Ontario Securities Commission Bulletin
Issue 44/03 - January 21, 2021
Ont. Sec. Bull. Issue 44/03
• Solar Income Fund Inc. et al.
• Stableview Asset Management Inc. and Colin Fisher
• First Global Data Ltd. et al.
• Stableview Asset Management Inc. and Colin Fisher
• Temporary, Permanent & Rescinding Issuer Cease Trading Orders
• Temporary, Permanent & Rescinding Management Cease Trading Orders
• Neo Exchange Inc. -- Listing Manual Amendments -- Notice of Approval
• Nasdaq CXC Limited -- Notice of Proposed Changes and Request for Comment
• Outback Goldfields Corp. (formerly Skarb Exploration Corp.) -- s. 4(b) of the Regulation
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OSC Staff Notice 11-739 (Revised) -- Policy Reformulation Table of Concordance and List of New Instruments
The following revisions have been made to the Table of Concordance and List of New Instruments. A full version of the Table of Concordance and List of New Instruments as of December 31, 2020 has been posted to the OSC Website at www.osc.gov.on.ca.
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Table of Concordance
Item Key
The third digit of each instrument represents the following: 1-National/Multilateral Instrument; 2-National/Multilateral Policy;
3-CSA Notice; 4-CSA Concept Release; 5-Local Rule; 6-Local Policy; 7-Local Notice; 8-Implementing Instrument;
9-Miscellaneous
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Reformulation |
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Instrument |
Title |
Status |
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81-105 |
Notice of Correction -- CSA Notice of Amendments to NI 81-105 Mutual Fund Sales Practices and Related Consequential Amendments Prohibition of Mutual Fund Trailing Commissions Where No Suitability Determination Was Required -- Annex F |
Published October 8, 2020 |
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11-737 |
(Revised) Securities Advisory Committee -- Vacancies |
Published October 8, 2020 |
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11-739 |
Policy Reformulation Table of Concordance and List of New Instruments |
Published October 22, 2020 |
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51-361 |
Continuous Disclosure Review Program Activities for the fiscal years ended March 31, 2020 and March 31, 2019 |
Published October 29, 2020 |
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13-708 |
Fees Under OSC Rule 13-502 Fees and OSC Rule 13-503 (Commodity Futures Act) Fees |
Published November 12, 2020 |
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11-790 |
Protecting Aging Investors through Behavioural Insights |
Published November 12, 2020 |
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51-731 |
Corporate Branch 2020 Annual Report |
Published November 19, 2020 |
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11-791 |
Statement of Priorities -- Request for Comments Regarding Statement of Priorities for Financial Year to End March 31, 2022 |
Published November 19, 2020 |
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51-102 and 41-101 |
Ministerial Approval of Amendments to NI 51-102 Continuous Disclosure Obligations Related to Business Acquisition Report Requirements |
Ministerial Approval published November 19, 2020 |
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25-302 |
Matters Relating to CDOR, LIBOR and Other Interest Rate Benchmarks |
Published November 26, 2020 |
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48-503 |
OSC Notice of General Order -- Temporary Exemption from Certain Provisions of Ontario Securities Commission Rule 48-501 Trading During Distributions, Formal Bids and Share Exchange Transactions |
Published December 3, 2020 |
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25-403 |
Activist Short Selling |
Published for comment on December 3, 2020 |
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32-506 |
OSC Rule (Under the Commodity Futures Act) Exemptions for International Dealers, Advisers and Sub-Advisers -- Proposed Amendment to OSC Rule 91-502 Trades in Recognized Options under the Securities Act |
Published for comment on December 3, 2020 |
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13-315 |
(Revised) Securities Regulatory Authority Closed Dates 2021 |
Published December 10, 2020 |
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45-501 |
Notice of Amendments to OSC Rule 45-501 Ontario Prospectus and Registration Exemptions relating to Syndicated Mortgages |
Published December 10, 2020 |
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55-317 |
Automatic Securities Disposition Plans |
Published December 10, 2020 |
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45-317 |
Ontario's Exempt Market |
Published December 10, 2020 |
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81-105 |
Mutual Fund Sales Practices and Related Consequential Amendments Prohibition of Mutual Fund Trailing Commissions Where No Suitability Determination Was Required |
Ministerial Approval published December 10, 2020 |
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11-742 |
(Revised) Securities Advisory Committee |
Published December 24, 2020 |
For further information, contact:
Darlene WatsonProject ManagerOntario Securities Commission416-593-8148 -January 14, 2021
Marilyn Dianne Stuart -- ss. 127(1), 127(10)
FILE NO.: 2021-1
PROCEEDING TYPE: Inter-jurisdictional Enforcement Proceeding
HEARING DATE AND TIME: In writing
The purpose of this proceeding is to consider whether it is in the public interest for the Commission to make the order(s) requested in the Statement of Allegations filed by Staff of the Commission on January 12, 2021.
Take notice that Staff of the Commission has elected to proceed by way of the expedited procedure for a written hearing provided for by Rule 11(3) of the Commission's Rules of Procedure.
Staff must serve on you this Notice of Hearing, the Statement of Allegations, Staff's hearing brief containing all documents Staff relies on, and Staff's written submissions.
You have 21 days from the date Staff serves these documents on you to file a request for an oral hearing, if you do not want to follow the expedited procedure for a written hearing.
Otherwise, you have 28 days from the date Staff served these documents on you to file your hearing brief and written submissions.
Any party to the proceeding may be represented by a representative at the hearing.
IF A PARTY DOES NOT PARTICIPATE THE HEARING MAY PROCEED IN THE PARTY'S ABSENCE AND THE PARTY WILL NOT BE ENTITLED TO ANY FURTHER NOTICE IN THE PROCEEDING.
This Notice of Hearing is also available in French on request of a party. Participation may be in either French or English. Participants must notify the Secretary's Office in writing as soon as possible if the participant is requesting a proceeding be conducted wholly or partly in French.
L'avis d'audience est disponible en français sur demande d'une partie, que la participation à l'audience peut se faire en français ou en anglais et que les participants doivent aviser le Bureau du secrétaire par écrit dès que possible si le participant demande qu'une instance soit tenue entièrement ou partiellement en français.
Dated at Toronto this 13th day of January, 2021.
For more information
Please visit www.osc.gov.on.ca or contact the Registrar at registrar@osc.gov.on.ca.
1. Staff of the Enforcement Branch (Staff) of the Ontario Securities Commission (the Commission) elect to proceed using the expedited procedure for inter-jurisdictional proceedings as set out in Rule 11(3) of the Commission's Rules of Procedure.
2. Staff make the following allegations of fact:
(i) Overview
3. On December 2, 2019, Marilyn Dianne Stuart (Stuart) pled guilty before the Honourable Justice D.S. Rose of the Ontario Court of Justice (the OCJ) to fraud over $5000 contrary to section 380(1)(a) of the Criminal Code of Canada (CCC).
4. A sentencing hearing was subsequently held before Justice Rose who issued Reasons for Sentence on December 19, 2019 (the Reasons for Sentence), sentencing Stuart to a conditional sentence of two years less a day, to be served in the community, followed by probation for two years. Stuart was also ordered to make restitution to the MFDA Investor Protection Corporation in the amount of $1.1 million.
5. The offences for which Stuart was charged arose from transactions, business or a course of conduct related to securities.
6. Staff is seeking an inter-jurisdictional enforcement order reciprocating Stuart's conviction, pursuant to paragraph 1 of subsection 127(10) of the Act.
