2024 ONSC 4691

DIVISIONAL COURT FILE NO.: 451/23 & 441/23

DATE: 20240828

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

Backhouse, Lococo and Leiper JJ.

BETWEEN:

MAURICE AZIZ, NAYEEM ALLI and ANDRE ITWARU

Appellants

– and –

CHIEF EXECUTIVE OFFICER OF THE ONTARIO SECURITIES COMMISSION

Respondent

Robert Stellick, for the Appellants Maurice Aziz and Nayeem Alli

Mark M. Persaud, for the Appellant Andre Itwaru

Mark Bailey and Sakina Babwani, for the Respondent

HEARD in Toronto: July 25, 2024, by video conference; additional written submissions, August 16, 2024

REASONS FOR JUDGMENT

R. A. LOCOCO J.

I. Introduction

[1] The appellants Maurice Aziz, Nayeem Alli and Andre Itwaru appeal two decisions of the Capital Markets Tribunal in regulatory proceedings brought by the respondent Chief Executive Officer of the Ontario Securities Commission (“OSC”) under the Securities Act, R.S.O. 1990, c. S.5.

[2] In the “Merits Decision” dated September 15, 2022 (reported at First Global Data Ltd. (Re), 2022 ONCMT 25), the Tribunal found that the appellants and other defending parties committed breaches of Ontario securities law, including securities fraud, illegal distribution and unregistered trading, in relation to the sale of debentures of a public company and related matters.

[3] In the “Sanctions Decision” dated June 22, 2023 (reported at First Global Data Ltd. (Re), 2023 ONCMT 25), the Tribunal imposed monetary and non-monetary sanctions that included disgorgement, administrative penalties, and market participation restrictions, and also ordered costs against the appellants.

[4] The appellants submit that the Tribunal erred in the Merits Decision on various questions of law, fact, and mixed fact and law. They ask the court to set aside the Merits Decision and dismiss the allegations against them or remit the matter to the Tribunal for reconsideration.

[5] In the alternative, the appellants submit that the Tribunal erred in the Sanctions Decision, including in its interpretation and application of the disgorgement remedy. They ask the court to substitute less onerous sanctions and costs or remit the matter to the Tribunal for reconsideration.

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

II. Background

[7] First Global Data Ltd. (“First Global”) was an Ontario public company, the shares of which were listed on the Toronto Venture Exchange. It was a reporting issuer under the Securities Act and the securities legislation of other provinces. First Global described itself as an international financial technology company, involved in mobile payments and cross-border payments: Merits Decision, at para. 51.

[8] The appellants Andre Itwaru and Nayeem Alli were the co-founders of First Global. Mr. Itwaru was the chief executive officer. Mr. Alli was the chief financial officer: Merits Decisions, at para. 52. Both were also directors of First Global: Merits Decision, at para. 581.

[9] During an eight-month period in 2015, 80 investors invested a total of $4.46 million in debentures issued by First Global. The investors lost all their money: Merits Decision, at para. 1.

A. OSC staff’s allegations against the appellants

[10] The Tribunal decisions under appeal arose from allegations by the staff of the OSC (“OSC staff”) that the appellants and other defending parties breached Ontario securities law[^1] in relation to the sale of First Global debentures and related matters.

[11] In its Statement of Allegations, OSC staff alleged that First Global’s fundraising activities were carried out by Global Bioenergy Resources Inc. (“GBR Ontario”), a private Ontario company, and its principals, including the appellant Maurice Aziz (GBR Ontario’s secretary) and Harish Bajaj (its president). Mr. Aziz, Mr. Bajaj and an associate of Mr. Bajaj “founded” GBR Ontario and were its only directors and shareholders: Merits Decision, at para. 164. Mr. Bajaj was a defending party before the Tribunal but is not an appellant in this appeal.

[12] GBR Ontario was incorporated in 2015 for the purpose of raising funds for Global Bioenergy Resource SAS (“GBR Colombia”), a newly-formed Colombian company that was intended to hold rights to certain natural resource properties in Colombia: Merits Decision, at paras. 4-5, 34-41. The principal shareholder of GBR Colombia was Adriana Rios Garcia, who controlled natural resource assets in Colombia and required funding to develop the assets: Merits Decision, at paras. 18-21, 34-35. The four directors of GBR Colombia were Ms. Garcia, Mr. Aziz, Mr. Bajaj and Mr. Bajaj’s associate: Merits Decision, at para. 41. Ms. Garcia testified as a witness for OSC staff at the Tribunal hearing but was not a defending party in those proceedings.

[13] Mr. Bajaj and the fourth director of GBR Colombia “considered it important that fundraising [for GBR Colombia] be done through a public company, so that investors could hold their investments in registered accounts (e.g., RRSP, TFSA)”: Merits Decision, at para. 50. Mr. Aziz introduced them to First Global, which also required funding for its business. Mr. Aziz had a relationship with First Global through his longstanding friendship with its principals, Mr. Itwaru and Mr. Alli: Merits Decision, at para. 52.

[14] In its Statement of Allegations, OSC staff alleged that in carrying out the sale of First Global debentures, the appellants and other defending parties committed breaches of Ontario securities law.

[15] Unless an exemption applies, a person is not permitted to engage in a distribution of securities unless a prospectus for those securities is filed with the OSC: Securities Act, s. 53(1). Unless an exemption applies, a person is not permitted to engage in the business of trading in securities unless registered with the OSC to do so: Securities Act, s. 25(1). If a company has not complied with Ontario securities law, a director or officer of the company who authorized, permitted or acquiesced in the non-compliance is deemed also to have not complied with Ontario securities law: Securities Act, s. 129.2.

[16] OSC staff alleged that the First Global debentures were illegally distributed without a prospectus or a prospectus exemption. It was also alleged that GBR Ontario, Mr. Aziz and Mr. Bajaj engaged in the business of trading those debentures without being registered: Merits Decision, at para. 3.

[17] OSC staff further alleged that GBR Ontario, Mr. Aziz and Mr. Bajaj committed securities fraud, contrary to s. 126.1 of the Securities Act, because of misrepresentations they made in selling the First Global debentures to investors. In the Merits Decisions, at para. 4, the Tribunal described the fraudulent misrepresentations as follows:

The three sets of allegedly fraudulent misrepresentations were about:

a. how the funds raised by selling First Global debentures would be put to use, i.e., to fund First Global’s working capital, and/or to help First Global deploy its mobile technology and global payment systems outside Canada, and/or to fund certain Colombian natural resource operations unrelated to First Global’s core business;

b. whether natural resource assets and production facilities existed in Colombia that were operating and that were producing sufficient revenue to generate the promised returns on the First Global debentures; and

c. whether investment in the First Global debentures was secure, guaranteed, and risk-free.

