that the adoption of the methodology nor the calculations which the Panel accepted from the OSC are subject to any palpable and overriding error, which is the standard of review for findings of fact. The correction does not affect the Panel's ultimate finding that Mr. Kadonoff breached the Act. The Panel provided detailed reasons for adopting the evidence of the rationale, there is no fault in the underlying logic, and the adjusted number remains sufficiently significant to amount to proof on a balance of probabilities that Mr. Kadonoff committed the actus reus of the offence under the Securities Act.
[27] The Panel's reasons on this point in relation to all three respondents are found at paragraphs 100-105 of its reasons as follows:
[100] The respondents also dispute the precise amount of the impugned payment from the SIF#2 fund account to investors. Staff's investigator witness arrived at the figure of $223,224.04 for distributions by a self-described conservative approach of taking the total of $261,159.38 paid for distributions during the period and deducting an adjustment of $37,935.34.
[101] Staff's investigator witness applied the adjustment on a chronological basis to reflect the fact that some funds were commingled in the SIF#2 fund account, and some or all of the $37,935.34 may have been used for various impugned purposes, including not only the payment of distributions and exempt market dealer fees, but also allegedly improper payments to SIF Inc. and CPE. While that last category of payments is not the subject of Staff's fraud allegation, the category is essential to understanding the adjustment.
[102] We accept this conservative approach as an appropriate methodology. Accordingly, for our purposes the amount transferred from SIF#1 to SIF#2 that funded distributions is not less than $223,224.04,and may be slightly higher. Using Staff's chronological approach, the opening balance adjustment referred to above was consumed by July 22, 2015, at the latest. This date is not material for the overall calculation we discuss here, but it becomes relevant when we address Mr. Kadonoff's responsibility below.
[103] Taking the $223,224.04 amount together with the dealer fees of $11,640, the total challenged amount is $234,864.04.
[104] Contrary to the respondents' submission, Staff's analysis does not demonstrate that the impugned uses of SIF#1 funds began no earlier than September 2015. Staff's analysis cannot be completely conclusive on the point, because of the commingling of funds. We accept Staff's conclusion that the use of SIF#1 funds to pay distributions and dealer and marketing fees began no later than June 2015. We are bolstered in this conclusion by Mr. Grossman's testimony that the "entire management team" in June and July of 2015 was aware that funds were being transferred at that time from SIF#1 to SIF#2 to pay distributions to SIF#2 investors.
[105] The respondents describe the impugned amount as a small subset of the funds that SIF#1 advanced to SIF#2. Even accepting that characterization for the sake of argument, it is irrelevant to our analysis. If the transfer were isolated, inadvertent, and of an insignificant amount, then under certain circumstances it might justifiably be disregarded for not meeting the "dishonesty" criterion. In this case, that description does not apply. The absolute size of the amount in issue, and the ratio of the impugned amount to the total amount transferred, are meaningless in the context of this merits hearing.
[28] The Panel adopted the "conservative" approach proposed in the evidence which took into account that the funds from SIF#1 had been commingled in SIF#2's bank accounts, thus not permitting a dollar-for-dollar analysis of which funds were used to fund the distributions. The investigator witness proposed a methodology and a rationale. The methodology deducted certain amounts that were in the SIF#2 accounts as being available for contributing to the distributions and other impugned but not fraudulent payments (management fees to related entities), thus reducing the amount for which Mr. Kadonoff was found to be responsible. The Panel was entitled to accept this evidence. It did so, and gave detailed reasons for that decision.
[29] In argument, the OSC conceded that the net amount attributed to Mr. Kadonoff on the methodology proposed and removing the notional use of SIF#2 existing funds from impugned but not fraudulent payments, would adjust the finding of the fraudulent amounts attributable to Mr. Kadonoff to $45,298. This was the number that the OSC submitted to the Panel was the product of the methodology proposed at the hearing.
[30] I agree that this is a fair interpretation of the "conservative" analysis as found by the Panel. The OSC is right to concede that this aspect of the application of the methodology adopted by the Panel can fairly reduce the amount involved from $51,361 to $45,298.