7. The offences for which Stuart was charged took place between January 2004 to May 31, 2013 (the Material Time).
(ii) The Respondent
8. Stuart is a resident of Keswick, Ontario.
Facts
9. Stuart has pled guilty to the facts as set out below.
10. During the Material Time, Stuart and her husband were the principals and representatives of W.H. Stuart Mutuals Ltd. (WH Stuart). Stuart was the co-owner and director of WH Stuart and related entities. Under the category of Mutual Fund Dealer with WH Stuart, Stuart was registered as a Trading Officer (until September 28, 2009), Dealing Representative (September 28, 2009 to May 9, 2013), Director and Officer (until May 9, 2013) and Ultimate Designated person (from November 20, 2009 to May 9, 2013).
11. During the Material Time, several individuals, consisting primarily of retired teachers and police officers, invested their commuted valued pensions with WH Stuart. They invested in the instruments marketed by WH Stuart as guaranteed investments with an annual interest rate of five percent to ten percent or as cash accounts. The investors had varying understandings of the specific investment product that they were purchasing but they all expected that their funds would be held in cash or cash equivalents or used for purchases of investment products that would return five to ten percent annually.
12. Ultimately, the funds were not used as promised. The monies invested were used to pay interest and return principal to other investors, essentially devolving in a Ponzi scheme. The monies were also transferred and deposited into the accounts of other entities and persons related to WH Stuart without the authorization of clients.
13. In September 2013, after an investigation by the Mutual Fund Dealers Association (MFDA), a bankruptcy order was made against WH Stuart. Through its Investor Protection Corporation, the MFDA compensated most of the investors, but only to the original amount of their principal investment. The total loss paid out by the MFDA following the bankruptcy of WH Stuart was approximately $7.2 million.
14. All of the employee witnesses stated that Stuart had complete control over the finances of WH Stuart. Stuart had signing authority on all the WH Stuart accounts, and she had functional control of the bank accounts in which investor monies were deposited. Stuart directed operations including its financial affairs and also performed important regulatory functions such as client complaint handling and financial reporting to the MFDA.
15. Stuart was also part owner in a company called S21C Technologies Limited (S21C). The S21C software was the in-house computer database record system that was designed by Stuart and utilized by WH Stuart employees to manage their client's accounts. One of the main purposes of the S21C system was to give investors an ability to independently monitor their own accounts. In reality, S21C was part of the Ponzi Scheme. Stuart had full administrative rights to the data system and manipulated it to give investors the false impression that their funds were growing and could be redeemed, when in fact this was not true.
16. The accounting firm Deloitte conducted a tracing review of WH Stuart for the period of September 30, 2008 to May 31, 2013 (the Tracing Period). Deloitte focused its review on the investments of 10 clients in the investment program and concluded that these invested amounts were not used to purchase an actual investment product nor did the funds remain in a trust account in the clients' names.
17. Deloitte did not identify any repayment of investor funds from WH Stuart to the 10 clients during the Tracing Period for each deposit being traced. Deloitte found that $1.1 million invested by the 10 clients was deposited into bank accounts held by WH Stuart and used as follows:
a. To fund operating expenses at each entity;
b. To fund payments to related parties including Stuart and her immediate family or corporations under their control and WH Stuart employees and their spouses;
c. To fund payments to other known clients; and
d. To purchase investment products for other clients.
Stuart's Sentence
18. A sentencing hearing was held before Justice Rose on December 19, 2019. Stuart was sentenced to a conditional sentence of two years less a day, to be served in the community, followed by probation for two years for one count of fraud listed as count one on the Information.
19. In addition, pursuant to s. 380.2 of the CCC Stuart is prohibited for twenty years from seeking, obtaining or continuing any employment, or becoming or being a volunteer in any capacity, that involves having authority over the real property, money or valuable security of another person.
20. Stuart was also ordered to pay restitution in the amount of $1.1 million to the MFDA Investor Protection Corporation.
21. Pursuant to paragraph 1 of subsection 127(10) of the Act, Stuart's conviction for offences arising from transactions, business or a course of conduct related to securities or derivatives may form the basis for an order in the public interest made under subsection 127(1) of the Act.
22. Staff allege that it is in the public interest to make an order against Stuart.
23. Staff reserve the right to amend these allegations and to make such further and other allegations as Staff deem fit and the Commission may permit.
24. Staff request that the Commission make the following inter-jurisdictional enforcement order, pursuant to paragraph 1 of subsection 127(10) of the Ontario Securities Act, RSO 1990 c S.5 (the Act):
(a) against Stuart that:
i. pursuant to paragraph 2 of subsection 127(1) of the Act, trading in any securities or derivatives by Stuart cease permanently;
ii. pursuant to paragraph 2.1 of subsection 127(1) of the Act, acquisition of any securities by Stuart be prohibited permanently;
iii. pursuant to paragraph 3 of subsection 127(1) of the Act, any exemptions contained in Ontario securities law do not apply to Stuart permanently;
iv. pursuant to paragraphs 7, 8.1 and 8.3 of subsection 127(1) of the Act, Stuart resign any positions that she holds as a director or officer of any issuer or registrant;
v. pursuant to paragraphs 8, 8.2 and 8.4 of subsection 127(1) of the Act, Stuart be prohibited permanently from becoming or acting as a director or officer of any issuer or registrant;
vi. pursuant to paragraph 8.5 of subsection 127(1) of the Act, Stuart be prohibited permanently from becoming or acting as a registrant or promoter; and
(b) such other order or orders as the Commission considers appropriate.
DATED this 12th day of January, 2021.
FOR IMMEDIATE RELEASE
January 11, 2021
TORONTO -- Take notice an attendance in the above named matter is scheduled to be heard on January 13, 2021 at 8:30 a.m.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
January 13, 2021
TORONTO -- The Office of the Secretary issued a Notice of Hearing pursuant to Subsections 127(1) and 127(10) of the Securities Act.
A copy of the Notice of Hearing dated January 13, 2021 and Statement of Allegations dated January 12, 2021 are available at www.osc.gov.on.ca.
For media inquiries:
For investor inquiries:
Stableview Asset Management Inc. and Colin Fisher
FOR IMMEDIATE RELEASE
January 14, 2021
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated January 13, 2021 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
January 18, 2021
TORONTO -- Take notice that the hearing in the above named matter scheduled to be heard on January 21, 25, and 26, 2021 will not proceed as scheduled.
For media inquiries:
For investor inquiries:
FOR IMMEDIATE RELEASE
January 19, 2021
TORONTO -- The Commission issued its Reasons for Decision on a Motion in the above named matter.
A copy of the Reasons for Decision on a Motion dated January 18, 2021 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
January 19, 2021
TORONTO -- The Commission issued its Reasons for Decision on a Motion in the above named matter.
A copy of the Reasons for Decision on a Motion dated January 18, 2021 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
January 19, 2021
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated January 19, 2021 is available at www.osc.gov.on.ca.
For media inquiries:
For investor inquiries:
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions. Relief from the requirement in paragraph 14.5.3(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (the Custodial Records Requirement) requiring firms to take reasonable steps to ensure that cash and securities of each client or investment fund are held by a qualified custodian using an account number or other designation in the records of the qualified custodian sufficient to show that the beneficial ownership of the cash or securities of the client or investment fund is vested in that client or investment fund. The registered firm is a manager of Capital Accumulation Plans, typically providing investment and retirement saving services to small Canadian businesses. The registered firm will continue its historical relationship with its custodian, which qualifies as a "Canadian custodian" as defined in NI 31-103 -- the registered firm and its Canadian custodian have implemented enhanced and improved contractual arrangements and systems so the Canadian Custodian has access to data showing the beneficial ownership of the individual cash and securities positions of each individual client independently of the registered firm.