[18] OSC staff made similar allegations of fraud against GBR Ontario and Mr. Aziz relating to a debenture issued by GBR Ontario (not First Global) directly to EF, an individual investor. The GBR Ontario debenture reflected a total investment (loan) of $450,000 that EF made to GBR Ontario in two instalments over a period of less than two months: Merits Decision, at paras. 8, 61-62, 442-445.

[19] As discussed further below, OSC staff also alleged that First Global and its principals, Mr. Itwaru and Mr. Alli, approved and released audited financial statements and unaudited quarterly financial reports that did not comply with Ontario securities law.

B. Merits Decision

[20] Following a virtual hearing that ran 34 days from October 2020 to April 2021 (followed by written closing submissions), the three-member Tribunal panel issued its 129-page (603-paragraph) Merits Decision on September 15, 2022.

[21] The Tribunal determined that the First Global debentures were illegally distributed in breach of the prospectus requirements of the Securities Act. The Tribunal found that the appellants and other defending parties directly participated in the illegal distribution: Merits Decision, at paras. 2, 112, 134.

[22] The Tribunal also found that GBR Ontario and its principals, Mr. Aziz and Mr. Bajaj, engaged in the business of trading those debentures, thereby breaching the registration requirements of the Securities Act: Merits Decision, at paras. 2, 168.

[23] The Tribunal further found that GBR Ontario, Mr. Aziz and Mr. Bajaj committed securities fraud in relation to the sale of First Global debentures: Merits Decision, at paras. 5, 427. The Tribunal reached the same conclusion as against GBR Ontario and Mr. Aziz with respect to the $450,000 GBR Ontario debenture issued to EF: Merits Decision, at paras. 8, 482.

[24] With respect to the First Global debentures, the Tribunal concluded that GBR Ontario, Mr. Aziz and Mr. Bajaj put investor funds to uses that had not been disclosed to investors, including (a) to go toward a different Colombian project (a coal mine), (b) to pay referral fees and other expenses of GBR Ontario, and (c) to pay interest to debenture holders: Merits Decision, at paras. 6, 359-368. The Tribunal also concluded that at a minimum, those parties were (a) reckless as to whether there were sufficient operating assets to produce the necessary income, (b) reckless as to whether any assets had been pledged (as promised) to secure the debentures, and (c) cavalier in promising that investment in those debentures was 100 percent guaranteed and risk free: Merits Decision, at para. 7, 280-344, 423-425, 428.

[25] In relation to the allegations about EF’s investment in the GBR Ontario debenture, the Tribunal found Mr. Aziz and GBR Ontario liable for the same set of fraudulent misrepresentations about the investment being secure, guaranteed and risk free, including that the investment was secured by natural resource assets in Colombia (the “Security Representations”): Merits Decision, at paras. 8, 172, 444-445.

[26] The Tribunal also found that First Global, Mr. Itwaru and Mr. Alli, approved and released an unaudited quarterly financial report that did not comply with Ontario securities law: Merits Decision, at paras. 11, 579, 585, as described below.

[27] Section 122(1)(b) of the Securities Act prohibits a person or company from making a misleading or untrue statement in any financial statement or other document filed under Ontario securities law.

[28] Section 122(2) provides a statutory “Due Diligence Defence” to an offence under s. 122(1)(b). The Due Diligence Defence applies 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 light of the circumstances in which it was made” (emphasis added).

[29] As set out in the Merits Decision, at para. 9, OSC staff’s allegations against First Global, Mr. Itwaru and Mr. Alli relating to First Global’s financial reporting were as follows:

Finally, Staff alleges that First Global entered into agreements that purported to be licence agreements but that were in reality investment or financing agreements. In one set of audited year-end financial statements [for the 2016 financial year], and three subsequent quarterly unaudited interim financial reports [for the first three quarterly periods in the 2017 financial year], First Global improperly recognized revenue in connection with these agreements. First Global eventually restated its financial results to reflect a significant negative impact, but Staff alleges that before that restatement, First Global breached its obligation to prepare and file financial statements prepared in accordance with applicable standards. Staff also alleges that First Global’s two principals authorized the release of the improper financial results and that they therefore failed to comply with Ontario securities law.

[30] In the Merits Decision, the Tribunal found that First Global had improperly recognized revenue in connection with purported license agreements but that First Global, Mr. Itwaru and Mr. Alli had a Due Diligence Defence to the allegations relating to the 2016 audited year-end financial statements and the unaudited interim financial reports for the following two quarterly periods in 2017. For those periods, the Tribunal found that those parties exercised reasonable due diligence, primarily because First Global’s auditor gave a clean audit opinion with respect to the 2016 year-end financial statements despite being aware of the revenue recognition issue: Merits Decision, at paras. 10, 574. However, the Tribunal concluded that OSC staff had proven its allegations with respect to the unaudited interim financial report for the third quarter of 2017 (the “Q3 2017 financial report”): Merits Decision, at paras. 11, 579, 585. The Tribunal found that the Due Diligence Defence was not available for that report since by that time, “the [revenue recognition] issue had been repeatedly discussed, and First Global’s auditor had reversed his position and advised First Global not to recognize the revenue”: Merits Decision, at para. 11. The Tribunal found that First Global, Mr. Itwaru and Mr. Aziz breached Ontario securities law by approving and releasing the financial report for that quarterly period.

C. Sanctions Decision

[31] On June 22, 2023, following a two-day hearing that occurred in April 2022, the Tribunal issued its Sanctions Decision. As summarized further below under “Sanctions appeal”, the Tribunal imposed monetary and non-monetary sanctions that included disgorgement, administrative penalties, and market participation restrictions, and also ordered costs against the appellants and other defending parties.

III. Jurisdiction and standard of review

[32] The appellants appeal the Merits Decision and Sanctions Decision. The Divisional Court has jurisdiction to hear this appeal: Securities Act, s. 10(1). The appellate standards of review apply, as set out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 8, 10, 19, 26-37; see also Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 2 S.C.R. 653, at para. 37.

[33] The standard of review is correctness for questions of law, including legal principles extricable from questions of mixed fact and law.

[34] The standard of review is palpable and overriding error for questions of fact and for questions of mixed fact and law (where the legal principle is not readily extricable), including with respect to the application of correct legal principles to the evidence.

[35] A palpable and overriding error is an obvious error that is sufficiently significant to vitiate the challenged finding: Longo v. MacLaren Art Centre, 2014 ONCA 526, 323 O.A.C. 246, at para. 39. The appellant must show that the error goes to the root of the challenged finding such that it cannot safely stand in the face of the error: Waxman v. Waxman (2004), 2004 39040 (ON CA), 186 O.A.C. 201 (C.A.), at para. 297, leave to appeal refused, [2004] S.C.C.A. No. 291.