[31] Counsel for Mr. Kadonoff sought to further reduce fraudulent transfers for which he was responsible based on amounts received after his participation in funding transfers for SIF#2 distributions. On his application of further reductions, Mr. Kadonoff submits the amount he is responsible for is so insignificant, that in line with the Panel's comments about an insignificant amount potentially not rising to the level of fraud, I would not give effect to these submissions. These funds were not available, quantified or known at the time of the transfers. Mr. Kadonoff did not rely on these funds given that his evidence was that he did not know that SIF#1 was funding SIF#2's distributions. They were not in SIF#2's account.
[32] Further, and more fundamentally, even if Mr. Kadonoff had relied on the incoming funds which could have made SIF#1 whole, that would not necessarily have rendered proper the movement of funds from SIF#1 to the account of SIF#2 for improper purposes. The risk of loss is sufficient to establish fraud.
[33] Finally, the other adjustments proposed by Mr. Kadonoff on appeal did not form part of the methodology as found by the Panel. This portion of the argument was an invitation to reweigh the evidence and to arrive at a different conclusion than the Panel, without having heard all of the evidence and in the absence of palpable and overriding error.
[34] The result of the conceded correction and adjustment does not support a finding that s. 126.1 was not breached, or that the amount was inadvertent or insignificant. The Panel did not fall into palpable and overriding error. I would make the correction conceded, but otherwise not give effect to this ground of appeal.
Did the Panel err in law by finding that Mr. Kadonoff had not established a due diligence defence under s. 126.1 of the Securities Act?
[35] Mr. Kadonoff argues that the Panel erred in stating that due diligence is not an available a defence to an allegation of breach of s. 126.1 of the Securities Act. The Panel made this comment in the context of its consideration of the defence of reasonable reliance on legal advice. At paragraph 239 of the reasons the Panel wrote:
[239] We will now review the defence of reasonable reliance on legal advice and consider whether it is available to the respondents on the facts of this case.
[240] The defence is available in a Commission proceeding in respect of an allegation that requires Staff to establish an intentional or wilful act. An allegation of fraud contrary to the Act falls into that category. The defence is therefore available, subject to a respondent satisfying the criteria for its use.
[241] Subsection 126.1(1) of the Act does not provide for a due diligence defence, and under these circumstances none is available. Instead, a respondent who asserts the defence must establish that:
a. the lawyer had sufficient knowledge of the facts on which to base the advice;
b. the lawyer was qualified to give the advice;
c. the advice was credible given the circumstances under which it was given; and
d. the respondent made sufficient enquiries and relied on the advice.
[242] The last of these four components has a due diligence aspect to it, and even though the defence in this context is not a true due diligence defence, diligence on the part of the respondent asserting the defence may play a role both in the assessment of the mental element at the merits stage and as a potential mitigating factor at the sanctions stage (if any) of a proceeding. (Citations omitted).
[36] The defence of due diligence is a defence available at common law or by statute for strict liability offences. It involves an individual proving on a balance of probabilities that they took all reasonable care or took all reasonable steps to avoid committing the offence: R. v. Sault Ste Marie (City), [1978] 2 S.C.R. 1299, at p. 14.
[37] This defence is also incorporated in some statutes, including in s. 122 of the Securities Act in the case of a prosecution for the offence of making misleading statements:
Defence – Without limiting the availability of other defences, no person or company is guilty of an offence under clause (1)(a) or (b) if the person or company did not know and in the exercise of reasonable diligence could not have known that the statement was misleading or untrue or that it omitted to state a fact that was required to be stated or that was necessary to make the statement not misleading in the light of circumstances in which it was made.
[38] In contrast to s. 122 which uses the language of "reasonable diligence" s. 126.1 of the Securities Act provides:
Fraud and market manipulation
126.1(1) A person or company shall not, directly or indirectly, engage or participate in any act, practice or course of conduct relating to securities, derivatives or the underlying interest of a derivative that the person or company knows or reasonably ought to know,
a. results in or contributes to a misleading appearance of trading activity in, or an artificial price for, a security, derivative or underlying interest of a derivative; or
b. perpetrates a fraud on any person or company.
[39] Due diligence can take several forms. As counsel for the OSC concedes, a mistake of fact is an aspect of due diligence which can be a legitimate defence in a prosecution under s. 126.1 of the Securities Act. Mr. Kadonoff raised that defence, testifying that he did not know that SIF#1's funds were being used to fund the distributions by SIF#2 in June, July and August of 2015.