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 1.1, 14.2(2) (a.1), 14.2(2) (a.2), 14.5.2(5), 14.5.3(a), 14.6, and 15.1.
January 14, 2021
On June 4, 2018, amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103) came into effect that enhanced the custody requirements applicable to registered advisers, dealers and investment fund managers that are not members of a self-regulatory organization (SRO) such as the Investment Industry Regulatory Organization of Canada or the Mutual Fund Dealers Association of Canada (the Custody Amendments). The Custody Amendments primarily (a) address potential intermediary risks when registered firms that are not members of an SRO are involved in the custody of client assets; (b) enhance the protection of client assets; and (c) codify existing custodial best practices of registered firms that are not members of an SRO.
The principal regulator in the Jurisdiction received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for an exemption under section 15.1 of NI 31-103 from the requirement in paragraph 14.5.3(a) of NI 31-103 that a registered firm such as the Filer must take reasonable steps to ensure that the cash and securities of a client or investment fund are held by a qualified custodian (or, in respect of cash, by a Canadian financial institution) using an account number or other designation in the records of the qualified custodian or financial institution sufficient to show that the beneficial ownership of the cash or securities is vested in that client or investment fund (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated since 1995 under the Ontario Business Corporations Act. The Filer is registered as a dealer in the categories of exempt market dealer and mutual fund dealer and as an adviser in the category of portfolio manager in Ontario, as a dealer in the category of mutual fund dealer and as an adviser in the category of portfolio manager in Nunavut, and as an adviser in the category of portfolio manager in each of the other provinces and territories of Canada.
2. The Filer is a provider of Capital Accumulation Plans (CAP). A typical client of the Filer is a small business employer (Plan Sponsor) that has established a group retirement plan for its employees (Plan Members). The Filer provides discretionary investment management services to Plan Members of defined contribution pension plans, group registered retirement savings plans and other group retirement plans, as well as non-registered accounts and tax-free savings accounts. Plan Members typically contribute to their respective plan via ongoing payroll deductions ranging from 1% to 6% of their gross earnings.
3. The core of the Filer's product offering is nine CAP mandates of institutionally-priced mutual funds. Each Plan Member must complete an Investor Profile Risk Assessment Form (IP Form), which generates a score for the Plan Member. This score determines the CAP mandate the Plan member is invested in.
4. Canadian Western Trust (CWT) is currently the custodian of the cash and securities for the Plan Members, having been appointed as custodian in 2013. The securities of Plan Members are registered in the name of CWT, and cash is held by CWT in one of seven trust accounts in trust for the Plan Members.
5. CWT is a "Canadian financial institution" as defined in NI 31-103 and a "Canadian custodian" under paragraph (b) of the definition of that term in section 1.1 of NI 31-103. It is accordingly qualified to continue to act as the custodian of the assets of Clients of the Filer, and it is intended that it do so.
6. The seven trust accounts are bulk accounts (sometimes referred to as omnibus accounts) for Plan Members in the following plan types: (i) group registered retirement savings plans; (ii) individual registered retirement savings plans; (iii) locked-in registered retirement income funds, registered retirement income funds or life income funds; (iv) non-registered plans; (v) defined contribution pension plans; (vi) deferred profit sharing plans; and (vii) tax-free savings accounts.
7. In accordance with the agreements (the Agency Agreements) between CWT and the Filer, the Filer is the record keeper for these trust accounts. As the record keeper, the Filer maintains all records of the underlying ownership of cash and securities by each individual Plan Member and the related transactions which produce those balances. The Filer administers all records at the individual Plan Member level on behalf of CWT in accordance with the Agency Agreements.
8. All of the Filer's record keeping is performed on Basis, which is a record keeping system created, owned and maintained by Buck Canada HR Services Limited (Buck). Buck, and its predecessors, have provided this service to the Filer since 2012, as per a Software License and Cosourcing Agreement, dated February 17, 2012, as amended on December 7, 2020 (the Agreement). All client data resides on Buck servers and these servers reside in Canada.
9. Daily transactions of each Plan Member are recorded in Basis by the Filer, including all portfolio transactions, contributions and withdrawals, and Basis is able to produce detailed reporting at period ends. This includes the Plan Members' period end portfolio positions and the portfolio transactional details and performance for the period.
10. Holding plan members' cash and securities in bulk accounts gives the Filer the ability to offer institutional class mutual fund units to their Plan Members, who would otherwise not qualify for this class of securities.
11. On a daily basis, the Filer performs a reconciliation of cash and securities on the Basis record keeping system to the cash and securities in each trust account at CWT (the Reconciliation). The Reconciliation is not complex due to the limited number of investment options offered to Clients. The nine CAP mandates currently hold a combined total of 14 mutual funds offered by four mutual fund companies. The Reconciliation is for internal control purposes and a Reconciliation report is provided to CWT on a monthly basis in a format agreed to by CWT and the Filer.
12. Pursuant to the Agreement, the Filer has instructed Buck to provide CWT with direct access to the Basis record keeping system. CWT staff have been fully trained on how to use the system. As a result of the access and training, CWT staff are able to independently view and download individual plan member records at any time and generate any reports independent of the Filer, which allows CWT to view the allocation of cash and securities held in each bulk account to individual account holders.
13. Under the terms of the Agreement, CWT has the right to periodically audit the Reconciliation on a scheduled or unscheduled basis. In the event the Agreement between the Filer and Buck or its successor terminates, CWT will continue to have access to the Basis record keeping system for a period of up to 12 months post-termination of the Agreement
14. Despite the arrangement described above, the Filer will, however, continue to be the recordkeeper in the first instance of individual Plan Member records. This is contrary to section 14.5.3(a) of NI 31-103, as the Filer is required to take reasonable steps to ensure that Clients' cash and securities is held by a qualified custodian (or, in respect of cash, a Canadian financial institution) using an account number or other designation in the records of the qualified custodian sufficient to show that the beneficial ownership of the cash or securities of a Client is vested in that Client. CWT's records outside of Basis do not show that the beneficial ownership of the cash or securities of a Client is vested in that Client.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision provided that:
(i) the Filer conducts daily reconciliations between its client account records and the records of CWT, and retains records of the results of these reconciliations;
(ii) the Filer completes a monthly review of its reconciliation process which includes an internal certification of account reconciliations, and retains records of the results of these reconciliations;
(iii) the Filer continues to provide CWT with direct access to the Basis record keeping system through its Agreement with Buck or Buck's successor; and
(iv) the Filer continues to permit CWT to conduct scheduled and unscheduled audits of the Filer.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted.
Flagship Communities Real Estate Investment Trust
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief from provisions in section 8.4 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) permitting the Filer to include alternative financial disclosure in the business acquisition report pursuant to section 13.1 of NI 51-102 -- the Filer acquired 14 properties for which it cannot obtain certain historical financial information -- the financial statements that will be included in the BAR will be adequate to allow investors to understand the impact of the acquisition of the Initial Properties.
National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.4 and 13.1.
December 7, 2020
The principal regulator in the Jurisdiction (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the Decision Maker (the Legislation) for a decision pursuant to Section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) that the Filer be exempt from the requirement under section 8.4 of NI 51-102 and Item 3 of Form 51-102F4 Business Acquisition Report to include financial statement disclosure for significant acquisitions, provided that the Filer include or incorporate by reference the Alternative Acquisition Financial Disclosures (as defined herein) of the Filer relating to the Acquisition Transaction (as defined herein) in the business acquisition report (BAR) (the Relief Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut (collectively, together with Ontario, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The head office of the Filer is located at 467 Erlanger Road, Erlanger, Kentucky, 41018, United States of America. The registered office of the Filer is located at 199 Bay Street, Suite 4000, Toronto, Ontario, M5L 1A9.