[36] There are limited circumstances in which findings of fact, or the adjudicator’s assessment of evidence, may give rise to an extricable error of law: see Yatar v. TD Insurance Meloche Monnex, 2021 ONSC 2507, 157 O.R. (3d) 337 (Div. Ct), at para. 28, aff’d 2022 ONCA 446, rev’d on other grounds, 2024 SCC 8, 489 D.L.R. (4th) 191. Challenges to the sufficiency or weight of evidence supporting a finding of fact do not give rise to a question of law. However, a misapprehension of or failure to appreciate the evidence may constitute an error of law if the failure is based on a wrong legal principle: R. v. J.M.H., 2011 SCC 45, [2011] 3 S.C.R. 197, at paras. 29, citing R. v Morin, 1992 40 (SCC), [1992] 3 S.C.R. 286, at p. 295. If the adjudicator ignored items of evidence that the law required the adjudicator to consider in making the decision, then the adjudicator erred in law: Canada (Director of Investigation and Research) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748, at para. 41. It is an error of law to make a finding of fact for which there is no supporting evidence: J.M.H, at para. 25, citing R. v. Schuldt, 1985 20 (SCC), [1985] 2 S.C.R. 592, at p. 604. It is an error of law to make a finding of fact on a material point where the factual finding is based solely on (a) no evidence, (b) irrelevant evidence, or (c) an irrational inference: Johannson v. Saskatchewan Government Insurance, 2019 SKCA 52, 93 C.C.L.I. (5th) 228, at paras. 24-25.

[37] When the decision under appeal is fact intensive or involves the exercise of discretion, care must be taken in identifying extricable errors of law since the process of severing out legal issues can undermine the standard of review analysis. An arguably unreasonable exercise of discretion is not an error of law or jurisdiction: Wood Buffalo (Regional Municipality) v. Alberta (Energy and Utilities Board), 2007 ABCA 192, 80 Alta. L.R. (4th) 229, at para. 8; Natural Resource Gas Limited v. Ontario (Energy Board), 2012 ONSC 3520 (Div. Ct.), at para. 8; Conserve Our Rural Environment v. Dufferin Wind Power Inc., 2013 ONSC 7307 (Div. Ct.), at para. 13.

[38] While an appellate court is empowered to replace a tribunal’s findings on questions of law with its own, the correctness standard does not detract from the need to respect the tribunal’s specialized function. The tribunal’s subject matter experience and expertise relating to the requirements of its home statute are to be taken into account: Reisher v. Westdale Properties, 2023 ONSC 1817 (Div. Ct.), at paras. 9-10, citing Planet Energy (Ontario) Corp. v. Ontario Energy Board, 2020 ONSC 598 (Div. Ct.), at para. 31; Vavilov, at para. 36.

[39] Further considerations relating to the standard of review applicable to the Sanctions Decision are addressed later in these reasons under “Sanctions appeal: Legal Framework – sanctions and costs”.

IV. Merits appeal

A. Appellants’ positions – merits appeal

[40] The appellants submit the Tribunal made reversible errors in the Merits Decision, alleging various errors of law and palpable and overriding errors of fact or mixed fact and law. They ask the court to set aside the Merits Decision and dismiss the allegations against them or remit the matter to the Tribunal for reconsideration.

[41] Mr. Aziz submits that the Tribunal erred in law by making findings that were not available on the evidence. With respect to the Tribunal’s finding of securities fraud arising from the Security Representations (including that the debentures were secured against natural resource assets in Colombia), Mr. Aziz argues that the Tribunal drew conclusions about the legal impact of documents on ownership rights and security interests in Colombia without any expert evidence or other attempt by OSC staff to prove Colombian law. He submits that in doing so, the Tribunal impermissibly shifted the burden of proof onto the defending parties, requiring them to prove that the impugned representations were accurate. He also submits that the Tribunal made several palpable and overring errors of fact on key issues.

[42] Mr. Alli argues that the Tribunal erred in finding him personally responsible for the illegal distribution of First Global debentures, given his limited participation in the transaction. He submits that the Tribunal failed to recognize that a party’s diligence is relevant to the availability of exemptions from the prospectus requirement. Mr. Alli says that he was unjustifiably held responsible for the failure of others to adequately monitor compliance.

[43] Mr. Alli and Mr. Itwaru submit that the Tribunal erred in finding that the Due Diligence Defence was not available to them relating to First Global’s Q3 2017 financial report. They say that the Tribunal failed to apprehend material evidence that supported the defence, including the fact that the financial reports were approved by First Global’s board of directors and audit committee. They say that they should not have been found personally responsible for First Global’s noncompliant quarterly financial report. Mr. Itwaru argues that his lack of financial background was a relevant factor that the Tribunal should have considered. Mr. Alli says that he should not bear personal responsibility for an accounting judgment that does not relate to him personally.

[44] As explained below, I have concluded that the Tribunal did not make any reversible errors that would justify interfering with the Merits Decision.

B. Analysis – merits appeal

i. The evidence supports the Tribunal’s findings on the Security Misrepresentations

[45] Mr. Aziz submits that the Tribunal erred in its findings on the Security Misrepresentations because OSC staff led no direct evidence on the ownership or security of the Colombian assets referenced in the Security Misrepresentations. Mr. Aziz says that OSC staff was required to lead evidence from an expert in Colombian law or provide other evidence to prove this fact. He submits that OSC staff’s failure to provide such evidence amounts to an error of law.

[46] I disagree. Mr. Aziz’s assertion relating to the need for expert evidence on Colombian law raises an issue of whether the Tribunal had sufficient evidence to support its factual findings. This is an alleged error of fact, not law. The appropriate standard of review on this point is palpable and overriding error. I see no such error in the Tribunal’s findings.

[47] In any case, Mr. Aziz’s assertion that there was no direct evidence regarding the ownership of the Colombian assets (and whether, as a result, they secured the First Global Debentures) is not correct. Ms. Garcia testified directly on the issue and was “definitive” in answering that GBR Colombia never had any ownership interest in the Colombian assets: Merits Decision, at para. 292. Ms. Garcia’s testimony was the only direct evidence on the point and she was in a position to provide it given her control of the relevant corporations: Merits Decision, at paras. 292-293, 406. Her evidence was not successfully challenged on cross-examination: Merits Decision, at para. 426. In these circumstances, expert evidence was not required for OSC staff to meet its burden. I see no basis for Mr. Aziz’s position that the Tribunal reversed the onus.

[48] In his factum, Mr. Aziz points to several documents or events in the record that he said could conceivably have transferred ownership or grant security for the First Global Debentures. Each of these documents and events was considered by the Tribunal and was rejected as evidence to establish that a security interest was created without any need to resort to expert evidence. If Mr. Aziz contends that Colombian law requires a different interpretation of these documents (which were executed in Canada) then he was required to call such evidence: Threlfall v. Carleton University, 2019 SCC 50, [2019] 3 S.C.R. 726, at para. 26; Dahroug v. Hassan, 2023 ONSC 5031, at paras. 4, 7. The Tribunal correctly rejected the notion that the Commission was required to prove a negative: Merits Decision, at para. 426.

