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Alberta Securities Commission Concludes Settlement for Insider TippingAlberta Securities Commission Concludes Settlement for Insider Tipping222BLG Blog PostAndrew Pozzobonapozzobon@blg.com | Andrew Pozzobon | 693A30232E777C626C6763616E6164615C61706F7A7A6F626F6E i:0#.w|blgcanada\apozzobon ​On March 23, 2017, the Alberta Securities Commission (ASC) announced that it had concluded a settlement agreement in Re Jawhari, with an Edmonton resident named Khalid Jawhari for trading in securities of Artek Exploration Ltd. (Artek) on a tip from a friend. As background, on February 23, 2015, Artek announced it had entered into an arrangement with a purchaser (Purchaser) pursuant to which the Purchaser agreed to acquire all of the issued outstanding common shares of Artek. Prior to the announcement, Jawhari had a conversation with an employee (the Employee) of the Purchaser regarding Artek. In that conversation, the Employee had told Jawhari that the Purchaser was looking at Artek, Artek was a good buy and the Employee was planning on purchasing shares of Artek. Jawhari purchased 41,500 shares of Artek on February 20, 2015, through a numbered company, following the conversation. Three days after Jawhari's purchase, Artek announced that the Purchaser was acquiring the outstanding shares of Artek at a 61 per cent premium to its then average trading price. Jawhari sold his Artek shares on February 23 and 25 for a profit of $39,868. Under the settlement agreement, Jawhari paid the ASC $59,802 (1.5 times the profit he earned from his trading), plus $7,500 in investigation costs. He also agreed to cease trading in securities for three years, except through a single account, with a registrant having possession of the agreement. <p>​On March 23, 2017, the Alberta Securities Commission (ASC) announced that it had concluded a settlement agreement in <a href="http://www.albertasecurities.com/Notices%20Decisions%20Orders%20%20Rulings/Enforcement/JAWHARI%20Khalid%20Walid%20SAU%202017-03-22%205240843%20v3.pdf">Re Jawhari, </a>with an Edmonton resident named Khalid Jawhari for trading in securities of Artek Exploration Ltd. (Artek) on a tip from a friend. </p><p>As background, on February 23, 2015, Artek announced it had entered into an arrangement with a purchaser (Purchaser) pursuant to which the Purchaser agreed to acquire all of the issued outstanding common shares of Artek. Prior to the announcement, Jawhari had a conversation with an employee (the Employee) of the Purchaser regarding Artek.  In that conversation, the Employee had told Jawhari that the Purchaser was looking at Artek, Artek was a good buy and the Employee was planning on purchasing shares of Artek.  Jawhari purchased 41,500 shares of Artek on February 20, 2015, through a numbered company, following the conversation. Three days after Jawhari's purchase, Artek announced that the Purchaser was acquiring the outstanding shares of Artek at a 61 per cent premium to its then average trading price. Jawhari sold his Artek shares on February 23 and 25 for a profit of $39,868.</p><p>Under the settlement agreement, Jawhari paid the ASC $59,802 (1.5 times the profit he earned from his trading), plus $7,500 in investigation costs. He also agreed to cease trading in securities for three years, except through a single account, with a registrant having possession of the agreement. </p>3/27/2017 4:00:00 AM2017-03-27T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebSecurities: Litigation Regulatory and Compliance
CSA Releases 2016 Enforcement ReportCSA Releases 2016 Enforcement Report221BLG Blog PostMaureen Dohertymdoherty@blg.com | Maureen Doherty | 693A30232E777C626C6763616E6164615C6D646F6865727479 i:0#.w|blgcanada\mdoherty ​The Canadian Securities Administrators ("CSA") recently released its 2016 Enforcement Report. The report highlights the fact that as a result of the CSA members' increased collaboration with the RCMP, there was an overall increase in jail terms and criminal proceedings commenced and concluded. It also noted that in 2016 members' made substantial efforts to combat insider trading and tipping and serious market abuses. Another highlight was the implementation of an initiative to develop a new national market analytics program which will aim to combat securities violations in a world of increasing algorithmic trading.<p>​The Canadian Securities Administrators ("CSA") recently released its<a href="http://www.csasanctions.ca/CSA_AnnualReport2016_English_Final.pdf"> 2016 Enforcement Report</a>.  The report highlights the fact that as a result of the CSA members' increased collaboration with the RCMP, there was an overall increase in jail terms and criminal proceedings commenced and concluded.  It also noted that in 2016 members' made substantial efforts to combat insider trading and tipping and serious market abuses.  Another highlight  was the implementation of an initiative to develop a new national market analytics program which will aim to combat securities violations in a world of increasing algorithmic trading.</p> ​The Canadian Securities Administrators ("CSA") recently released its 2016 Enforcement Report. The report highlights the fact that as a result of the CSA members' increased collaboration with the RCMP, there was an overall increase in jail terms and criminal proceedings commenced and concluded. It also noted that in 2016 members' made substantial efforts to combat insider trading and tipping and serious market abuses. Another highlight was the implementation of an initiative to develop a new national market analytics program which will aim to combat securities violations in a world of increasing algorithmic trading. Some notable statistics from 2016 include109 concluded cases$62,148,866 in fines, administrative penalties and other voluntary payments56 proceedings commenced 45 interim and assert freeze orders While the total proceedings commenced in 2016 appear to be down, the CSA concluded the report by noting that "securities enforcement goes far beyond the numbers".<p>​The Canadian Securities Administrators ("CSA") recently released its <a href="http://www.csasanctions.ca/CSA_AnnualReport2016_English_Final.pdf">2016 Enforcement Report</a>.  The report highlights the fact that as a result of the CSA members' increased collaboration with the RCMP, there was an overall increase in jail terms and criminal proceedings commenced and concluded.  It also noted that in 2016 members' made substantial efforts to combat insider trading and tipping and serious market abuses.  Another highlight  was the implementation of an initiative to develop a new national market analytics program which will aim to combat securities violations in a world of increasing algorithmic trading.</p><p>Some notable statistics from 2016 include:</p><ul><li>109 concluded cases</li><li>$62,148,866 in fines, administrative penalties and other voluntary payments</li><li>56 proceedings commenced </li><li>45 interim and assert freeze orders</li></ul><p> <br>While the total proceedings commenced in 2016 appear to be down, the CSA concluded the report by noting that "securities enforcement goes far beyond the numbers".</p>3/24/2017 4:00:00 AM2017-03-24T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebSecurities: Litigation Regulatory and Compliance