2. The Filer is an internally-managed, unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust dated as of August 12, 2020, as amended and restated on September 28, 2020, as may be further amended and/or amended and restated from time to time.
3. The Filer is a reporting issuer or the equivalent thereof in each Jurisdiction and is not in default of any requirement of Canadian securities legislation.
4. The Filer was established for the primary purpose of indirectly acquiring a 100% interest in and owning and operating a portfolio of 45 manufactured housing communities, comprising 8,255 lots located in the following four contiguous states: Kentucky, Indiana, Ohio and Tennessee, and a fleet of approximately 600 manufactured homes available for lease (the Initial Communities and, together with certain ancillary and head office assets, the Initial Portfolio).
5. Prior to the IPO, MHC Management, LLC, d/b/a SSK Communities (the Promoter) was the manager of the Initial Portfolio.
6. The ownership interests in the Filer are divided into trust units (Units).
7. The Units are listed on the Toronto Stock Exchange under the symbol "MHC.U".
8. On September 28, 2020, the Principal Regulator issued a receipt in respect of the final prospectus of the Filer (the Prospectus) relating to the initial public offering (the IPO) of the Units, qualifying 7,187,500 Units for distribution, including Units issuable pursuant to an over-allotment option granted by the Filer to the underwriters of the IPO.
9. On October 7, 2020 (the IPO Closing Date), the Filer issued 6,250,000 Units and, on October 22, 2020, the Filer issued a further 937,500 Units pursuant to the IPO underwriters' exercise of the over-allotment option in full.
10. In connection with the IPO, on the IPO Closing Date, the Filer completed its acquisition of the Initial Portfolio other than two of the Initial Communities comprising 622 lots located in Louisville, being Barrington Pointe and Copperstone Pointe (the Deferred Acquisition Properties), via the acquisition of all of the issued and outstanding securities of Flagship Communities, LLC (FCLLC) and 15 entities (the SSK Entities) managed by the Promoter (other than the SSK Entity that owns the two Deferred Acquisition Properties) from the owners thereof in exchange for cash, new Units and new class B units (Class B Units) of the Filer's subsidiary, Flagship Operating, LLC (the IPO Acquisition).
11. On November 2, 2020, the Filer acquired the Deferred Acquisition Properties in exchange for Class B Units (together with the IPO Acquisition, the Acquisition Transaction).
12. The financial results for (a) 17 of the Initial Communities then owned by the SSK Entities (the Legacy SSK Portfolio) for the three-year period ended December 31, 2019 and the six-month period ended June 30, 2020 were presented in the financial statements contained in the Prospectus; and (b) 14 of the Initial Communities then owned by entities managed by the Promoter were presented (i) in the financial statements of the Legacy SSK Portfolio in the Prospectus for the period from January 1, 2018 to May 24, 2018, and (ii) in the financial statements of FCLLC contained in the Prospectus for the periods May 24, 2018 to December 31, 2019 and the six-month period ended June 30, 2020, as such assets were indirectly transferred on May 24, 2018 from entities managed by the Promoter to FCLLC (collectively, such 31 Initial Communities being the Full Period Properties).
13. FCLLC or an SSK Entity, as applicable, acquired the remaining 14 of the Initial Communities (the Recently Acquired Properties) after January 1, 2017 (and in each case, after January 1, 2018). The financial results for the Recently Acquired Properties for the period from the date financial statements are available to the Filer following their respective acquisition dates (each such date, as applicable, the Acquisition Date) to December 31, 2019 and for the six-month period ended June 30, 2020 are also presented in the financial statements included in the Prospectus.
14. No exemption is required with respect to the financial information to be included in the BAR with respect to the Full Period Properties. The Relief Sought is only required with respect to Recently Acquired Properties.
15. The fiscal year end for the Initial Portfolio is December 31.
16. The Acquisition Transaction is a "significant acquisition" for purposes of NI 51-102 and the Filer must file a BAR in respect of the Acquisition Transaction.
17. The Recently Acquired Properties were indirectly acquired by the Filer via the acquisition of FCLLC. FCLLC acquired the Recently Acquired Properties from arm's length third parties after January 1, 2018.
18. Neither the Filer, the SSK Entity, FCLLC nor the Promoter possesses, has access to, nor is entitled to obtain access to, financial information in respect of the Recently Acquired Properties for any period prior to their respective Acquisition Dates. The SSK Entity, FCLLC or the Promoter, as applicable, requested historical accounting records and supporting information at the time of acquisition for each of the Recently Acquired Properties as part of the due diligence review; however, the information received is insufficient to form the basis of audited or unaudited financial statements. The SSK Entity, FCLLC and the Promoter have, without success, made every reasonable effort to obtain access to, or copies of, historical accounting records in respect of the Recently Acquired Properties for the period from January 1, 2018 to the respective Acquisition Date for each Recently Acquired Property. In particular, the applicable entity that sold each Recently Acquired Property to the SSK Entity or FCLLC has in each case refused to provide, at this time, adequate historical accounting records to the SSK Entity, FCLLC, the Promoter and the Filer.
19. The Filer submits that the financial statements for the Recently Acquired Properties that are missing from the BAR are not material. The missing financial information of the Recently Acquired Properties represents an insignificant amount of the overall (a) aggregate fair market value, (b) revenue and (c) NOI, of the Initial Properties. The missing financial information of the Recently Acquired Properties will not be significant or otherwise material (individually or in the aggregate) to the Filer having regard to the overall size and value of the Filer's business and operations.
20. The required financial information for each of the Recently Acquired Properties for the period from January 1, 2018 to the first availability of financial statements following its respective Acquisition Date was not available for the Prospectus.
21. The Filer shall include (or incorporate by reference) the following financial information (collectively, the Alternative Acquisition Financial Disclosures) in the BAR:
(a) in respect of the Filer, the following financial statements, each prepared in accordance with International Financial Reporting Standards (IFRS) and each of which was included in the Prospectus:
a. audited statements of income and comprehensive income, changes in unitholder's equity and cash flows for the one-day period August 12, 2020 (the date of the Filer's formation);
b. an audited statement of financial position as at August 12, 2020;
c. unaudited pro forma consolidated financial statements as at and for the year ended December 31, 2019 and as at and for the six months ended June 30, 2020; and
(b) separate financial statements for the Initial Portfolio as follows, each prepared in accordance with IFRS, and in each applicable case, including the financial results of each Recently Acquired Property for only the period from its Acquisition Date:
a. in respect of the Legacy SSK Portfolio, the following from within the financial statements (and accompanying notes thereto) included in the Prospectus: audited combined carve-out statements of net income and comprehensive income, changes in divisional equity and cash flows for the years ended December 31, 2019 and December 31, 2018; audited combined carve-out statements of financial position as at December 31, 2019 and December 31, 2018; unaudited condensed combined interim carve-out statements of net income (loss) and comprehensive income (loss) for the three and six month periods ended June 30, 2020 and June 30, 2019; unaudited condensed combined interim carve-out statements of changes in divisional equity and cash flows for the six month periods ended June 30, 2020 and June 30, 2019; and the unaudited condensed combined interim carve-out statements of financial position as at June 30, 2020 and December 31, 2019; and
b. in respect of FCLLC the following from within the financial statements (and accompanying notes thereto) included in the Prospectus: audited consolidated carve-out statements of net income and comprehensive income, changes in divisional equity and cash flows for the year ended December 31, 2019 and for the period from March 11, 2018 (date of incorporation) to December 31, 2018; audited consolidated carve-out statements of financial position as at December 31, 2019 and December 31, 2018; unaudited condensed consolidated interim carve-out statements of net income and comprehensive income for the three and six month periods ended June 30, 2020 and June 30, 2019; unaudited condensed consolidated interim carve-out statements of changes in divisional equity and cash flows for the six month periods ended June 30, 2020 and June 30, 2019; and an unaudited condensed consolidated interim carve-out statements of financial position as at June 30, 2020 and December 13, 2019;
(c) a financial forecast in respect of the Filer consisting of consolidated statements of forecasted net income and comprehensive loss for each of the three-month periods ending December 31, 2020, March 31, 2021, June 30, 2021 and September 30, 2021, and for the twelve-month period ending September 30, 2021, with an audit report thereon from the Filer's auditors; and
(d) summary information of an appraisal including an independent estimate of the aggregate market value of the Initial Communities and the Filer's head office property on a portfolio basis as at July 30, 2020, such appraisal having been filed on SEDAR.