[49] As well, Mr. Aziz’s own evidence before the Tribunal conflicts with his position on appeal. Mr. Aziz testified that none of the documents he reviewed established that GBR Colombia owned the Colombian assets: Merits Decision, at para. 426. His evidence was that final documentation was always “about to come”. The Tribunal correctly concluded that this evidence was at odds with Mr. Aziz’s position that he reasonably believed at the time that the assets had already been transferred: Merits Decision, at para. 334.

ii. The Tribunal made no other palpable and overriding errors of fact

[50] Mr. Aziz alleges several other errors that he characterizes as errors of fact. On these points, he fails to meet the threshold of palpable and overriding error required for appellate intervention.

[51] Among other things, Mr. Aziz takes issue with the Tribunal’s finding that the subscription documents showed that he was the sales representative for at least $288,305 of First Global debentures as a basis for Mr. Aziz’s liability for trading and his involvement in the fundraising: Merits Decision, at para. 143(i). Among other things, he faults the Tribunal for giving too little weight to his own evidence in which he distances himself from the subscription documents, blaming his administrative assistant for putting his name on the forms. In doing so, however, he does not address the Tribunal’s other findings relating to his involvement in fundraising activities – the Tribunal cited 12 separate facts, each independently supported by the evidence: Merits Decision, at paras. 143-144.

[52] Mr. Aziz also questions the Tribunal’s conclusion that investors were not told that their funds would be used to support a coal mine in Colombia (which was contrary to Mr. Aziz’s submission to the Tribunal that “the investors were told exactly where their money would go, i.e., to the Colombia projects, including the coal mine”): Merits Decision, at paras. 208-209, 424. He points to the evidence of a single investor to support his argument but ignores significant evidence to the contrary. There was ample other evidence before the Tribunal (including the testimony of other investor witnesses, marketing and presentation material, and the testimony of Mr. Bajal) to support the finding that investors were not told that their funds would be used to support a coal mine: see also Merits Decision, at paras 193-94, 209, 230(a)(iii).

[53] In addition, Mr. Aziz challenges the Tribunal’s findings relating to whether investors were told that the Colombian assets were capable of generating a return on equity of 14 percent in order to make the interest payments owing: see Merits Decision, at paras. 244-248. In making its findings, the Tribunal appropriately relied on marketing brochures provided to investors. In any case, Mr. Aziz does not appear to challenge the Tribunal’s ultimate finding that “at no time did production in Colombia remotely approach what was suggested” in representations to investors, a finding that was amply supported by the evidence before the Tribunal: see Merits Decision, at para. 366. In these circumstances, I fail to see any palpable and overriding error in the Tribunal’s findings.

[54] Mr. Aziz also submits that the Tribunal made a palpable and overriding error with respect to EH’s investment in the GBR Debenture. Mr. Aziz says that the Tribunal erred when it found, at para. 474, that “EH understood that the funds were going to be used for the Colombian projects, and that the investment would be secured by the assets in Colombia. That did not happen.” Mr. Aziz points to OSC staff’s tracing analysis and Ms. Garcia’s testimony as supporting the conclusion that EH’s investment was directed to the biodiesel facility (one of the Colombian assets identified to act as security).

[55] I see no palpable and overriding error in the Tribunal’s analysis. The Tribunal considered the evidence Mr. Aziz cites and concluded, at para. 453, that even if EH’s investment ultimately found its way into the biodiesel facility “that possibility might be of no value to EH unless the assets actually were pledged.” While an unsecured claim could be advanced, the Tribunal reasoned, at para. 453, that “it would require impermissible speculation, and a suspension of common sense, to conclude that EH would be equally well protected without the creation of a proper security interest.” As set out above, the Tribunal properly concluded, at para. 453, that such a security interest was not created, the assets were not transferred, and that Mr. Aziz’s representations to EH to the contrary were false. Whether EH’s investment was used to support the biodiesel facility or otherwise is beside the point.

iii. Mr. Alli and Mr. Itwaru did not have a diligence defence to illegal distribution of First Global debentures

[56] Mr. Alli argues that the Tribunal erred in finding him personally responsible for the illegal distribution of First Global debentures, given his limited participation in the transaction. Unlike the offence of making a false or misleading statement in s. 122(1)(b) of the Securities Act, there is no statutory due diligence defence for breach of the prospectus requirement in s. 53(1). Mr. Alli correctly notes that in previous decisions, the Tribunal has not recognized a diligence defence for the latter offence in the absence of a mens rea element to the offence: see Money Gate Mortgage Investment Corporation (Re), 2019 ONSEC 40, at paras. 193-195 (relating to reliance on legal advice). However, Mr. Alli submits that the Tribunal failed to recognize that a party’s diligence is relevant to the availability of exemptions from the prospectus requirement, in this case the exemption available for sale to an “accredited investor”. Mr. Alli says that he was unjustifiably held responsible for the failure of others to adequately monitor compliance.

[57] On the issue of reasonable diligence for the illegal distribution, the Tribunal held, at para. 121, that issuers may rely “on an investor’s certification as to their accredited status” if it conducts “a serious factual inquiry in good faith” to verify the certification, consistent with prior decisions: see Money Gate, at para. 195. The evidence of reasonable diligence that Mr. Alli points to is the involvement of counsel in drafting and approving the First Global debentures. This is not evidence of a “serious factual enquiry” into the specific exemptions claimed. Further, this submission was considered and rejected by the Tribunal because there was no evidence of any actual advice provided by counsel: Merits Decision, at para. 128.

[58] Mr. Alli’s argument has no merit. He misconstrues the Merits Decision as imposing on him the unreasonable requirement that he personally verify whether the individual investors qualified for the applicable prospectus exemption. The Tribunal imposed no such obligation. To rely on the investors’ certification as to their accredited status, First Global (as the issuer of the debenture) could have conducted “a serious factual inquiry in good faith” to verify the certification. Instead, the Tribunal found, at para. 129(c), that First Global’s inquiry was limited to having its staff “simply [review] the forms to ensure that the accredited investor certificates were completed, without having any contact with the investors”, which the Tribunal found was not sufficient to permit reliance on the certification. The Tribunal therefore concluded, at para. 129, that the accredited investor exemption was not available, with the result that First Global’s issuance of the debentures was an illegal distribution contrary to s. 53(1) of the Securities Act. As well, the Tribunal found, at para. 136, that Mr. Alli, together with Mr. Itwaru, also breached s. 53(1) by participating directly in the illegal distribution. The Tribunal also found, at para. 137, that as directors and officers of First Global who authorized the distribution, Mr. Alli and Mr. Itwaru would have been deemed parties to the breach, even without their direct participation. I see no error in those findings.

iv. Mr. Itwaru and Mr. Alli did not have a Due Diligence Defence for the noncompliant financial report

[59] Mr. Itwaru and Mr. Alli submit that the Tribunal erred when it found that they were not entitled to a Due Diligence Defence for First Global’s Q3 2017 financial report. Mr. Itwaru classifies all the alleged errors as errors of law on the basis that they were made without evidence. I disagree. In fact, Mr. Alli and Mr. Itwaru are raising concerns with factual findings that attract a high level of deference. There was ample evidence to support the Tribunal’s material findings. There are no grounds for appellate intervention.