Interest Act: When is a Default Charge a Prohibited Penalty?Interest Act: When is a Default Charge a Prohibited Penalty?220BLG Blog PostRobert Dawkinsrdawkins@blg.com | Robert Dawkins | 693A30232E777C626C6763616E6164615C726461776B696E73 i:0#.w|blgcanada\rdawkins ​In Bankers Mortgage Corporation v. Plaza 500 Hotels Ltd., the British Columbia Court of Appeal recently considered whether an "Exit Fee" payable on mortgage default to a mortgage broker (not to the lender) was a "penalty" on arrears payable on default and, therefore, prohibited under section 8 of the Interest Act. Section 8 prohibits the imposition of fines or penalties "reserved or exacted on any arrears of principal or interest secured by mortgage on real property or hypothec on immovables that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears." The court found that it was not sufficient for a default charge to be "related" to arrears secured by mortgage for it to be captured by the Interest Act. The charge must be "on" arrears secured by mortgage. The charge must also qualify as a "fine, penalty or [additional] rate of interest" on the arrears to be prohibited. Where, as here, the default charge is unsecured, a genuine pre-estimate of damages, does not inhibit the ability to payout the arrears and obtain a discharge of the mortgage, this decision suggests that the default charge will not be a prohibited penalty under the Interest Act and can be enforced. While it is important to note that in this case the default charge was payable to a broker, and not to the lender, the reasoning does not appear to turn on that fact. It should also be noted that the mortgage in this case was a commercial loan. Additional considerations apply for consumer mortgage loans due to restrictions on default charges in consumer protection legislation, such as those imposed in British Columbia under section 75 of the Business Practices and Consumer Protection Act.<p>​In <a href="https://www.canlii.org/en/bc/bcca/doc/2017/2017bcca66/2017bcca66.html?resultIndex=1"><em>Bankers Mortgage Corporation v. Plaza 500 Hotels Ltd., </em></a>the British Columbia Court of Appeal recently considered whether an "Exit Fee" payable on mortgage default to a mortgage broker (not to the lender) was a "penalty" on arrears payable on default and, therefore, prohibited under section 8 of the <a href="http://laws-lois.justice.gc.ca/eng/acts/I-15/FullText.html"><em>Interest Act</em></a>.  Section 8 prohibits the imposition of fines or penalties "reserved or exacted on any arrears of principal or interest secured by mortgage on real property or hypothec on <span style="color:#444444;font-family:"segoe ui","sans-serif";font-size:10pt;">immovables </span>that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears."  </p><p>The court found that it was not sufficient for a default charge to be "related" to arrears secured by mortgage for it to be captured by the <em>Interest Act</em>.  The charge must be "on" arrears secured by mortgage.  The charge must also qualify as a "fine, penalty or [additional] rate of interest" on the arrears to be prohibited.  Where, as here, the default charge is unsecured, a genuine pre-estimate of damages, does not inhibit the ability to payout the arrears and obtain a discharge of the mortgage, this decision suggests that the default charge will not be a prohibited penalty under the <em>Interest Act</em>  and can be enforced<em>.  </em>While it is important to note that in this case the default charge was payable to a broker, and not to the lender, the reasoning does not appear to turn on that fact.  It should also be noted that the mortgage in this case was a commercial loan.  Additional considerations apply for consumer mortgage loans due to restrictions on default charges in consumer protection legislation, such as those imposed in British Columbia under section 75 of the <a href="http://www.bclaws.ca/civix/document/LOC/complete/statreg/--%20B%20--/Business%20Practices%20and%20Consumer%20Protection%20Act%20%5bSBC%202004%5d%20c.%202/00_Act/04002_06.xml#section75">Business <em>Practices and Consumer Protection Act</em></a>.</p> In Bankers Mortgage Corporation v. Plaza 500 Hotels Ltd., the British Columbia Court of Appeal recently considered whether an "Exit Fee" payable on mortgage default to a mortgage broker (not to the lender) was a "penalty" on arrears payable on default and, therefore, prohibited under section 8 of the Interest Act. Section 8 prohibits the imposition of fines or penalties "reserved or exacted on any arrears of principal or interest secured by mortgage on real property or hypothec on immovables that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears." The court found that it was not sufficient for a default charge to be "related" to arrears secured by mortgage for it to be captured by the Interest Act. The charge must be "on" arrears secured by mortgage. The charge must also qualify as a "fine, penalty or [additional] rate of interest" on the arrears to be prohibited. Where, as here, the default charge is unsecured, a genuine pre-estimate of damages, does not inhibit the ability to payout the arrears and obtain a discharge of the mortgage, this decision suggests that the default charge will not be a prohibited penalty under the Interest Act and can be enforced. While it is important to note that in this case the default charge was payable to a broker, and not to the lender, the reasoning does not appear to turn on that fact. It should also be noted that the mortgage in this case was a commercial loan. Additional considerations apply for consumer mortgage loans due to restrictions on default charges in consumer protection legislation, such as those imposed in British Columbia under section 75 of the Business Practices and Consumer Protection Act. The reasoning in the case was essentially as follows (a) section 8 is a restriction on the general right to freedom of contract recognized in section 2 of the Interest Act and must be interpreted in that context. Section 2 states that "[e]xcept as otherwise provided by this Act or any other Act of Parliament, any person may stipulate for, allow and exact, on any contract or agreement whatever, any rate of interest or discount that is agreed on. (b) while the interpretation of section 8 must be guided by its purpose of protecting owners of property, it should be narrowly construed and informed by the fact that it is a restriction on the general right to contract freely, expressly affirmed in the Interest Act. (c) the purpose of section 8 is to protect owners of real estate from charges that have the effect, regardless of their form, of obstructing, making it more costly, or even making it impossible for owners to redeem or protect their equity. (d) the fact that an unsecured charge is triggered by default alone is not enough to bring it within the purview of section 8, even though it increases the borrower's overall obligations arising out of the transaction. Likewise, the fact that an unsecured obligation may affect the owner's equity, because it is capable of being enforced by way of judgment that can be registered against title, is insufficent to bring a charge within the prohibition. Where an "exit" or default fee is a reasonable pre-estimate of damages and otherwise enforceable at common law, is unsecured, and, therefore, does not offend these purposes of the Interest Act protections, it is, based upon the this case, enforceable. This case is helpful in clarifying the rights and obligations of financial institutions and other parties involved in facilitating mortgage transactions. It affirms that at least reasonable unsecured fees, with a valid commercial purpose, should be enforceable even if payable on default.<p>In <a href="https://www.canlii.org/en/bc/bcca/doc/2017/2017bcca66/2017bcca66.html?resultIndex=1"><em>Bankers Mortgage Corporation v. Plaza 500 Hotels Ltd</em>., </a>the British Columbia Court of Appeal recently considered whether an "Exit Fee" payable on mortgage default to a mortgage broker (not to the lender) was a "penalty" on arrears payable on default and, therefore, prohibited under section 8 of the <a href="http://laws-lois.justice.gc.ca/eng/acts/I-15/FullText.html"><em>Interest Act</em></a>.  Section 8 prohibits the imposition of fines or penalties "reserved or exacted on any arrears of principal or interest secured by mortgage on real property or hypothec on <span style="color:#444444;font-family:"segoe ui","sans-serif";font-size:10pt;">immovables </span>that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears."  </p><p>The court found that it was not sufficient for a default charge to be "related" to arrears secured by mortgage for it to be captured by the <em>Interest Act</em>.  The charge must be "on" arrears secured by mortgage.  The charge must also qualify as a "fine, penalty or [additional] rate of interest" on the arrears to be prohibited.  Where, as here, the default charge is unsecured, a genuine pre-estimate of damages, does not inhibit the ability to payout the arrears and obtain a discharge of the mortgage, this decision suggests that the default charge will not be a prohibited penalty under the <em>Interest Act</em>  and can be enforced<em>.  </em>While it is important to note that in this case the default charge was payable to a broker, and not to the lender, the reasoning does not appear to turn on that fact.  It should also be noted that the mortgage in this case was a commercial loan.  Additional considerations apply for consumer mortgage loans due to restrictions on default charges in consumer protection legislation, such as those imposed in British Columbia under section 75 of the <a href="http://www.bclaws.ca/civix/document/LOC/complete/statreg/--%20B%20--/Business%20Practices%20and%20Consumer%20Protection%20Act%20%5bSBC%202004%5d%20c.%202/00_Act/04002_06.xml#section75"><em>Business Practices and Consumer Protection Act</em></a>.</p><p>The reasoning in the case was essentially as follows:</p><p>(a) section 8 is a restriction on the general right to freedom of contract recognized in section 2 of the <em>Interest Act</em> and must be interpreted in that context.  Section 2 states that "[e]xcept as otherwise provided by this Act or any other Act of Parliament, any person may stipulate for, allow and exact, on any contract or agreement whatever, any rate of interest or discount that is agreed on.</p><p>(b) while the interpretation of section 8 must be guided by its purpose of protecting owners of property, it should be narrowly construed and informed by the fact that it is a restriction on the general right to contract freely, expressly affirmed in the <em>Interest Act</em>.</p><p>(c) the purpose of section 8 is to protect owners of real estate from charges that have the effect, regardless of their form, of obstructing, making it more costly, or even making it impossible for owners to redeem or protect their equity.</p><p>(d) the fact that an unsecured charge is triggered by default alone is not enough to bring it within the purview of section 8, even though it increases the borrower's overall obligations arising out of the transaction.  Likewise, the fact that an unsecured obligation may affect the owner's equity, because it is capable of being enforced by way of judgment that can be registered against title, is insufficent to bring a charge within the prohibition.</p><p>Where an "exit" or default fee is a reasonable pre-estimate of damages and otherwise enforceable at common law, is unsecured, and, therefore, does not offend these purposes of the <em>Interest Act</em> protections, it is, based upon the this case, enforceable.</p><p>This case is helpful in clarifying the rights and obligations of financial institutions and other parties involved in facilitating mortgage transactions.  It affirms that at least reasonable unsecured fees, with a valid commercial purpose, should be enforceable even if payable on default.</p>3/21/2017 4:00:00 AM2017-03-21T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#83d31cc8-2281-46b1-bd03-ad81b15c38ff;L0|#083d31cc8-2281-46b1-bd03-ad81b15c38ff|Banking Regulatory;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#d531403d-b705-440c-8be2-98e2a4c77989;L0|#0d531403d-b705-440c-8be2-98e2a4c77989|Class ActionsBanking Regulatory;Class Actions
International Court of Arbitration to Release Report on Financial Insitution Perceptions of ArbitrationInternational Court of Arbitration to Release Report on Financial Insitution Perceptions of Arbitration218BLG Blog PostMichelle Maniagommaniago@blg.com | Michelle Maniago | 693A30232E777C626C6763616E6164615C6D6D616E6961676F i:0#.w|blgcanada\mmaniago The International Court of Arbitration will release on 10 April 2017, in Hong Kong, its commission's report on financial institutions and their perceptions and experience with international arbitration. The launch will include a review of the report, its recommendations and conclusions. If you would like to attend the launch in person, details are available here.<p>The International Court of Arbitration will release on 10 April 2017, in Hong Kong, its commission's report on financial institutions and their perceptions and experience with international arbitration. The launch will include a review of the report, its recommendations and conclusions. If you would like to attend the launch in person, details are available<a href="http://image.webedmservice.com/file/client/556/attachment/default/ICC_Launch_of_Financial_Institutions_Report_-_Flyer_&_Form.pdf"> here</a>.</p>3/20/2017 4:00:00 AM2017-03-20T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#2df25a26-3353-4357-8797-8d21a2ea3aee;L0|#02df25a26-3353-4357-8797-8d21a2ea3aee|Banking and Bills of Exchange;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebBanking and Bills of Exchange
Are Financial Institutions the Next Representative Plaintiffs in Canadian Class Action Proceedings? Lessons from Home Depot Are Financial Institutions the Next Representative Plaintiffs in Canadian Class Action Proceedings? Lessons from Home Depot 217BLG Blog PostShelby Liesch;Robert Dawkinssliesch@blg.com | Shelby Liesch | 693A30232E777C626C6763616E6164615C736C6965736368 i:0#.w|blgcanada\sliesch;rdawkins@blg.com | Robert Dawkins | 693A30232E777C626C6763616E6164615C726461776B696E73 i:0#.w|blgcanada\rdawkins ​Financial Institutions rarely wear the "plaintiff hat" when it comes to class action proceedings. However, 50 financial institutions in the US found themselves on the other side of the negotiating table in 2014 when they launched 25 class actions against Home Depot in response to the massive breach of the retailer's payment data systems, which compromised 56 million credit and debit cards. These individual actions were eventually consolidated into a single complaint. <p>​Financial Institutions rarely wear the "plaintiff hat" when it comes to class action proceedings. However, 50 financial institutions in the US found themselves on the other side of the negotiating table in 2014 when they launched 25 class actions against Home Depot in response to the massive breach of the retailer's payment data systems, which compromised 56 million credit and debit cards. These individual actions were eventually consolidated into a single complaint. </p> ​Financial Institutions rarely wear the "plaintiff hat" when it comes to class action proceedings. However, 50 financial institutions in the US found themselves on the other side of the negotiating table in 2014 when they launched 25 class actions against Home Depot in response to the massive breach of the retailer's payment data systems, which compromised 56 million credit and debit cards. These individual actions were eventually consolidated into a single complaint. In a proposed settlement submitted for preliminary approval to the Georgia federal court on March 8, 2017, Home Depot has agreed to implement new data security measures going forward and pay $25 million into a non-revisionary fund for distribution to financial institutions that have not already released their claims. In addition, certain financial institutions who were persuaded to release their claims against Home Depot after receiving misleading communications from the retailer would also receive up to $2.25 million. The privacy breach occurred when cyber hackers installed malware onto Home Depot's self-checkout kiosks around the US in order to obtain customers' personal financial information, including full names, card numbers and other security credentials. The hackers sold this sensitive information to thieves over the internet, resulting in a massive number of fraudulent transactions. While consumers impacted by the breach launched a separate class action to recover their personal losses, the financial institutions sought to recover the substantial costs they incurred when they were forced to cancel and reissue compromised cards, reimburse customers for any fraudulent charges and other out of pocket expenses. If the settlement is approved, eligible financial institutions that file a claim to the fund will receive a fixed payment of approximately $2 per compromised card without having to submit documentation to prove their actual loss. Class members that are able to submit proof of losses will be eligible for a supplemental award of up to 60% of their documented losses arising from the data breach. With the increasing threat posed by cyberattacks, increasing expectations and duties on holders of personal information to implement reasonable cyber security protections and incident response plans, outsourcing of services to common