The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Maker under the Legislation is that the Relief Sought is granted with respect to the BAR provided that the Filer includes the Alternative Acquisition Financial Disclosures in the BAR in respect of the Acquisition Transaction.
Flagship Communities Real Estate Investment Trust
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the requirement to file a BAR for an acquisition that is not significant to the Filer from a practical, commercial, business, or financial perspective.
National Instrument 51-102 Continuous Disclosure Obligations, ss. 8.4 and 13.1.
December 22, 2020
The principal regulator in the Jurisdiction has received an application from the Filer (the Application) for a decision under the securities legislation of the Jurisdiction (the Legislation) for relief (a) pursuant to Section 13.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) exempting the Filer from the requirement in Part 8 of NI 51-102 to file a business acquisition report (a BAR) in respect of the acquisition of two manufactured housing communities and related assets in Paducah, Kentucky for a purchase price (subject to closing adjustments) of approximately US$1.4 million (the Acquisition) on December 2, 2020 and (b) pursuant to Section 8.1 of National Instrument 44-101 -- Short Form Prospectus exempting the Filer from any requirement under Item 10 of Form 44-101F1 Short Form Prospectus (44-101F1) to disclose the Acquisition as a "significant" acquisition in a short form prospectus (collectively, the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for the Application; and
(b) the Filer has provided notice that it intends to rely upon Section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) for each equivalent provision in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, Yukon, the Northwest Territories and Nunavut.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined in this decision.
This decision is based on the following facts represented by the Filer:
The Filer
1. The Filer is an unincorporated, open-ended real estate investment trust established under the laws of the Province of Ontario pursuant to a declaration of trust dated as of August 12, 2020, as may be amended and/or amended and restated from time to time.
2. The Filer's head office is located at 467 Erlanger Road, Erlanger, Kentucky, U.S.A., 41018.
3. The Filer's registered office is located at 199 Bay Street, Suite 4000, Toronto, Ontario, M5L 1A9.
4. The Filer is a reporting issuer or the equivalent thereof in each Jurisdiction and is not in default of any requirement of Canadian securities legislation.
5. On September 28, 2020, the Ontario Securities Commission issued a receipt for a final long form prospectus (the Final Prospectus) qualifying the initial public offering (IPO) of 6,250,000 trust units of the Filer (Units) in the Jurisdictions, upon which the Filer became a reporting issuer under the securities legislation in each of the Jurisdictions.
6. The closing of the IPO occurred on or about October 7, 2020 and, between such date and November 2, 2020, the Filer acquired 45 manufactured housing communities, comprising 8,255 lots, a fleet of approximately 600 manufactured homes available for lease and, together with certain ancillary and head office assets (the Initial Portfolio).
7. On October 22, 2020, pursuant to the exercise of the over-allotment option granted to the underwriters in connection with the IPO, the Filer issued an additional 937,500 Units.
8. The Units are listed and posted for trading on the Toronto Stock Exchange under the symbol "MHC.U".
9. Pursuant to an acquisition agreement, the Filer acquired two manufactured housing communities and related assets in Paducah, Kentucky for a purchase price (subject to closing adjustments) of approximately US$1.4 million (the Acquisition).
10. The Acquisition was completed on December 2, 2020.
Financial Statements
11. The Filer was formed on August 12, 2020 and, accordingly, will not have completed a full fiscal year until December 31, 2021. The applicable audited historical financial statements of the Filer in the Final Prospectus, as well as the Filer's interim financial statements for the period from the date of its formation to September 30, 2020 (as filed under the Filer's profile on SEDAR on November 12, 2020, the Q3 Financial Statements), only reflect assets of US$10.00, unitholders' capital of US$10.00 and financing activities of US$10.00 as a result of the issuance of the initial Unit upon its formation and prior to the completion of the IPO (the Nominal Financials).
12. The Final Prospectus includes certain audited annual financial statements of the Initial Portfolio, including an unaudited pro forma consolidated statement of income and comprehensive income for the year ended December 31, 2019 and the six month period ended June 30, 2020 giving effect to the acquisition of the Initial Portfolio as if it occurred on January 1, 2019 and January 1, 2020, respectively.
13. As of November 2, 2020, upon completion of the acquisition of the Initial Portfolio, the Filer had consolidated assets of (the Filer's Actual Assets) approximately US$438.9 million (i.e., the total assets set out in the Final Prospectus in the unaudited pro forma consolidated statement of financial position as at June 30, 2020 giving effect to the Initial Portfolio's acquisition as if it occurred on January 1, 2020).
Significance
14. Under Part 8 of NI 51-102, the Filer is required to file a BAR for any completed business acquisition that is determined to be significant based on the tests set out therein.
15. Under Item 10 of 44-101F1, in certain circumstances, an issuer must provide certain disclosure in a short form prospectus (including a shelf prospectus) concerning a completed or probable business acquisition that is considered significant for the purposes of Part 8 of NI 51-102.
16. The purchase price for the Acquisition represents only 0.3% of the Filer's Actual Assets, while approximately US$1.4 million of "consolidated assets" (as understood for purposes of Part 8 of NI 51-102) will be acquired pursuant to the Acquisition, also representing only 0.3% of the Filer's Actual Assets.
17. Further, the Acquisition comprises 81 lots, representing only 1.0% of the 8,255 lots comprising the Initial Portfolio.
18. The most recent set of financial statements for the Filer filed pursuant to NI 51-102 are the Q3 Financial Statements, which reflect the operation of the Filer for the period from its formation on August 12, 2020 to September 30, 2020, but for which the IPO and acquisition of the Initial Portfolio are a subsequent event. Therefore, the Q3 Financial Statements are similar to the Nominal Financials.
19. As the Filer has not yet filed financial statements reflecting the closing of the IPO and the Initial Portfolio's acquisition (rather than just the US$10 contribution to acquire the initial Unit), the Acquisition will constitute a "significant acquisition" of the Filer for the purposes of Part 8 of NI 51-102, requiring the Filer to file a BAR pursuant to Part 8 of NI 51-102.
20. The Filer does not believe that the Acquisition is significant to it from a practical, commercial, business or financial perspective.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted.