[60] Among other things, both Mr. Itwaru and Mr. Alli take issue with the Tribunal’s finding that First Global’s auditor advised them not to recognize revenue in the Q3 2017 financial support in connection with the licence agreements. They cite an email from the auditor to Mr. Alli dated November 29, 2017, in which the auditor states, among other things, that it was his “suggestion” not to recognize the revenue “until the fog around it is cleared”. However, that submission ignores the fact the communication is otherwise clear and ambiguous. It supports the conclusion that the auditor had “changed his views on the issue”, which was communicated to Mr. Alli: see Merits Decision, at paras. 564(a), 575(b). The fact that the auditor changed his views also refutes Mr. Itwaru’s submission that he was entitled to continue to rely on the auditor’s prior clean audit opinion in April 2017 (on year-end financial statements in which the revenue was improperly recognized), which predated the auditor’s change of view communicated in his November 2017 email.

[61] Mr. Itwaru also argues that there was no evidence before the Tribunal regarding its finding that First Global’s former chief financial officer “clearly expressed her concerns” about the accounting treatment of the licence agreements: Merits Decision, at para. 575(a). To the contrary, an email that Mr. Itwaru cites to support that submission states that the former chief financial officer “raised a number of concerns” regarding the issue. The Tribunal also refers to significant other evidence to support that finding: see Merits Decision, at paras. 546-548, 550.

[62] Mr. Itwaru also challenges the Tribunal’s finding that the former chief financial officer discussed with him the potential requirement for First Global to restate its financial statements. Contrary to Mr. Itwaru’s assertion, there is clear and unambiguous evidence to support the Tribunal’s factual findings on this point, including the testimony of the former chief financial officer.

[63] Mr. Itwaru and Mr. Alli ignore additional evidence which supports the conclusion that the Due Diligence Defence was no longer available by the time of the Q3 2017 financial report. They ignore the Tribunal’s finding, at para. 575(c), that “Itwaru agreed that First Global should stop selling licences and that First Global should hire legal counsel to assist with an understanding as to whether the licences were securities”. They do not address the finding, at para. 575(e), that “about five weeks had passed since the special First Global board meeting at which [the then chief financial officer] discussed her concerns, recommended that the board establish a special committee to review the matter, and recommended that the assessment be completed before First Global filed its Q3 interim financial report.” Each of these determinations is supported by the evidence and is sufficient to support the Tribunal’s findings.

[64] Mr. Itwaru and Mr. Alli also submit that the Tribunal erred in not giving weight to the fact that First Global’s board of directors and audit committee approved the accounting treatment of the licence agreement. In the Sanctions Decision, at para. 22, the Tribunal addressed the issue of reliance on board approval, stating that board approval “would not relieve Alli of responsibility, because no officer is required to take instruction from the board of directors, other than in exceptional circumstances not applicable here.” In any case, Mr. Itwaru and Mr. Alli are challenging the weight or sufficiency of the evidence, which does not give rise to an error of law. I see no palpable and overriding error in the Tribunal’s analysis.

[65] I also see no merit in Mr. Itwaru’s argument that his lack of financial background was a relevant consideration or Mr. Alli’s position that he should not bear personal responsibility for the misstatements because the accounting decision did not relate to him personally. Mr. Itwaru was First Global’s chief executive officer, Mr. Alli its chief financial officer. Both were directors of the company. Section 129.2 of the Securities Act expressly allows the Tribunal to find that an officer of a company has not complied with Ontario securities law if that officer authorized, permitted or acquiesced in the non-compliance of the corporation. The Tribunal found, at para. 585, that each of Mr. Alli and Mr. Itwaru “is deemed to have contravened Ontario securities law because he authorized First Global’s non-compliance”. I see no error in the Tribunal’s doing so.

[66] For the reasons above, I would dismiss the appeal of the Merits Decision.

V. Sanctions appeal

A. Introduction

[67] Following a two-day hearing in April 2023, the Tribunal[^2] issued its 60-page (259-paragraph) Sanctions Decision on June 23, 2022. In the Sanctions Decision, at paras. 3, 230, 255-256, 259, the Tribunal found that it was in the public interest to impose sanctions and costs against the appellants. The monetary amounts the Tribunal ordered the appellants to pay were:

a. Disgorgement:

i. Mr. Itwaru and Mr. Alli: $1.51 million (jointly and severally along with First Global), being the amount First Global retained from the $4.46 million total proceeds from the sale of First Global debentures.

ii. Mr. Aziz: $2.95 million (jointly and severally with Mr. Bajaj and GBR Ontario), being the amount flowing to GBR Colombia from the sale of First Global debentures.

iii. Mr. Aziz: $450,000 (jointly and severally with GBR Ontario), being the amount EF loaned to GBR Ontario pursuant to the GBR Ontario debenture.

b. Administrative Penalties:

i. Mr. Itwaru: $300,000

ii. Mr. Alli: $275,000

iii. Mr. Aziz: $750,000.

c. Costs:

i. Mr. Itwaru and Mr. Alli: $523,088 in total (jointly and severally with each other and First Global), consisting of $226,361 in respect of the First Global Debentures and $296,727 in respect of the purported licence agreements.

ii. Mr. Aziz: $452,723 (jointly and severally with Mr. Bajaj and GBR Ontario), in respect of the First Global debentures.

iii. Mr. Aziz: $104,474 (jointly and severally with GBR Ontario), in respect of the GBR Ontario debenture issued to EF.

[68] The Tribunal also imposed the following non-monetary sanctions against the appellants:

a. Mr. Itwaru and Mr. Alli: director and officer prohibitions for seven years and trading restrictions for five years.[^3]

b. Mr. Aziz: permanent market participation restrictions (together with Mr. Bajaj and GBR Ontario).

[69] The appellants submit that the Tribunal made reversible errors in the Sanctions Decision, including in relation to the disgorgement remedy. They ask the court to substitute less onerous sanctions and costs or remit the matter to the Tribunal for reconsideration.

[70] As explained below, I have concluded that the Tribunal did not make any reversible errors that would justify interfering with the Sanctions Decision.

B. Legal framework – sanctions and costs

[71] After a hearing, the Tribunal may make one or more of 16 categories of “public interest” orders imposing monetary and non-monetary sanctions on capital markets participants “if in its opinion it is in the public interest” to do so: Securities Act, s. 128(1). The Tribunal is also authorized to make a costs order: Securities Act, s. 127.1.