third party suppliers, and use of cloud storage, there may be increasing opportunities for financial institutions to sit at the plaintiff side of the class action table. <p>​Financial Institutions rarely wear the "plaintiff hat" when it comes to class action proceedings. However, 50 financial institutions in the US found themselves on the other side of the negotiating table in 2014 when they launched 25 class actions against Home Depot in response to the massive breach of the retailer's payment data systems, which compromised 56 million credit and debit cards. These individual actions were eventually consolidated into a single complaint. </p><p>In a proposed settlement submitted for preliminary approval to the Georgia federal court on March 8, 2017, Home Depot has agreed to implement new data security measures going forward and pay $25 million into a non-revisionary fund for distribution to financial institutions that have not already released their claims. In addition, certain financial institutions who were persuaded to release their claims against Home Depot after receiving misleading communications from the retailer would also receive up to $2.25 million. </p><p>The privacy breach occurred when cyber hackers installed malware onto Home Depot's self-checkout kiosks around the US in order to obtain customers' personal financial information, including full names, card numbers and other security credentials. The hackers sold this sensitive information to thieves over the internet, resulting in a massive number of fraudulent transactions. While consumers impacted by the breach launched a separate class action to recover their personal losses, the financial institutions sought to recover the substantial costs they incurred when they were forced to cancel and reissue compromised cards, reimburse customers for any fraudulent charges and other out of pocket expenses. </p><p>If the settlement is approved, eligible financial institutions that file a claim to the fund will receive a fixed payment of approximately $2 per compromised card without having to submit documentation to prove their actual loss. Class members that are able to submit proof of losses will be eligible for a supplemental award of up to 60% of their documented losses arising from the data breach. </p><p>With the increasing threat posed by cyberattacks, increasing expectations and duties on holders of personal information to implement reasonable cyber security protections and incident response plans, outsourcing of services to common third party suppliers, and use of cloud storage, there may be increasing opportunities for financial institutions to sit at the plaintiff side of the class action table.   </p>3/17/2017 4:00:00 AM2017-03-17T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#d531403d-b705-440c-8be2-98e2a4c77989;L0|#0d531403d-b705-440c-8be2-98e2a4c77989|Class Actions;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#da989fe7-de9b-44ca-9a7c-ade6643bc163;L0|#0da989fe7-de9b-44ca-9a7c-ade6643bc163|Cybersecurity;GP0|#2df25a26-3353-4357-8797-8d21a2ea3aee;L0|#02df25a26-3353-4357-8797-8d21a2ea3aee|Banking and Bills of ExchangeClass Actions;Cybersecurity;Banking and Bills of Exchange
Prepaid Credit Card Class Action Remitted to Certification JudgePrepaid Credit Card Class Action Remitted to Certification Judge219BLG Blog PostMichelle Maniagommaniago@blg.com | Michelle Maniago | 693A30232E777C626C6763616E6164615C6D6D616E6961676F i:0#.w|blgcanada\mmaniago ​​In Jiang v. Peoples Trust Company, the Court of Appeal allowed an appeal from a class certification order and remitted the matter for further consideration by the chambers judge. The defendants are all issuers of general use prepaid cards, branded as VISA, American Express or MasterCard. All defendants charged various fees in relation to the purchase and use of the prepaid cards. The BCCA held that the certification judge had erred in finally determining whether the plaintiff's claim was bound to succeed, and in requiring the plaintiff to show that the members of the class could be identified without considering subjective factors.<p>​​In <a href="http://www.courts.gov.bc.ca/jdb-txt/ca/17/01/2017BCCA0119.htm"><em>Jiang v. Peoples Trust Company</em></a>, the Court of Appeal allowed an appeal from a class certification order and remitted the matter for further consideration by the chambers judge.  The defendants are all issuers of general use prepaid cards, branded as VISA, American Express or MasterCard. All defendants charged various fees in relation to the purchase and use of the prepaid cards.  The BCCA held that the certification judge had erred in finally determining whether the plaintiff's claim was bound to succeed, and in requiring the plaintiff to show that the members of the class could be identified without considering subjective factors.</p> ​In Jiang v. Peoples Trust Company, the Court of Appeal allowed an appeal from a class certification order and remitted the matter for further consideration by the chambers judge. The defendants are all issuers of general use prepaid cards, branded as VISA, American Express or MasterCard. All defendants charged various fees in relation to the purchase and use of the prepaid cards. The cards were acquired by purchasers for a variety of reasons, including for reasons other than personal use. Ms. Jiang purchased a prepaid card for personal use, and alleged that the prepaid cards infringe the Business Practices and Consumer Protection Act ("BPCPA"). At certification, the chambers judge came to a final conclusion about whether the prepaid cards at issue were "prepaid purchase cards" within the meaning of the BPCPA, which, based on this analysis, led him to conclude there was a reasonable cause of action. On the issue of identifiable class, he concluded that it was impossible to define the class with reference to objective criteria. Despite that finding, the chambers judge went on to certify 5 common issues, while rejecting others. On appeal, the plaintiff Ms. Jiang and the defendants each raised issues with the chamber judge's reasoning. Three issues drove the result in the appeal. (1) The Court of Appeal held that the chambers judge properly determined that the plaintiff's claim was not bound to fail, but erred when he actually decided the merits of the issue of whether the prepaid cards were "prepaid purchase cards" within the meaning of the BPCPA. Final determinations of such issues, which would have resulted in the plaintiff being bound to "succeed" in that element of her cause of action, should have been left to the common issues trial. (2) The Court of Appeal held that the chambers judge erred in finding the class definition to be deficient. In doing so, the Court rejected the "objective standards" analysis articulated by the Supreme Court of British Columbia in Ileman v. Rogers Communications. The Court noted that the appeals in Ileman did not require the appellate courts to comment on this issue. The Court commented "it cannot be the case that a definition incorporating any subjective element denies the plaintiff resort to the [Class Proceedings Act] by virtue of failing the s. 4(1)(b) requirement. To hold otherwise would be to essentially rule that class actions under the BPCPA are impossible because the definition of "consumer transaction" will always incorporate a subjective inquiry did this person purchase the good or service for a primarily personal, family or household purpose?" The Court held that it was an error to conflate the identifiable class requirement with the consideration of managing individual issues (which should appropriately be dealt with at the preferable procedure stage of the analysis (s. 4(1)(d)). (3) The Court concluded that the chambers judge did not properly consider the s. 4(1)(d) analysis (given his error in conflating the identifiable class and preferable procedure requirements) and failed at all to address the requirements under s. 4(1)(e), relating to the proposed representative plaintiff.The Court held it appropriate to remit the certification application back to the lower court to reconsider its s. 4(1)(d) analysis and perform a s. 4(1)(e) analysis.