Stableview Asset Management Inc. and Colin Fisher
File No. 2020-40
January 13, 2021
WHEREAS on January 13, 2021 the Ontario Securities Commission held a hearing by teleconference;
ON HEARING the submissions of Staff of the Commission, and the representative for Colin Fisher and no one appearing for Stableview Asset Management Inc. although properly served;
IT IS ORDERED THAT:
1. Staff shall disclose to the respondents non-privileged relevant documents and things in the possession or control of Staff by 4:30 p.m. on February 19, 2021;
2. The respondents shall serve and file a motion, if any, regarding Staff's disclosure or seeking disclosure of additional documents by 4:30 p.m. on April 30, 2021;
3. Staff shall serve and file a witness list, and serve a summary of each witness' anticipated evidence on the Respondents and indicate any intention to call an expert witness, including providing the expert's name and the issues on which the expert will give evidence, by 4:30 p.m. on May 3, 2021; and
4. A further attendance in this proceeding is scheduled for May 13, 2021 at 9:30 a.m., by teleconference, or on such other date and time as may be agreed by the parties and set by the Office of the Secretary.
Application for an order that the issuer is not a reporting issuer under applicable securities laws -- requested relief granted.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).
January 8, 2021
The principal regulator in the Jurisdiction has received an application from the Filer for an order under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the Filer has ceased to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer (the Order Sought).
Under the Process for Cease to be a Reporting Issuer Applications (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that subsection 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia and Alberta.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined.
This order is based on the following facts represented by the Filer:
1. the Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets;
2. the outstanding securities of the Filer, including debt securities, are beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders in total worldwide;
3. no securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported;
4. the Filer is applying for an order that the Filer has ceased to be a reporting issuer in all of the jurisdictions of Canada in which it is a reporting issuer; and
5. the Filer is not in default of securities legislation in any jurisdiction.
The principal regulator is satisfied that the order meets the test set out in the Legislation for the principal regulator to make the order.
The decision of the principal regulator under the Legislation is that the Order Sought is granted.
Pacgen Life Science Corporation
National Policy 11-206 Process for Cease to be a Reporting Issuer Applications -- Application for an order that the issuer is not a reporting issuer under applicable securities laws -- The issuer is not an OTC reporting issuer; the securities of the issuer are beneficially owned by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders worldwide; no securities of the issuer are traded on a market in Canada or another country; the issuer is not in default of securities legislation except it has not filed certain continuous disclosure documents -- Requested relief granted.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).
January 8, 2021
The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for an order under the securities legislation of the Jurisdictions (the Legislation) that the Filer has ceased to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer (the Order Sought).
Under the Process for Cease to be a Reporting Issuer Applications (for a dual application):
(a) the British Columbia Securities Commission is the principal regulator for this application,
(b) the Filer has provided notice that subsection 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Alberta, Saskatchewan, Manitoba and Nova Scotia, and
(c) this order is the order of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined.
This order is based on the following facts represented by the Filer:
1. the Filer was incorporated under the Business Corporations Act (British Columbia) (the BCBCA);
2. the Filer's head office is located in Vancouver, British Columbia;
3. the Filer's authorized capital of the Filer consists of an unlimited number of common shares of which 64,815,969 common shares (the Common Shares) are issued and outstanding; the Filer has no other outstanding securities;
4. the Common Shares traded on the TSX Venture Exchange (the TSXV) and no other securities of the Filer are listed on any other exchange;
5. on September 30, 2020, the Filer completed a statutory plan of arrangement (the Arrangement) under the BCBCA pursuant to which General Biologicals Corporation (GBC) acquired all issued and outstanding Common Shares of the Filer, other than Common Shares owned by GBC, Tsong-Chin Lin, Golden Global International Corporation and Curie Med Corporation;
6. following completion of the Arrangement, the sole shareholders of the Corporation are GBC, Tsong-Chin Lin, Golden Global International Corporation and Curie Med Corporation;
7. on October 1, 2020, the Common Shares were delisted from the TSXV;
8. the Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets;
9. the outstanding securities of the Filer, including debt securities, are beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders in total worldwide;
10. no securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported;
11. the Filer is applying for an order that the Filer has ceased to be a reporting issuer in all of the jurisdictions of Canada in which it is a reporting issuer;
12. the Filer is not in default of securities legislation in any jurisdiction, other than the obligation to file on or before November 30, 2020 its interim financial statements and related management's discussion and analysis for the interim period ended September 30, 2020 as required under National Instrument 51-102 Continuous Disclosure Obligations and the related certification of interim filings as required under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (collectively, the Filings); and
13. the Filer is not eligible to use the simplified procedure under National Policy 11-206 Process for Cease to be a Reporting Issuer Applications as the Filer is in default for failure to file the Filings.
Each of the Decision Makers is satisfied that the order meets the test set out in the Legislation for the Decision Maker to make the order.
The decision of the Decision Makers under the Legislation is that the Order Sought is granted.
File No. 2020-14
January 19, 2021
WHEREAS the Ontario Securities Commission (the Commission) held a hearing in writing to consider a motion by Dentons Canada LLP (Dentons) to remove Dentons as counsel of record for Joshua Cartu;
ON READING the materials filed by Dentons and on considering that Joshua Cartu did not respond to the motion, although properly served;
IT IS ORDERED THAT pursuant to Rule 21(2) of the Commission's Rules of Procedure and Forms, Dentons is removed as counsel of record for Joshua Cartu.
Citation: Debus (Re), 2021 ONSEC 1
Date: 2021-01-18
File No. 2019-16
Hearing: |
In Writing |
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Decision: |
January 18, 2021 |
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Panel: |
M. Cecilia Williams |
Commissioner and Chair of the Panel |
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Submissions: |
Gavin S. MacKenzie |
For Staff of the Commission |
Alexandra Matushenko |
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Kathryn Andrews |
For Staff of the Investment Industry Regulatory Organization of Canada |
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Sally Kwon |
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No written submissions were filed by or on behalf of Joseph Debus |
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[1] Joseph Debus (Debus) applied for a hearing and review of the Investment Industry Regulatory Organization of Canada (IIROC) merits{1} and sanctions{2} decisions against him, pursuant to sections 8 and 21.7 of the Securities Act{3} (the Act). The hearing and review is scheduled to be heard on January 27 and 28, 2021.
[2] Debus provided notice of his intention to rely on documents or things not included in the record of the original proceeding before IIROC, pursuant to my order.
[3] IIROC Staff objects to the admission of this new evidence and requests that the motion be heard in advance of the hearing and review (the New Evidence Motion). Staff of the Commission (OSC Staff) filed materials supporting IIROC Staff's position. Though given the opportunity to file responding submissions, Debus did not file any additional materials.
[4] The New Evidence Motion was heard in writing. On December 2, 2020, I ordered, with reasons to follow, that, at the hearing and review, Debus shall not be permitted to examine the five individuals named in his witness list, and he shall not be permitted to adduce the documentary evidence he proposes to introduce.{4} These are my reasons.
[5] The IIROC hearing on the merits in this matter took place over 18 hearing days in 2018 and 2019. The hearing included a number of motions relating to production and disclosure, the summons of witnesses, and requests for adjournment.{5}
[6] On April 16, 2019, Debus filed an application for the hearing and review.
[7] On August 26, 2019, I ordered Debus to provide notice of his intention to rely on documents or things not included in the record of the original proceeding before IIROC, and to disclose such documents or things.
[8] On December 10, 2019, Debus provided notice of his intention pursuant to my order.
[9] At an attendance in this proceeding on February 11, 2020, Debus sought an order from this Panel seeking summonses of certain documents from a third party, his former Member, Richardson GMP. I requested written submissions from the parties as to whether I had the authority to summons documents from a third party, and if so, whether I should summons the documents requested by Debus.