[72] Two of the public interest orders that the Tribunal is authorized to make under s. 128(1) would require the payment of monetary amounts to the OSC:

Orders in the public interest

127 (1) The Tribunal may make one or more of the following orders if in its opinion it is in the public interest to make the order or orders:

9. If a person or company has not complied with Ontario securities law, an order requiring the person or company to pay an administrative penalty of not more than $1 million for each failure to comply.

10. If a person or company has not complied with Ontario securities law, an order requiring the person or company to disgorge to the Commission any amounts obtained as a result of the non-compliance.

[73] The Tribunal has “very wide discretion” to intervene in the public interest under s. 127(1): see Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission), 2001 SCC 37, [2001] 2 S.C.R. 132 (“Asbestos”), at para. 39. The discretionary nature of the Tribunal’s authority is evident from the opening wording of s. 127(1), authorizing the Tribunal to make orders “if in its opinion it is in the public interest” to do so (emphasis added). The Tribunal’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”: Asbestos, at para. 42.

[74] The Tribunal weighs many factors in determining appropriate sanctions, in a process that is generally fact intensive. The weight given to any individual sanctioning factor will vary from case to case and falls within the Tribunal’s discretion. No one factor should be considered in isolation “because to do so would skew the textured and nuanced evaluation conducted by the [tribunal] in crafting an order in the public interest”: Cartaway, at para. 64.

[75] Appeal courts have afforded the Tribunal’s decisions on sanctions considerable deference, given their discretionary and fact-intensive nature and recognizing the tribunal’s subject matter expertise: Cartaway, at para. 45; see also Wood Buffalo, at para. 8; Natural Resource Gas, at para. 8; Dufferin Wind Power, at para. 13. An appeal court will interfere with a tribunal’s decision on sanctions only if the tribunal made an error in principle or the sanction is clearly unfit: College of Physicians and Surgeons of Ontario v. Peirovy, 2018 ONCA 420, 143 O.R. (3d) 596, at para. 38. As well, an appeal court will interfere with a tribunal’s costs award only if the tribunal made an error in principle or was plainly wrong: Kennedy v. College of Veterinarians, 2018 ONSC 3603 (Div. Ct.), at para. 24, citing Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.

C. Appellants’ positions – sanctions appeal

[76] The appellants submit that the Tribunal erred in its interpretation and application of the disgorgement remedy under s. 128(1)10. They say that the Tribunal’s authority to make a disgorgement order against a particular party is limited to the amount that party “obtained”, directly or indirectly, “as a result of the noncompliance.” The appellants argue that the Tribunal erred in interpreting s. 128(1)10 as permitting disgorgement of any amount raised or received from anyone from the impugned activity. In doing so, they say that the Tribunal inappropriately circumvented the $1 million limit for an administrative monetary penalty set out in s. 128(1)9. They urge the court to adopt the reasoning of the British Columbia Court of Appeal in Poonian v. British Columbia Securities Commission, 2017 BCCA 207, 413 D.L.R. (4th) 594, as to the scope of the disgorgement remedy, rather than the “pre-Vavilov” reasoning in Phillips v. Ontario (Securities Commission), 2016 ONSC 7901, 135 O.R. (3d) 771 (Div. Ct.), and other Ontario judicial and Tribunal decisions.

[77] As outlined further below, the appellants also argue that the sanctions imposed, considered on a global basis, were punitive in nature and disproportionate to the appellants’ impugned conduct. They also submit that the Tribunal failed to properly take into account considerations and mitigating circumstances particular to an individual appellant, including health and financial considerations and the fact that not all defending parties were found to have committed fraud. Mr. Itwaru also argued that there was no basis for making a joint and several costs order against him.

D. Analysis – sanctions appeal

i. The Tribunal made no reversible error relating to disgorgement

[78] The appellants submit that the Tribunal erred in law in its interpretation and application of the disgorgement remedy under s. 128(1)10.

[79] By way of background, before the Tribunal, OSC staff sought disgorgement of $4.46 million against all defending parties, jointly and severally, being the total proceeds from the sale of First Global debentures: Sanctions Decision, at paras. 83, 101. Instead, the Tribunal ordered disgorgement of $1.51 million as against First Global, Mr. Itwaru and Mr. Alli, jointly and severally, being the amount First Global retained from the total proceeds: Sanctions Decision, at paras. 3(a), 141(a). The Tribunal also ordered disgorgement of $2.95 million against GBR Ontario, Mr. Aziz and Mr. Bajaj, jointly and severally, being that amount flowing to GBR Colombia from the sale of First Global debentures: Sanctions Decision, at paras. 3(b), 141(b).

[80] Before the Tribunal, OSC staff also sought disgorgement of an additional $450,000 against Mr. Aziz and GBR Resources, jointly and severally, being the amount of EH’s loans to GBR Resources pursuant to the GBR Resources debenture. The Tribunal made that order: Sanctions Decision, at paras 3(c), 142.

[81] In interpreting the phrase “obtained as a result of the non-compliance” in s. 128(1)10, the Tribunal determined that the statute supported the imposition of joint and several disgorgement on First Global, Mr. Itwaru and Mr. Alli, finding they acted as a single entity in committing the wrongdoing: Sanctions Decisions, at paras. 132-134. Similarly, the Tribunal imposed a joint and several disgorgement against GBR Ontario, Aziz and Bajaj, finding that they also acted as a single entity: Sanctions Decision, at paras. 135-136.

[82] In its analysis, the Tribunal considered the 2016 Divisional Court decision in Phillips. In the tribunal decision under appeal in Phillips, the tribunal held that the disgorgement remedy was broad enough to support disgorgement of amounts beyond what a wrongdoer had actually obtained for themselves. In upholding the tribunal’s decision, the court observed, at para. 71, that “[o]n its face, the wording of the section is broad” and supports the conclusion that disgorgement can be ordered of “any amounts obtained”, and that there “is no limitation based on the individual’s use of the funds obtained.” The court concluded, at para. 80. that the tribunal’s decision fell within a range of reasonable outcomes and that “the reasons given were justifiable, transparent and intelligible”. While Phillips was decided before the Supreme Court’s 2019 decision in Vavilov (therefore on a reasonableness standard of review), the court’s reasons strongly suggest that it viewed the tribunal’s decision as correct. At para. 78, the court stated that the tribunal’s decision “was consistent with the plain wording of the legislation, the purpose of the legislation and prior case law”.

[83] Similarly, in North American Financial Group Inc. v. Ontario (Securities Commission), 2018 ONSC 136, the Divisional Court stated, at para. 217, that the “issue of whether disgorgement orders should be limited to the amount that the fraudsters obtained personally, either directly or indirectly, has been litigated and lost”.

[84] In the current appeal, while the Tribunal followed those principles in formulating the disgorgement orders applicable to each defending party, the Tribunal’s decision is ultimately a discretionary and fact-intensive exercise deserving of deference.

