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An Overview of OSC Enforcement Proceedings

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Ontario’s capital markets are overseen by the Ontario Securities Commission (OSC). Contraventions of securities laws are investigated by a branch of the OSC known as Enforcement staff.

Enforcement staff have broad powers to carry out their investigations. Under section 127 of the Securities Act (Ontario), Enforcement staff derive their authority to commence proceedings against both individuals and companies suspected of either violating securities laws or acting against the public interest. These proceedings take place at the OSC and are administrative hearings. Such hearings are adjudicated upon by a Panel of Commissioners (“Panel”).

A proceeding is commenced by the issuance of a Notice of Hearing. This Notice of Hearing will contain a Statement of Allegations issued by Enforcement staff. The subject or target of a proceeding is referred to as the respondent. In these proceedings the Panel does not have the ability to sentence people to jail. However, proceedings can also be initiated by Enforcement staff in the Ontario Court of Justice. Proceedings in the Ontario Court of Justice are quasi-criminal in nature and the judges of the Ontario Court of Justice do have the ability to impose fines and jail sentences.  The Panel or tribunal that presides over the proceedings at the OSC is not a court but it is vested with quasi-judicial powers.  The hearings are conducted before a Panel, which consists of one to three Commissioners of the OSC.

Before a hearing on the merits of a case is held, there may be several appearances held before a Panel member in order to discuss preliminary matters. These preliminary matters include the disclosure of evidence, pre-hearing motions, and issues surrounding the hearing of the matter on its merits. Respondents are free to negotiate a settlement with Enforcement staff at any time during an investigation or proceeding. Respondents should also be aware that, in appropriate cases, Enforcement staff may seek a temporary cease trade order against the respondent while the matter is proceeding.

During the hearing of the case on its merits, the Panel will consider the evidence presented as well as submissions made by both sides. The Panel will then render its decision. Sometimes, the decision is rendered immediately while at other times the Panel will reserve its decision in order to produce written reasons.

If the Panel finds that Enforcement staff has proven its case, a hearing to determine punishment (known as sanctions) will follow. There are numerous sanctions that the Panel may order, which are set out in section 127(1) of the Securities Act (Ontario). Additionally, the Panel may order that the respondent pay costs related to the investigation and hearing. The issue of costs is detailed in section 127.1 of the Securities Act (Ontario). There are also various avenue of appeal of the Panel’s decision.

The issues in these investigations and proceedings are complex and the consequences can be significant. Therefore, a respondent should seriously consider seeking legal advice from a lawyer.

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