[10] In his written submissions, Debus narrowed the date range of documents he sought to summons. The documents Debus sought to summons from Richardson GMP were any and all emails exchanged between the parties listed below from January 2009 to March 2013:
i. between RN and clients PE, DB and AP;
ii. between RN and AB and RN and TB;
iii. between RN and AA;
iv. between AA and clients PE, DB and AP;
v. between AA and AB, and between AA and TB; and
vi. between JI and clients AP and DB.
[11] RN and AA were Debus's assistants. AB and TB were Debus's managers. PE, DB and AP were clients of Debus. JI was a former colleague of Debus at Richardson GMP.
[12] On April 9, 2020, I denied Debus's request for summonses, and advised that reasons for that decision would be included in the final reasons for the hearing and review.
[13] On May 8, 2020, I ordered Debus to serve and file his hearing brief containing copies of the documents and identifying the other things that he intends to rely on or enter as evidence at the hearing and review.
[14] Because the documents I declined to summons were many of the same documents listed in Debus's notice of intention, on October 1, 2020 I ordered Debus to confirm his intention to rely on additional documents or things, and list what those documents or things were.{6}
[15] Debus confirmed his intention to rely on these same emails on October 15, 2020.
[16] Debus also confirmed that he intends to call five witnesses at the hearing and review.
A. Issue
[17] The issue I must decide is whether Debus is precluded from seeking to admit at the hearing and review the additional documents and testimony proposed in his correspondence dated October 15, 2020.
[18] IIROC Staff submits that the additional documents were the subject of Debus's summons motion, which was denied, and there is no new basis for the Panel to reconsider allowing these additional documents to be introduced at the hearing and review.
[19] In addition, IIROC Staff submits that the oral testimony Debus proposes to introduce does not meet the Canada Malting test of being "new" and "compelling". Therefore, Debus should not be permitted to examine the five individuals identified in his witness list.
[20] OSC Staff submits that Debus has failed to satisfy the "new and compelling" standard for the admission of new evidence at a hearing and review. In particular, OSC Staff submits that Debus has failed to demonstrate that the evidence was neither known nor ought to have been known to him at the time of the original proceeding and that the proposed new evidence would have changed the IIROC Hearing Panel's decision.
[21] As noted above, Debus did not file any additional materials in response to IIROC's motion.
[22] Applicants in a hearing and review proceeding are required to provide notice of their intention to rely on documents or things not included in the record of the original proceeding and disclose such documents or things.
[23] As above, Debus provided notice and subsequently confirmed his intention to rely on documents or things not included in the record of the original proceeding.
[24] Debus disclosed the new oral evidence he seeks to rely on in the form of witness summaries, which were served on June 23, 2020.
[25] However, the same is not true of the documentary evidence he seeks to rely on. It is clear to me from Debus's October 15, 2020 correspondence that the emails he seeks to rely upon are not in his possession, as he refers to "relevant e-mails we are requesting from RGMP". These are the very emails I declined to summons.
1. Test for admitting new evidence in a hearing and review
[26] An applicant is not required to bring a motion to adduce new evidence. Any party who objects to the admissibility of documents or things not included in the record of the original proceeding is entitled to do so, either at the hearing and review, or in advance of the hearing by bringing a motion.
[27] On an application for hearing and review under section 21.7 of the Act, the Commission has original jurisdiction to make a decision and can, in its discretion, admit new evidence that was not before the decision maker below.{7}
[28] However, in the past the Commission has taken a restrained approach in exercising its discretion to allow new evidence to be introduced.{8}
[29] When admitting new evidence at a hearing and review, the Commission must be cautious that in admitting the additional evidence, they are not permitting the applicant the opportunity to re-argue the initial hearing with an augmented record of evidence that was available at the time of the initial hearing and is of questionable probative value. This would, as this Commission has said in respect of intervening in the decisions of self regulatory organizations (SROs), "introduce an unacceptable degree of uncertainty in our regulatory regime".{9}
[30] The test for overturning a decision of an SRO is set out in Canada Malting.{10} There are five possible grounds on which the Commission might interfere with a decision of an SRO, the fourth of which is that "new and compelling evidence was presented to the Commission that was not presented to the [SRO]".{11}
[31] It follows that any new evidence admitted on an application for hearing and review must meet the standard of "new and compelling".{12}
[32] The Commission has held that "new" means "information that was not known to the party purporting to introduce it as new at the time of the SRO's decision".{13} In that regard, the Commission has expressed concern with parties classifying as new "evidence which that party knew or ought to have known at the time of the [SRO hearing]".{14}
[33] The Commission has also held that evidence would be considered "compelling" if it would have changed the SRO's decision had it been known at the time of the decision.{15}
2. Admissibility of documentary evidence
[34] Debus has not disclosed the emails he proposes to rely on at the hearing and review because they are not in his possession. I declined to summons them.
[35] If the emails had been properly disclosed, I would have considered whether these emails were "new and compelling" in the context of the Canada Malting test, as was done by the Panel in Northern Securities.{16}
[36] In my view, these emails would not meet the standard of "new and compelling".
[37] The emails are not new. They date from January 2009 to March 2013 and were available at the time of the IIROC hearing in 2018 and 2019.
[38] On the record before me I find that Debus and his agent brought several successful production motions and numerous documents were provided by Richardson GMP as a result.
[39] The basis for Debus's production requests was that the information sought was critical to Debus's ability to make full answer and defence to the allegations against him. Debus would have known, or ought to have known, at the time of making these requests that his assistants RN and AA and associate JI worked closely with him and dealt with his clients. The will-say statements of RN and JI filed in advance of the IIROC hearing indicate that they worked closely with Debus's clients. Yet, among the production requests during that hearing, Debus did not specifically request the emails of these individuals.
[40] Permitting Debus to introduce this documentary evidence, that he knew or ought to have known about at the time of the IIROC hearing, would, in my view, threaten the orderly conduct of litigation and the integrity of IIROC's disciplinary process.
3. Admissibility of oral evidence
[41] Debus proposes to call five witnesses. Two of those witnesses (RN and JI) he planned to call in the original proceeding, but ultimately did not, and one witness (LC) testified in the original proceeding. Another proposed witness (AA) was Mr. Debus's assistant for part of the relevant period. The final proposed witness (HP) was a law clerk of Debus's agent in the original proceeding.
[42] The first four witnesses are not new. RN and JI had will-say statements filed at the IIROC hearing and Debus chose not to call them.
[43] AA was Debus's assistant for a portion of the material time. Debus knew, or should have known, that her evidence existed during the IIROC hearing.
[44] LC testified at the IIROC hearing. He provided evidence on the record, which is available for my review. By allowing this witness to testify again and augment the record of the proceeding, we risk re-opening the IIROC hearing.
[45] HP is a former law clerk of Debus's agent in the original proceeding. Although arguably new, HP's proposed evidence is not compelling or relevant.
[46] Debus proposes to call HP to provide evidence as to the experience and qualifications of his agent at the IIROC hearing, as well as the nature and quality of the representation provided by his agent.
[47] I agree with the submissions of IIROC Staff and OSC Staff that HP is not qualified to give evidence about the quality of Debus's representation at the IIROC hearing. HP's personal assessment or opinion of Debus's agent is not relevant.
[48] Accordingly, while new, the evidence of HP is not relevant, and therefore not compelling for the purposes of the hearing and review.
[49] The nature and quality of the agent's representation is an issue to be determined at the hearing and review and can be determined by reviewing the record of the IIROC proceeding.
[50] As per my order dated December 2, 2020, at the hearing and review, Debus shall not be permitted to examine the five individuals named in his witness list filed with the Commission on October 15, 2020, and the proposed documentary evidence set out by Debus in his correspondence dated October 15, 2020, shall not be admitted.
Dated at Toronto this 18th day of January, 2021.