[40] Had the Panel accepted this evidence, then this would have been a defence, at common law, akin to due diligence. Mr. Kadonoff's mistake would have countered the allegation that he knew or reasonably ought to have known that the acts done perpetrated a fraud. But the Panel did not accept his evidence on this point, finding that although Mr. Kadonoff raised concerns about the transfers, he signed the cheque to SIF#2 distributions in his capacity as an officer of SIF Inc. The Panel went on to say that "a reasonable inquiry would have revealed exactly what Mr. Kadonoff feared was indeed happening, we cannot accept his wishful assertion that he relied on others to justify his signing the cheque." Thus, although the Panel did not describe his defence as one of due diligence, it nevertheless considered Mr. Kadonoff's defence of mistake of fact, and his lack of knowledge and rejected his evidence on that point. I find that in considering the defence of mistake of fact, and in observing that there was no statutory defence of due diligence in s. 126.1, the Panel did not fall into legal error.
[41] In reading the detailed reasons for each of the defences raised by Mr. Kadonoff and considering the discussion of due diligence in the context of the section, I conclude that it is likely that the Panel meant that s. 126.1 does not include an explicit statutory defence of due diligence. The Panel understood the defences raised by Mr. Kadonoff at common law and addressed them. This raises a question of mixed fact and law. I see no error in law or any palpable and overriding error in the Panel's application of the law to Mr. Kadonoff's defence of mistake of fact or purported exercise of due diligence. Thus, I would not give effect to this ground of appeal.
Did the Panel err in its formulation and application of the defence of reasonable reliance on legal advice?
[42] Mr. Kadonoff submits that the Panel erred in its treatment of his defence of reasonable reliance on legal advice, by adding a fifth component to the test. I disagree. The Panel considered the issue at length and the evidence in support of the defence in detail. It correctly set out the four-part test at para. 241 of its reasons, and observed that the fourth component of that test"the respondent made sufficient enquiries and relied on the advice" meant that Mr. Kadonoff needed to "show that the advice was sufficiently clear, specific and connected to the impugned act, by addressing the question raised by that impugned act."
[43] The Panel did not add a fifth element to the test. It did consider how the fourth element could logically and legitimately be linked to "sufficient enquiries" by the person who relies on the legal advice.[^2]
[44] The evidence before the Panel from counsel to SIF Inc.'s counsel was that none of SIF Inc.'s management asked Aird & Berlis for an opinion on the propriety of SIF#1 loaning funds to SIF#2 for distributions and dealer fees, and that Aird & Berlis never gave such an opinion. The Panel considered this evidence carefully, devoting several pages of its reasons to the content and chronology of emails and letters exchanged between Aird & Berlis and SIF Inc.
[45] The Panel gave detailed reasons for rejecting Mr. Kadonoff's reliance on legal advice, relative to one communication. It concluded his reliance was "misplaced" given the following:
a. As is quite often the case with notes of this kind, the note is, to use Mr. Kadonoff's own description of it"cryptic" to anyone but the author;
b. On its face, the phrase "distributions may be made" is entirely ambiguous as to whether it reflects Mr. Kadonoff telling Ms. Nelligan that distributions might be made in the future (a possible interpretation that Mr. Kadonoff does not contradict), or Ms. Nelligan giving advice that distributions are permissible;
c. We are not persuaded by Mr. Kadonoff's attempt under direct examination to enhance the value of the phrase, when he testified that it "is really consistent with what I believe I heard";
d. Even if the phrase does reflect Ms. Nelligan's advice, it says only that distributions may be made – it makes no reference to a loan from SIF#1 to SIF #2 for the purpose; indeed, on cross-examination, Mr. Kadonoff conceded that he did not recall Ms. Nelligan giving advice about that issue, although he "didn't hear any objection to it being done";
e. Ms. Nelligan acknowledged that information about distributions may have been imparted to her, but she testified that to her knowledge, no one raised with Aird & Berlis a concern about using SIF#1 loan funds to pay SIF#2 distributions, and Aird & Berlis never gave advice on that issue.
[46] The Panel also specifically preferred Ms. Nelligan's evidence to that of Mr. Kadonoff where their recollections diverged and gave reasons for this finding. As such, its treatment of the defence of reliance on legal advice was a question of mixed fact and law. Mr. Kadonoff has not identified any legal error, nor is there any palpable and overriding error in the Panel's findings of fact.