[85] The Tribunal determined that all funds raised from the sale of the First Global debentures were deposited with First Global. As a result, First Global had “obtained” the full $4.46 million within the meaning of s. 127(1)10. While $4.46 million was the upper limit for disgorgement, the Tribunal retained the discretion to order disgorgement of a lower amount: Sanctions Decision, at paras. 110, 125. The Tribunal also found, at paras. 108-109, that Mr. Itwaru and Mr. Alli should not be viewed separately from First Global because of their roles as directors, officers, principals and directing minds of First Global and given their personal involvement with the First Global debenture offering.

[86] The Tribunal further found that each of GBR Ontario, Mr. Aziz and Mr. Bajaj were potentially liable to disgorge $2.95 million they raised and provided for the benefit of GBR Colombia: Sanctions Decision. The Tribunal recognized that GBR Ontario could not be said to have “obtained” the $1.51 million retained by First Global but went on to find that GBR Ontario, Mr. Aziz and Mr. Bajaj “obtained” $2.95 million within the meaning of s. 127(1)10: Sanctions Decision, at para. 118. In making that determination, the Tribunal, at para.113, relied on the following findings in the Merit Decision:

a. GBR Ontario and its principals were raising funds for both First Global and the Colombian natural resource projects;

b. with respect to the Colombian projects, the presentations and marketing documents often conflated GBR Colombia and GBR Ontario, and investors received the message that the two entities were one; and

c. $2.95 million was provided to or for the benefit of GBR Colombia.

[87] The Tribunal found that for the purposes of determining an appropriate disgorgement order, the activities of GBR Ontario should not be considered as separate from those of GBR Colombia: Sanctions Decision, at para. 114. The Tribunal noted that while GBR Ontario and GBR Colombia were “separate corporate entities”, the defending parties did not treat their activities as separate but rather “treated them as if it were all one fundraising and project execution enterprise.” The Tribunal observed that Mr. Bajaj and Mr. Aziz “themselves were unclear about which entity they were referring to at any given time, and most importantly, the message to investors was that ‘GBR’ was one enterprise.” Consequently, the Tribunal concluded that “within the meaning of s. 127(1)10 of the Act, GBR Ontario obtained the $2.95 million”: Sanctions Decision, at para. 114.

[88] The Tribunal also concluded that Mr. Aziz and Mr. Bajaj were so closely aligned with GBR Ontario that they should be treated as one entity with GBR Ontario for the purposes of disgorgement. At para. 115, the Tribunal noted as follows:

Bajaj and Aziz were two of three founding shareholders of GBR Ontario, which was incorporated solely to carry out the fundraising. The company carried on no other business at any time, and it acted only through those three individuals. Bajaj was GBR Ontario’s president and Aziz was a director. Bajaj and Aziz were both heavily involved in GBR Ontario’s fundraising activities (despite Aziz’s submission to the contrary).

[89] In support of their submission that the Tribunal erred in its interpretation and application of the disgorgement remedy, the appellants rely on the British Columbia Court of Appeal’s decision in Poonian, which (like the Ontario Divisional Court decision in Phillips) was decided before the Supreme Court’s decision in Vavilov.

[90] In Poonian, the court considered the scope of the disgorgement remedy under s. 161(1)(g) of the Securities Act, R.S.B.C. 1996, c. 418. That provision is substantially similar to s. 127(1)10 of the Ontario statute, with the addition of the words “directly or indirectly” to modify the “amount obtained” as a result of the non-compliance. The parties to this appeal agree that those additional words in the B.C. statute make no difference to the analysis in this case.

[91] In Poonian, at paras. 100, the court concluded that for the purposes of a disgorgement order, the “amount obtained” must be an amount obtained (directly or indirectly) by “the person who is to pay pursuant to the order, because the person contravened the Act” (emphasis in the original). In its analysis, the court, at para. 98 recognized the “interpretive challenge” that arises from the language of the disgorgement provision, “which omits explicit reference to who is doing the obtaining”. However, the court rejected the regulator’s submission that the provision should be read as authorizing disgorgement “by anyone who contributed to the failure to comply or whose wrongful act contributed to the amount being obtained … despite not having directly or indirectly obtained any amount.” The court found, at para. 110, that the narrower reading of the “amount obtained” reflected the “ordinary grammatical reading” of the language. The court also found, at para. 111, that this reading was “consistent with the purpose of the provision: to deter persons from non-compliance by removing the prospect of receiving and retaining moneys from non-compliance. It is also consistent with what is not the primary purpose of the provision: it is not to punish or compensate.”

[92] The court also noted, at para. 143(4), that the narrow interpretation of the disgorgement remedy “generally prohibits the making of a joint and several order because such an order would require someone to pay an amount that person did not obtain as a result of that person's contravention.” However, the court went on to state, at para. 143(5) that a joint and several order may be appropriate where the parties subject to the order “are under the direction and control of the contravener”, with the result that “the contravener obtained those amounts indirectly”. In its analysis, the court noted, at para. 131, that the disgorgement remedy was intended “to capture amounts the wrongdoer obtained through indirect means (e.g., through agents, nominees, alter egos), as opposed to direct means”. At para. 134, the court also stated:

Using a corporate alter ego is but one example of a mechanism a wrongdoer may employ to indirectly obtain funds from wrongdoing. It is impossible to imagine and enumerate the wide variety of tactics wrongdoers may use to do so. The critical element is that the wrongdoer and the person with whom he or she is held jointly and severally liable were, in effect, acting as one person. [Emphasis added.]

[93] The appellants submit that the approach to interpretation of the disgorgement remedy in Poonian is the correct approach and should be adopted in this case. Among other things, they argue that consistent with Poonian, joint and several liability for disgorgement is only available in the narrow circumstances where third parties subject to the disgorgement order are under the direction and control of the wrongdoer, for example, where the wrongdoer is the controlling shareholder of third-party companies subject to the order. The appellants argue that this approach differs significantly from the law in Ontario and would lead to a different result.

[94] I do not agree. As argued by OSC staff, the interpretation of the B.C. statute in Poonian supports (rather than undermines) the Tribunal’s disgorgement analysis. As noted above, the court in Poonian recognized, at paras. 134, that the disgorgement remedy was intended to be available to cover “the wide variety of tactics wrongdoers may use” to indirectly obtain funds from wrongdoing – the “critical element” is that “the wrongdoer and the person with whom he or she is held jointly and severally liable were, in effect, acting as one person.”

[95] The fact that GBR Ontario and GBR Colombia were acting as one entity was central to the Tribunal’s disgorgement findings in the Sanctions Decision. Notably, the Tribunal declined to impose disgorgement liability on GBR Ontario and its principals in respect of the $1.51 million retained by First Global. The Tribunal found that the “central role” that GBR Ontario and its principals played raising those funds was not sufficient to conclude that GBR Ontario and its principals “obtained” those funds, since there was no evidentiary basis for the conclusion that GBR Ontario and First Global (and their respective principals) were acting as a single entity: Sanctions Decision, at paras. 111-112. Also crucial to the Tribunal’s disgorgement order was the finding, at para.115, that GBR Ontario, Mr. Aziz and Mr. Bajaj acted as one and the same entity, and the finding, at para. 108-109, that First Global, Mr. Itwaru and Mr. Alli acted as one and the same entity. Those findings are entitled to deference.