<p>​In <a href="http://www.courts.gov.bc.ca/jdb-txt/ca/17/01/2017BCCA0119.htm"><em>Jiang v. Peoples Trust Company</em></a>, the Court of Appeal allowed an appeal from a class certification order and remitted the matter for further consideration by the chambers judge. </p><p>The defendants are all issuers of general use prepaid cards, branded as VISA, American Express or MasterCard. All defendants charged various fees in relation to the purchase and use of the prepaid cards. The cards were acquired by purchasers for a variety of reasons, including for reasons other than personal use. Ms. Jiang purchased a prepaid card for personal use, and alleged that the prepaid cards infringe the <a href="http://www.bclaws.ca/civix/document/id/complete/statreg/04002_00"><em>Business Practices and Consumer Protection Act </em></a>("BPCPA").  <a href="http://www.canlii.org/en/bc/bcsc/doc/2016/2016bcsc368/2016bcsc368.html">At certification</a>, the chambers judge came to a final conclusion about whether the prepaid cards at issue were "prepaid purchase cards" within the meaning of the BPCPA, which, based on this analysis, led him to conclude there was a reasonable cause of action. On the issue of identifiable class, he concluded that it was impossible to define the class with reference to objective criteria. Despite that finding, the chambers judge went on to certify 5 common issues, while rejecting others. </p><p>On appeal, the plaintiff Ms. Jiang and the defendants each raised issues with the chamber judge's reasoning. Three issues drove the result in the appeal.</p><p>(1)    The Court of Appeal held that the chambers judge properly determined that the plaintiff's claim was not bound to fail, but erred when he actually decided the merits of the issue of whether the prepaid cards were "prepaid purchase cards" within the meaning of the BPCPA. Final determinations of such issues, which would have resulted in the plaintiff being bound to "succeed" in that element of her cause of action, should have been left to the common issues trial.<br> <br>(2)    The Court of Appeal held that the chambers judge erred in finding the class definition to be deficient. In doing so, the Court rejected the "objective standards" analysis articulated by the Supreme Court of British Columbia in <a href="http://www.canlii.org/en/bc/bcsc/doc/2014/2014bcsc1002/2014bcsc1002.html?autocompleteStr=2014%20BCSC%201002&autocompletePos=1"><em>Ileman v. Rogers Communications</em></a>. The Court noted that the appeals in <em>Ileman </em>did not require the appellate courts to comment on this issue. The Court commented: "<em>it cannot be the case that a definition incorporating any subjective element denies the plaintiff resort to the [Class Proceedings Act] by virtue of failing the s. 4(1)(b) requirement. To hold otherwise would be to essentially rule that class actions under the BPCPA are impossible because the definition of "consumer transaction" will always incorporate a subjective inquiry: did this person purchase the good or service for a primarily personal, family or household purpose?"</em> The Court held that it was an error to conflate the identifiable class requirement with the consideration of managing individual issues (which should appropriately be dealt with at the preferable procedure stage of the analysis (s. 4(1)(d)).</p><p>(3)    The Court concluded that the chambers judge did not properly consider the s. 4(1)(d) analysis (given his error in conflating the identifiable class and preferable procedure requirements) and failed at all to address the requirements under s. 4(1)(e), relating to the proposed representative plaintiff.<br><br>The Court held it appropriate to remit the certification application back to the lower court to reconsider its s. 4(1)(d) analysis and perform a s. 4(1)(e) analysis.</p>3/17/2017 4:00:00 AM2017-03-17T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#d531403d-b705-440c-8be2-98e2a4c77989;L0|#0d531403d-b705-440c-8be2-98e2a4c77989|Class Actions;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebClass Actions
Court of Appeal for Ontario to Rule on Discovery Type Relief in the Small Claims CourtCourt of Appeal for Ontario to Rule on Discovery Type Relief in the Small Claims Court216BLG Blog PostZiad Yehiazyehia@blg.com | Ziad Yehia | 693A30232E777C626C6763616E6164615C7A7965686961 i:0#.w|blgcanada\zyehia ​The Court of Appeal for Ontario has granted leave to hear a case that concerns whether Small Claims deputy judges have jurisdiction to grant “discovery type relief”. The decision has implications for financial institutions, which are frequently sued in Small Claims Court. If the decision is upheld on appeal, those Small Claims Court cases could become more expensive and time-consuming to defend.<p><span style="line-height:115%;font-family:"arial","sans-serif";font-size:11pt;"><font color="#000000">​<span style="line-height:115%;font-family:"arial","sans-serif";font-size:11pt;"><font color="#000000">The Court of Appeal for Ontario has granted leave to hear a case that concerns whether Small Claims deputy judges have jurisdiction to grant “discovery type relief”. The decision has implications for financial institutions, which are frequently sued in Small Claims Court.  If the decision is upheld on appeal, those Small Claims Court cases could become more expensive and time-consuming to defend</font></span>.</font></span></p>The Court of Appeal for Ontario has granted leave to hear a case that concerns whether Small Claims deputy judges have jurisdiction to grant "discovery type relief". In Riddell v Apple Canada Inc., the Ontario Superior Court of Justice, Divisional Court held that deputy judges have jurisdiction to grant discovery type relief in limited circumstances. In that case, Mr. Riddell applied for judicial review of the order of a deputy judge who ordered him to deliver to the Defendant a mobile phone that he purchased from the defendant, for the purpose of having it examined by an expert in the context of Mr. Riddell's action for damages, in which he claimed that the phone had "overheated and cause[d] severe burns" to his right arm. The Divisional Court recognized that a "natural tension" exists between maintaining the summary approach to dispositions upon which the Small Claims Court is founded and ensuring that the Small Claims Court arrives at a result that is "just and agreeable to good conscience". The balance will generally tip in favour of not making pre-trial orders for discovery type relief. However, there is a small subset of cases where an order for pre-trial inspection is necessary in order to do justice and this does not undermine the effectiveness and expediency of the Small Claims Court, nor does it "open the floodgates" to discovery requests. It is a "narrow and limited expansion of the existing discovery procedures in that court that reflects the need, in those rare cases, to grant an order that will secure 'the just, most expeditious and least expensive determination of every proceeding on its merits.'"In light of the foregoing, the Divisional Court concluded that the order for inspection made by the deputy judge was authorized by a combination of the two sub-rules in Rule 1.03 of the Small Claims Court Rules based on two reasons1. Rule 17.03 of the Small Claims Court Rules provides that the trial judge could inspect the phone at trial. In order to make the authority to inspect a meaningful one, such as in this case, some expert assistance will be necessary. In the interests of an expeditious determination at trial of the issues raised in this action, that expert assistance needs to be provided in advance of the trial. Rule 1.03(2) provides the authority to do so. 2. The Plaintiff made it clear that he intended to call an expert witness and elicit expert evidence from her/him based on an inspection of the phone. Since the Plaintiff refused the Defendant's request to examine the phone, the only way of "levelling the playing field" and ensuring that fairness between the parties is achieved was for the deputy judge to order the Plaintiff to provide the phone to the Defendant for an inspection. The decision has implications for financial institutions, which are frequently sued in Small Claims Court. If the decision is upheld on appeal, those Small Claims Court cases could become more expensive and time-consuming to defend.Stay tuned for the Court of Appeal's decision!