Did the Panel err by imposing a disproportionate, overly punitive penalty?
[47] The Panel imposed sanctions on all three respondents, including Mr. Kadonoff, and in doing so considered seriousness, duration, indirect benefit, and precedents in other sanction decisions of the Capital Markets Tribunal. The Panel rejected taking a broader contextual perspective based on the amounts raised by the funds, and instead connected the financial sanctions to the amounts attributed to each respondent. It also considered and carefully examined the mitigating factors raised by the parties, including Mr. Kadonoff's ability to pay.
[48] Sanctions are at the discretion of the Panel. Absent a palpable and overriding error as to the facts on which the sanctions are based, or an error in principles of sanction, the court should not interfere. Here, the Panel carefully went through the appropriate principles and reviewed in detail the arguments and factors pertinent to sanction. The Panel was guided by questions of public interest, and the purposes of the Securities Act, including "the protection of investors from unfair, improper or fraudulent practices and the fostering of fair and efficient capital markets."
[49] In Mr. Kadonoff's case, the Panel imposed an administrative penalty of $125,000, disgorgement in the amount of $51,361, costs of $37,500 (jointly and severally with Mr. Grossman for SIF Inc.'s portion of the costs), along with cease trading orders, and a prohibition on serving as an officer and director, save for certain "carve-outs" available once the financial penalties have been paid.
[50] The Panel noted that the disgorgement ordered for Mr. Kadonoff is less than that for the other respondents, given "his limited (in time and amount) role in SIF Inc.'s fraud." Thus, having accepted that a further reduction in that limited amount is available on the record and in line with the acceptance by the Panel of the "conservative" methodology proposed by the OSC, and on appeal (if true), I would reduce the amount of the disgorgement ordered and make a replacement order in the amount of $45,298. Given the relatively minor amount of the adjustment, I would not disturb either the administrative penalty or costs.
[51] Counsel for Mr. Kadonoff also raised the question of whether requiring payment of the financial penalties before permitting the carve-out provisions to take effect is overly punitive given the submission to the Panel that Mr. Kadonoff has limited resources. The Panel considered this submission and noted that in contrast to the respondent, Mr. Mazzacato, who provided a detailed affidavit about his financial situation, Mr. Kadonoff filed only information about his current employment status without disclosing information about his assets or income earned from those assets. The Panel fairly concluded that the evidence proffered was insufficient to establish that Mr. Kadonoff was unable to pay the financial penalties ordered as part of his sanction.
[52] Based on these findings, it cannot be said that the Panel imposed a harsh or punitive sanction by requiring Mr. Kadonoff to pay the penalties and costs prior to having the benefit of the carve-outs from the prohibition orders.
Conclusion
[53] The Appeal is dismissed, except for the adjustment which reduces the disgorgement order against Mr. Kadonoff from $51,361 to $45,298. By agreement of the parties, costs of the appeal are to be paid by Mr. Kadonoff to the OSC in the amount of $15,000.
Leiper J.
I agree
Sutherland J.
I agree
Centa J.
Date: October 26, 2023
CITATION: Kadonoff v. OSC, 2023 ONSC 6027
DIVISIONAL COURT FILE NO.: 100/23
DATE: 20231026
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
Before: Sutherland, Leiper and Centa JJ.
BETWEEN:
Kenneth Kadonoff Applicant/Appellant/Moving Party
– and –
Ontario Securities Commission and Chief Executive Officer, OSC Respondent
ORAL REASONS FOR JUDGMENT
Leiper, J.
Date of Reasons for Judgment: October 26, 2023 Date of Release: October 26, 2023
[^1]: The Capital Markets Tribunal, formerly known as the Ontario Securities Commission, will be referred to in these reasons as the "Panel".
[^2]: Counsel for Mr. Kadonoff provided the court with the decision in Allen v. Dodd and Company Ltd [2020] EWCA Civ 258, in which the Court of Appeal for England and Wales rejected the notion that to rely on legal advice to avoid the tort of inducing breach of contract, the advice must be "definitive." The Court observed that liability may not be avoided unless it at least advises that "it is more probable than not that no breach will be committed" (at paras. 34-36). However, in the case before us, the Panel found that Mr. Kadonoff did not seek legal advice on the question of compliance with the Securities Act, thus, Allen v. Dodd and Company does not assist him.