[96] Mr. Itwaru and Mr. Alli repeat on appeal that they should not be personally liable for disgorgement because there was no finding of fraud against them. The Tribunal considered this submission and determined, at para. 128, that a lower disgorgement figure of $1.51 million (instead of the full amount obtained of $4.46 million) was appropriate given that submission. That exercise of the Tribunal’s discretion does not warrant appellate intervention.

[97] Mr. Itwaru objects to the joint and several nature of the disgorgement order and costs award made against him on the grounds that he will likely pay most or all of the disgorgement amount because neither First Global nor Mr. Alli had the means to do so. Mr. Itwaru cites no evidence from the record or caselaw to support his argument. In any event, the imposition of joint and several liability lies squarely within the Tribunal’s discretion.

[98] Among other things, Mr. Itwaru also submits that the Tribunal erred in law in finding without evidence (or sufficient evidence) that he was “inattentive” to his responsibilities as justification for imposing disgorgement and other sanctions against him: Sanctions Decision, at paras. 20. 25, 64, 134. There is no merit in that submission. The findings of the Tribunal were grounded in the evidence and it properly exercised its discretion in determining sanctions. I see no grounds to interfere.

ii. The Tribunal made no other reversible error in the Sanctions Decision

[99] The appellants also submit that considered on a global basis, the sanctions imposed were disproportionate to their impugned conduct. They say that the sanctions offended the principle that sanction imposed by the Tribunal must be preventive and prospective in character, not retrospective, punitive or remedial: see Asbestos, at para. 45. The appellants also submit that the Tribunal failed to properly take into account considerations and mitigating circumstances particular to an individual appellant, including an appellant’s health or financial considerations and the extent to which an appellant may have benefited from the noncompliance.

[100] None of these submissions meet the bar for appellate intervention. The appellants largely repeat submissions made before the Tribunal that were considered and rejected after due consideration. To the extent that the appellants allege errors of law, they have not identified any extricable errors of law as distinct from arguably unreasonable exercises of discretion or challenges to the sufficiency or weight of evidence supporting factual findings. To the extent they allege errors on questions of fact or mixed fact and law, they have not identified any palpable and overriding errors or otherwise demonstrated that the sanctions and costs orders were clearly unfit or plainly wrong.

[101] Among other things, Mr. Itwaru faults the Tribunal for failing to give sufficient weight, as a mitigating factor, to his efforts to make investors whole, as set out in his affidavit before the Tribunal. He submits that the Tribunal erred in law by finding without evidence that there was “no basis to conclude the initiative is promising”, citing the Tribunal’s statement, at para. 44, that “we need not review the initiative in detail”. Mr. Itwaru also takes exception to a letter he received from OSC staff, indicating their position that by contacting First Global debenture holders about that initiative, Mr. Itwaru appeared to be in breach of an outstanding cease trade order relating to the securities of First Global. The letter also included a warning that Mr. Itwaru risked formal proceedings being commenced against him if he continued contacting investors.

[102] This argument provides no basis for disturbing any of the Tribunal’s sanctions determinations. In the Sanctions Decision, at para. 44, the Tribunal indicated that it considered Mr. Itwaru’s initiative and afforded it little weight on the basis that, on its face, it was unlikely to generate recovery for investors. The Tribunal’s determination falls squarely within its fact-finding and discretionary role and is entitled to deference. I also see no basis for questioning the warning letter from OSC staff about an apparent breach of a cease trade order, which was within their regulatory purview.

[103] Mr. Itwaru also objects to the Tribunal’s findings that he indirectly benefitted from First Global’s wrongdoing, arguing that there is no evidence of direct payments to him related to the wrongdoing. However, Mr. Itwaru does not address the actual findings of indirect benefits relied on by the Tribunal. For the licence agreements, the Tribunal noted, at para. 72, that the material misstatement “likely leads to an unjustified increase in, or maintenance of, the share price” to the benefit of First Global and its shareholders, including Mr. Itwaru and Mr. Alli. For the First Global debentures, the Tribunal noted, at para. 27, that the $1.51 million was “an infusion of capital” into First Global (then “experiencing financial difficulties”) to the indirect benefit of Mr. Itwaru and Mr. Alli as principals and shareholders of First Global. These findings of indirect benefit were well founded on the record and were appropriately afforded modest weight by the Tribunal.

[104] Mr. Alli submitted that the Tribunal erred in failing to take into account as mitigating factors his serious health problems and his debts incurred to ameliorate the First Global debentures. Once again, I see no basis for interfering with the Tribunal’s findings. At para. 49, the Tribunal indicated that it was “sympathetic to the health challenges Alli describes” but did not accept his “unsubstantiated” claim that they were related to the proceeding. Consistent with prior case law, the Tribunal, at para. 183, also considered ability to pay a relevant factor but “not generally a predominant or determining factor” and, at para. 191, stressed the relative importance of other sanctioning objectives, which include deterrence: see also para. 257. The Tribunal found, at para. 184, that Mr. Alli did not establish that he met the test for receiving special consideration based on his financial circumstances. I see no basis for overturning the Tribunal’s factual and discretionary determinations on these issues.

[105] Accordingly, I would dismiss the sanctions appeal.

VI. Disposition

[106] For the above reasons, I would dismiss the appeal against both decisions, with costs of $10,000 payable by each of the appellants to the OSC, the successful party in the appeal.

___________________________ Lococo J.

I agree: ___________________________ Backhouse J.

I agree: ___________________________ Leiper J.

Date: August 28, 2024

2024 ONSC 4691

DIVISIONAL COURT FILE NO.: 451/23 & 441/23

DATE: 20240828

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Backhouse, Lococo and Leiper JJ.

BETWEEN:

NAYEEM ALLI, MAURICE AZIZ and ANDRE ITWARU

Appellants

– and –

CHIEF EXECUTIVE OFFICER OF THE ONTARIO SECURITIES COMMISSION

Respondent

REASONS FOR JUDGMENT

R. A. LOCOCO J.

Date: August 28, 2024

[^1]: "Ontario securities law" means the Securities Act, the regulations under that Act, and securities regulatory decisions to which a person or company is subject: Securities Act, s. 1(1).

[^2]: Timothy Moseley chaired each of the three-member Tribunal panels that separately heard and decided the Merits Decision and the Sanctions Decision. There was no other overlap in the members of those panels.

[^3]: Trading restrictions for Mr. Itwaru and Mr. Alli are subject to limited carve-outs applicable after satisfying any financial sanctions and costs ordered.