<p style="text-align:justify;">The Court of Appeal for Ontario has granted leave to hear a case that concerns whether Small Claims deputy judges have jurisdiction to grant "discovery type relief". </p><p style="text-align:justify;">In <a href="https://www.canlii.org/en/on/onscdc/doc/2016/2016onsc6014/2016onsc6014.html?searchUrlHash=AAAAAQAaUmlkZGVsbCB2IEFwcGxlIENhbmFkYSBJbmMAAAAAAQ&resultIndex=1"><em>Riddell v Apple Canada Inc</em>., </a>the Ontario Superior Court of Justice, Divisional Court held that deputy judges have jurisdiction to grant discovery type relief in limited circumstances.  In that case, Mr. Riddell applied for judicial review of the order of a deputy judge who ordered him to deliver to the Defendant a mobile phone that he purchased from the defendant, for the purpose of having it examined by an expert in the context of Mr. Riddell's action for damages, in which he claimed that the phone had "overheated and cause[d] severe burns" to his right arm.  </p><p style="text-align:justify;">The Divisional Court recognized that a "natural tension" exists between maintaining the summary approach to dispositions upon which the Small Claims Court is founded and ensuring that the Small Claims Court arrives at a result that is "just and agreeable to good conscience".  The balance will generally tip in favour of not making pre-trial orders for discovery type relief.  However, there is a small subset of cases where an order for pre-trial inspection is necessary in order to do justice and this does not undermine the effectiveness and expediency of the Small Claims Court, nor does it "open the floodgates" to discovery requests.  It is a "narrow and limited expansion of the existing discovery procedures in that court that reflects the need, in those rare cases, to grant an order that will secure 'the just, most expeditious and least expensive determination of every proceeding on its merits.'"</p><p style="text-align:justify;">In light of the foregoing, the Divisional Court concluded that the order for inspection made by the deputy judge was authorized by a combination of the two sub-rules in Rule 1.03 of the <em>Small Claims Court Rules</em> based on two reasons:</p><p style="text-align:justify;">1.    Rule 17.03 of the <em>Small Claims Court Rules </em>provides that the trial judge could inspect the phone at trial.  In order to make the authority to inspect a meaningful one, such as in this case, some expert assistance will be necessary. In the interests of an expeditious determination at trial of the issues raised in this action, that expert assistance needs to be provided in advance of the trial. Rule 1.03(2) provides the authority to do so. </p><p style="text-align:justify;">2.    The Plaintiff made it clear that he intended to call an expert witness and elicit expert evidence from her/him based on an inspection of the phone.  Since the Plaintiff refused the Defendant's request to examine the phone, the only way of "levelling the playing field" and ensuring that fairness between the parties is achieved was for the deputy judge to order the Plaintiff to provide the phone to the Defendant for an inspection. </p><p style="text-align:justify;">The decision has implications for financial institutions, which are frequently sued in Small Claims Court.  If the decision is upheld on appeal, those Small Claims Court cases could become more expensive and time-consuming to defend.</p><p style="text-align:justify;">Stay tuned for the Court of Appeal's decision!</p>3/16/2017 4:00:00 AM2017-03-16T04:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#83d31cc8-2281-46b1-bd03-ad81b15c38ff;L0|#083d31cc8-2281-46b1-bd03-ad81b15c38ff|Banking Regulatory;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebBanking Regulatory
Trump trumped at the Supreme CourtTrump trumped at the Supreme Court215BLG Blog PostSuzanne Kittellskittell@blg.com | Suzanne Kittell | 693A30232E777C626C6763616E6164615C736B697474656C6C i:0#.w|blgcanada\skittell Last year, the Ontario Court of Appeal ​​'s decision in Singh v Trump overturned a lower court decision and awarded the plaintiff damages against Donald J. Trump Sr. (as he then was) for negligent misrepresentation with respect to a Trump Hotel investement program (read about that here).Mr. Trump sought leave to appeal the decision to the Supreme Court of Canada, and was denied that leave this morning. ​The Court of Appeal's award stands, as does its order remitting the Plaintiff's claim in fraudulent misrepresentation back to the courts.<p> </p><div><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2">Last year, the Ontario Court of Appeal ​​'s</span><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2" style="color:#0a0a0a;background-color:#fefefe;"> </span><a href="http://www.canlii.org/en/on/onca/doc/2016/2016onca747/2016onca747.html" target="_blank" data-unsp-sanitized="clean" style="line-height:inherit;cursor:pointer;box-sizing:inherit;background-color:transparent;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2">decision</span></a><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2"> in </span><em class="ms-rteThemeFontFace-1 ms-rteFontSize-2">Singh v Trump</em><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2"> overturned a</span><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2" style="color:#0a0a0a;background-color:#fefefe;"> </span><a href="http://www.canlii.org/en/on/onsc/doc/2015/2015onsc4461/2015onsc4461.html" target="_blank" data-unsp-sanitized="clean" style="line-height:inherit;cursor:pointer;box-sizing:inherit;background-color:transparent;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2">lower court decision</span></a><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2" style="color:#0a0a0a;background-color:#fefefe;"> and awarded the plaintiff damages against Donald J. Trump Sr. (as he then was) for negligent misrepresentation with respect to a Trump Hotel investement program (read about <em>that</em> <a href="/theexchange/Pages/Post.aspx?PID=165" data-unsp-sanitized="clean">here</a>).</span><br class="ms-rteThemeFontFace-1 ms-rteFontSize-2"></div><div><font class="ms-rteThemeFontFace-1 ms-rteFontSize-2" color="#0a0a0a"><br></font><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2" style="color:#0a0a0a;background-color:#fefefe;"></span><p style="padding:0px;color:#0a0a0a;margin-bottom:1rem;box-sizing:inherit;background-color:#fefefe;text-rendering:optimizelegibility;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2">Mr. Trump sought leave to appeal the decision to the Supreme Court of Canada, and was denied that leave this morning. </span></p><p style="padding:0px;color:#0a0a0a;font-family:"helvetica neue", helvetica, roboto, arial, sans-serif;margin-bottom:1rem;box-sizing:inherit;background-color:#fefefe;text-rendering:optimizelegibility;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-2">​The Court of Appeal's award stands, as does its order remitting the Plaintiff's claim in fraudulent misrepresentation back to the courts.</span><br></p></div>3/9/2017 5:00:00 AM2017-03-09T05:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#11984f46-19e7-4b16-acce-db2c31f12bae;L0|#011984f46-19e7-4b16-acce-db2c31f12bae|Fraud and White Collar Crime;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0eb;GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and ComplianceFraud and White Collar Crime;Securities: Litigation Regulatory and Compliance
Welcome to the Family: Promissory notes under the Securities ActWelcome to the Family: Promissory notes under the Securities Act214BLG Blog PostIvana Nenadicinenadic@blg.com | Ivana Nenadic | 693A30232E777C626C6763616E6164615C696E656E61646963 i:0#.w|blgcanada\inenadic ​In Ontario Securities Commission v. Tiffin, the Ontario Court of Justice clarified the limits of the definition of "securities" under s.1(1) of the Securities Act, as it relates to promissory notes. The Court applied the "family resemblance test" established by the U.S Supreme Court to conclude that the notes in question were similar to notes secured by a lien on a small business or its assets and as such were non-security notes.<p>​In <em>Ontario Securities Commission v. Tiffin</em>, the Ontario Court of Justice clarified the limits of the definition of "securities" under s.1(1) of the Securities Act, as it relates to promissory notes.  The Court applied the "family resemblance test" established by the U.S Supreme Court to conclude that the notes in question were similar to notes secured by a lien on a small business or its assets and as such were non-security notes.</p> ​In Ontario Securities Commission v. Tiffin, the Ontario Court of Justice clarified the limits of the definition of "securities" under s.1(1) of the Securities Act, as it relates to promissory notes. The defendant in the case was charged with trading in securities without being registered and while prohibited, and without filing a prospectus. The issue in the case was whether the promissory notes were "securities for the purposes of the Act. The Court concluded that the “family resemblance” test established by the U.S. Supreme Court in Reves v.Ernst & Young should be adopted. The test stands for the proposition that a note is presumed to be a security unless it bears a strong resemblance, determined by examining four specific factors, to one of a judicially crafted list of categories of instrument that are not securities. In this case, the financial advisor (the defendant) issued promissory notes for loans he needed for personal use, to keep his company running, while subject to a cease trade order. The lenders had remedies under contract and tort law, and the defendant had provided collateral. Moreover, the notes were similar to notes secured by a lien on a small business or its assets, which is one of the families of notes recognized in Reves as non-security notes. Therefore the defendant was acquitted of the charge of breaching s.122 of the Securities Act.<p>​In <a href="https://www.canlii.org/en/on/oncj/doc/2016/2016oncj543/2016oncj543.html?searchUrlHash=AAAAAQApIm9udGFyaW8gc2VjdXJpdGllcyBjb21taXNzaW9uIHYuIHRpZmZpbiIAAAAAAQ&resultIndex=1"><span style="background:white;color:#222222;font-family:"arial","sans-serif";font-size:9.5pt;"><em><span class="ms-rteThemeForeColor-5-0">Ontario Securities Commission v. Tiffin</span>,</em></span></a> <span style="background:white;color:#222222;font-family:"arial","sans-serif";font-size:9.5pt;">the Ontario Court of Justice clarified the limits of the definition of "securities" under s.1(1) of the<span class="apple-converted-space"> </span><a href="https://www.ontario.ca/laws/statute/90s05"><em>Securities Act</em></a>, as it relates to promissory notes.  The defendant in the case was charged with trading in securities without being registered and while prohibited, and without filing a prospectus.  The issue in the case was whether the promissory notes were "securities for the purposes of the Act.</span></p><p><span style="background:white;color:#222222;font-family:"arial","sans-serif";font-size:9.5pt;"></span><span style="background:white;color:#222222;font-family:"arial","sans-serif";font-size:9.5pt;">The Court concluded that the “family resemblance” test established by the U.S. Supreme Court in </span><span style="background:white;color:#222222;font-family:"arial","sans-serif";font-size:9.5pt;"><a href="https://supreme.justia.com/cases/federal/us/494/56/case.html"><span class="apple-converted-space"><em>Reves v.Ernst & Young </em></span></a></span><span style="background:white;color:#222222;font-family:"arial","sans-serif";font-size:9.5pt;">should be adopted.  The test stands for the proposition that a note is presumed to be a security unless it bears a strong resemblance, determined by examining four specific factors, to one of a judicially crafted list of categories of instrument that are not securities.  In this case, the financial advisor (the defendant) issued promissory notes for loans he needed for personal use, to keep his company running, while subject to a cease trade order. The lenders had remedies under contract and tort law, and the defendant had provided collateral. Moreover, the notes were similar to notes secured by a lien on a small business or its assets, which is one of the families of notes recognized in<span class="apple-converted-space"> </span><em>Reves<span class="apple-converted-space"> </span></em>as non-security notes. Therefore the defendant was acquitted of the charge of breaching <a href="https://www.ontario.ca/laws/statute/90s05#BK174">s.122 of the Securities Act</a>.</span></p>3/8/2017 5:00:00 AM2017-03-08T05:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebSecurities: Litigation Regulatory and Compliance
British Columbia Securities Commission Finds Common Law Due Diligence Defense Available in Administrative Proceedings for Breach of Securities LegislationBritish Columbia Securities Commission Finds Common Law Due Diligence Defense Available in Administrative Proceedings for Breach of Securities Legislation213BLG Blog PostAlannah Fotheringhamafotheringham@blg.com | Alannah Fotheringham | 693A30232E777C626C6763616E6164615C61666F74686572696E6768616D i:0#.w|blgcanada\afotheringham ​In a decision released on February 20, 2017, a panel of the British Columbia Securities Commission (the "Commission") held that a defence of due diligence is available in the context of contraventions of securities legislation that proceed under an administrative process. The decision is significant for its definitive finding that a common law due diligence defence is available in administrative proceedings under provincial securities legislation, and will have a considerable impact on the conduct of such proceedings going forward. Given their historical disagreement on this point, we expect the other provincial securities regulatory authorities to weigh in on this important issue in the near future.<p>​In a <a href="http://www.bcsc.bc.ca/Enforcement/Decisions/PDF/2017_BCSECCOM_58/">decision </a>released on February 20, 2017, a panel of the British Columbia Securities Commission (the "Commission") held that a defence of due diligence is available in the context of contraventions of securities legislation that proceed under an administrative process.  The decision is significant for its definitive finding that a common law due diligence defence is available in administrative proceedings under provincial securities legislation, and will have a considerable impact on the conduct of such proceedings going forward. Given their historical disagreement on this point, we expect the other provincial securities regulatory authorities to weigh in on this important issue in the near future.</p> In a decision released on February 20, 2017, a panel of the British Columbia Securities Commission (the "Commission") held that a defence of due diligence is available in the context of contraventions of securities legislation that proceed under an administrative process. In Re SunCentro, the respondent SunCentro Corporation ("SunCentro") entered into a business development agreement with the respondents YDS Energy, Resources and Humanitarian Relief Corporation ("YDS"), to provide marketing and financing services to SunCentro. SunCentro also entered into an agreement with Donald Weiss ("Weiss"), authorizing Weiss to raise money for SunCentro. As part of these agreements, SunCentro agreed to pay the YDS and Weiss commissions for referring investors to SunCentro. SunCentro never filed a prospectus under the British Columbia Securities Act (the "Act") and instead relied on prospectus exemptions to raise money from investors. However, none of the investors referred to SunCentro qualified under a registration or prospectus exemption. Accordingly, the executive director of the Commission alleged that each of the respondents contravened section 61 of the Act, which prohibits the distribution of securities without a prospectus in the absence of an exemption. The executive director also alleged that the directors and officers of SunCentro and YDS authorized, permitted or acquiesced to those contraventions, and were therefore liable under section 168.2 of the Act. The agreed statement of facts and affidavits filed by the respondents contained admissions of liability for contraventions of section 61 of the Act. However, the Commission did not find the admissions conclusive of the issue of liability of the respondents, on the basis that other evidence tendered by the respondents suggested the possibility of there being a due diligence defence available with respect to some of the impugned distributions. In considering the availability of the due diligence defence, the Commission noted that neither the applicable Companion Policy nor the Act expressly created a legal basis for establishing a due diligence defence to an allegation of a contravention of section 61. Accordingly, the Commission premised the availability of such a defence on whether there was such a defence at common law, which, in turn, depended on whether a contravention of section 61 was properly considered an absolute liability or strict liability offence. Due to the inconsistent findings among Commission panels and other securities regulatory authorities across Canada on the categorization of section 61 contraventions, the Commission looked to the British Columbia Court of Appeal's decision in Whistler Mountain Ski Corp v British Columbia (General Manager Liquor Control and Licensing Branch) ("Whistler") for guidance on whether the section 61 contraventions should be considered absolute or strict liability offences. In Whistler, the Court found that administrative proceedings that could result in significant sanctions being imposed for contraventions should be strict liability offences, absent clear legislative language to indicate that an offence is one of absolute liability. Finding the enforcement regime under the Act analogous to that considered by the Court in Whistler, and noting that there was no language in the Act prescribing that such contraventions should be absolute liability offences, the BCSC followed Whistler and found the due diligence defence was available to the respondents. The Commission proceeded to evaluate the availability of the due diligence defence for each of the respondents. On the facts, the Commission ultimately found that SunCentro, and one of its director/officers, successfully made out the due diligence defence with respect to seven investors, where they received confirmation of the accuracy of the investors' subscription agreements, exercised reasonable care by establishing a board policy around capital raising, and made efforts to understand the exemptions it intended to rely on. However, SunCentro, YDS, and their officers and directors were unable to make out the due diligence defence with respect to the issuance of securities for 19 other investors, and were sanctioned accordingly. Overall, this decision is significant for its definitive finding that a common law due diligence defence is available in administrative proceedings under provincial securities legislation, and will have a considerable impact on the conduct of such proceedings going forward. Given their historical disagreement on this point, we expect the other provincial securities regulatory authorities to weigh in on this important issue in the near future.<p>In a decision released on February 20, 2017, a panel of the British Columbia Securities Commission (the "Commission") held that a defence of due diligence is available in the context of contraventions of securities legislation that proceed under an administrative process.</p><p>In <a href="http://www.bcsc.bc.ca/Enforcement/Decisions/PDF/2017_BCSECCOM_58/"><em>Re SunCentro</em></a>, the respondent SunCentro Corporation ("SunCentro") entered into a business development agreement with the respondents YDS Energy, Resources and Humanitarian Relief Corporation ("YDS"), to provide marketing and financing services to SunCentro. SunCentro also entered into an agreement with Donald Weiss ("Weiss"), authorizing Weiss to raise money for SunCentro. As part of these agreements, SunCentro agreed to pay the YDS and Weiss commissions for referring investors to SunCentro. </p><p>SunCentro never filed a prospectus under the British Columbia<em> </em><a href="http://www.bclaws.ca/civix/document/id/complete/statreg/96418_01"><em>Securities Act</em></a> (the "Act") and instead relied on prospectus exemptions to raise money from investors. However, none of the investors referred to SunCentro qualified under a registration or prospectus exemption. Accordingly, the executive director of the Commission alleged that each of the respondents contravened section 61 of the Act, which prohibits the distribution of securities without a prospectus in the absence of an exemption. The executive director also alleged that the directors and officers of SunCentro and YDS authorized, permitted or acquiesced to those contraventions, and were therefore liable under section <a href="http://www.bclaws.ca/civix/document/id/complete/statreg/96418_01#section168.2">168.2 of the Act</a>.</p><p>The agreed statement of facts and affidavits filed by the respondents contained admissions of liability for contraventions of <a href="http://www.bclaws.ca/civix/document/id/complete/statreg/96418_01#section61">section 61 of the Act</a>. However, the Commission did not find the admissions conclusive of the issue of liability of the respondents, on the basis that other evidence tendered by the respondents suggested the possibility of there being a due diligence defence available with respect to some of the impugned distributions. </p><p>In considering the availability of the due diligence defence, the Commission noted that neither the applicable Companion Policy nor the Act expressly created a legal basis for establishing a due diligence defence to an allegation of a contravention of section 61.  Accordingly, the Commission premised the availability of such a defence on whether there was such a defence at common law, which, in turn, depended on whether a contravention of section 61 was properly considered an absolute liability or strict liability offence. </p><p>Due to the inconsistent findings among Commission panels and other securities regulatory authorities across Canada on the categorization of section 61 contraventions, the Commission looked to the British Columbia Court of Appeal's decision in <a href="http://www.courts.gov.bc.ca/jdb-txt/ca/02/04/2002bcca0426.htm"><em>Whistler Mountain Ski Corp v British Columbia (General Manager Liquor Control and Licensing Branch)</em> </a>("<em>Whistler</em>") for guidance on whether the section 61 contraventions should be considered absolute or strict liability offences. In <em>Whistler</em>, the Court found that administrative proceedings that could result in significant sanctions being imposed for contraventions should be strict liability offences, absent clear legislative language to indicate that an offence is one of absolute liability. Finding the enforcement regime under the Act analogous to that considered by the Court in <em>Whistler</em>, and noting that there was no language in the Act prescribing that such contraventions should be absolute liability offences, the BCSC followed <em>Whistler</em> and found the due diligence defence was available to the respondents.</p><p>The Commission proceeded to evaluate the availability of the due diligence defence for each of the respondents. On the facts, the Commission ultimately found that SunCentro, and one of its director/officers, successfully made out the due diligence defence with respect to seven investors, where they received confirmation of the accuracy of the investors' subscription agreements, exercised reasonable care by establishing a board policy around capital raising, and made efforts to understand the exemptions it intended to rely on. However, SunCentro, YDS, and their officers and directors were unable to make out the due diligence defence with respect to the issuance of securities for 19 other investors, and were sanctioned accordingly. </p><p>Overall, this decision is significant for its definitive finding that a common law due diligence defence is available in administrative proceedings under provincial securities legislation, and will have a considerable impact on the conduct of such proceedings going forward. Given their historical disagreement on this point, we expect the other provincial securities regulatory authorities to weigh in on this important issue in the near future.</p>3/6/2017 5:00:00 AM2017-03-06T05:00:00ZTrue1float;#3.00000000000000float;#2017.00000000000string;#Marchfloat;#201703.000000000GP0|#75eda1bb-5890-4b6b-aad7-b703245ec2e8;L0|#075eda1bb-5890-4b6b-aad7-b703245ec2e8|Securities: Litigation Regulatory and Compliance;GTSet|#efd3ce69-ee46-4bca-b6af-3daf96f6b0ebSecurities: Litigation Regulatory and Compliance

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