{1} Debus (Re), 2019 IIROC 5 (the Merits Decision)
{2} Debus (Re), 2019 IIROC 18 (the Sanctions Decision)
{3} RSO 1990, c S.5
{4} (2020) 43 OSCB 9259
{5} Merits Decision at para 1
{6} (2020) 43 OSCB 7868
{7} Northern Securities Inc. (Re), 2013 ONSEC 48, (2014) 37 OSCB 161 (Northern Securities) at para 27, citing HudBay Minerals Inc. (Re), 2009 ONSEC 15, (2009) 32 OSCB 3733 (HudBay) at paras 111-112
{8} Northern Securities at para 28
{9} HudBay at para 114
{10} Canada Malting Co. (Re), (1986) 9 OSCB 3565 (Canada Malting) at para 24
{11} Canada Malting at para 24
{12} Northern Securities at para 30
{13} Hahn Investment Stewards & Co. Inc. (Re), 2009 ONSEC 41, (2009) 32 OSCB 8683 (Hahn) at para 197
{14} Hahn at para 196
{15} Hahn at para 198
{16} Northern Securities at paras 29-34
Solar Income Fund Inc. et al. -- s. 25.0.1(a) of the SPPA
Citation: Solar Income Fund Inc. (Re), 2021 ONSEC 2
Date: 2021-01-18
File No. 2019-35
Hearing: |
In writing, and by a teleconference held on January 13, 2021 |
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Decision: |
January 18, 2021 |
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Panel: |
Timothy Moseley |
Vice-Chair of the Commission |
Appearances: |
Andrew Faith |
For Staff of the Commission |
Ryan Lapensée |
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James W.E. Doris |
For Solar Income Fund Inc. and Allan Grossman |
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Sean R. Campbell |
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Abhishek Vaidyanathan |
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Andrea L. Burke |
For Charles Mazzacato |
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Chantelle Cseh |
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Eli Lederman |
For Kenneth Kadonoff |
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Brian Kolenda |
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Madison Robins |
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[1] These reasons relate to the admissibility, at a yet-to-be-commenced merits hearing, of the report of a proposed expert witness.
[2] In this proceeding, Staff of the Ontario Securities Commission (Staff of the Commission) alleges that the respondents raised approximately $57 million from investors in the exempt market through a fund (the Fund) that would spend those funds on the acquisition, development and operation of solar energy installations, thereby producing an investment return for the Fund through the sale of solar energy. Staff alleges that the respondents misled and defrauded investors, in that the respondents did not use the funds as promised.
[3] The merits hearing is set to begin on March 1, 2021. In preparation for the hearing, Staff retained a proposed expert witness, who prepared a report (the Expert's Report), in which he expressed opinions regarding norms in the solar power industry and regarding the reasonable expectations of investors in that industry.
[4] The respondents object to the Expert's Report forming part of the record in this proceeding. They submit that the opinions contained in the report are outside the scope of the Statement of Allegations or are otherwise inadmissible. They do not wish to incur the expense of responding to the report, if they are correct in their position. They ask that the issue be resolved now.
[5] This issue came before me as a motion by Staff to adduce the Expert's report at the merits hearing, although Staff objects to my resolving this issue before the merits hearing begins, as opposed to during that hearing and before the full hearing panel. I invited submissions from the parties both as to the propriety of resolving the issue at a preliminary stage, and as to the admissibility of the Expert's Report, should I decide that it was appropriate to consider admissibility at this stage of the proceeding.
[6] After reviewing the parties' submissions, I issued an order on January 14 providing that, for reasons to follow, the Expert's Report is inadmissible at the merits hearing. These are my reasons, in which I explain why I concluded that:
a. the expert's opinions regarding solar power industry norms would be admissible, except that the respondents have, since the bringing of this motion, undertaken not to lead or elicit any evidence, or to make any submission, that would make the expert's opinions relevant; and
b. the expert's opinion regarding the reasonable expectations of investors is inadmissible, in that it purports to resolve an issue that is ultimately to be determined by the merits hearing panel, and for which the Commission does not require expert assistance.
[7] This motion has its roots in my order of August 11, 2020, in this proceeding. That order required that Staff serve every party with the report of its expert witness by October 16, and that if any respondent wished to file a motion regarding Staff's expert evidence, they were to do so by October 30.
[8] Staff delivered the Expert's Report. The respondents then filed a motion objecting to that report, as contemplated by the August 11 order. Following some correspondence with the parties, and a brief teleconference hearing on December 7, I agreed with the respondents' submission that Staff bore the burden of demonstrating the admissibility of the report. By my order of December 11, 2020, resulting from that hearing, the respondents' motion was effectively to be replaced by a motion brought by Staff to adduce the Expert's Report.
[9] I heard the motion in writing. Materials filed on the motion incorrectly refer to the respondents in the proceeding as the moving parties, a confusion no doubt caused by my August 11 order, which as noted above required the respondents to bring any motions regarding Staff's expert evidence by October 30.
[10] That confusion is inconsequential. This motion proceeded in the same way in which the core question would have been addressed during the merits hearing, where Staff would have indicated its intention to call expert evidence, the respondents would have objected, and Staff would have had the burden of demonstrating that the proposed evidence is admissible.
[11] On this motion, Staff filed the affidavit of Kevin Dusseldorp sworn December 18, 2020. That affidavit, which I have marked as Exhibit 1, has the following exhibits:
a. the Expert's Report;
b. the offering memorandum used by the respondents to raise funds from investors (the Offering Memorandum);
c. a newsletter sent from the respondent Solar Income Fund Inc. to investors; and
d. the summary of anticipated evidence of the respondent Kenneth Kadonoff (Kadonoff's Evidence Summary).
[12] I heard and decided this motion pursuant to s. 25.0.1(a) of the Statutory Powers Procedure Act,{1} which empowers the Commission to determine its own procedures and practices, and to make an order with respect to the procedures and practices that apply in a particular proceeding.
A. Introduction
[13] The core issue is whether part or all of the Expert's Report should be admissible in this proceeding.
[14] A collateral issue raised by this motion is whether the question of admissibility should be decided at this preliminary stage, before the merits hearing begins.
[15] Because both of these issues turn on the general question of how admissibility is determined in a Commission proceeding, I begin my analysis with that question. After addressing that general question, I then consider whether the admissibility question raised by this motion, in this case, should be resolved now, and if so, how it should be resolved.
B. How is admissibility of evidence determined in a Commission proceeding?
[16] An enforcement proceeding before the Commission is initiated by Staff filing its Statement of Allegations. The Statement of Allegations defines the issues in the proceeding.
[17] Unlike defendants in a civil action, who file a statement of defence in response to the statement of claim, respondents in a Commission proceeding are not required to deliver a response to Staff's Statement of Allegations.
[18] Staff does get discovery of a sort in an enforcement proceeding, through one or more of:
a. its investigation prior to the proceeding, which investigation may include the use of compulsory powers;
b. a respondent's obligation, once the proceeding has begun, to disclose to Staff any documents not already in Staff's possession, on which the respondent may rely;
c. a respondent's obligation to provide Staff with a summary of the testimony that the respondent expects to give, if the respondent decides to testify; and
d. a similar obligation on the respondent with respect to any witnesses that the respondent intends to call.
[19] While Staff gets that discovery, nothing disclosed through that discovery alters the scope of the proceeding. The scope is established by the Statement of Allegations. The investigation precedes the delivery of the Statement of Allegations, and a respondent's disclosure obligations are governed by the Statement of Allegations.
[20] Disclosure delivered by a respondent cannot enlarge the scope of a proceeding. If a respondent's witness summary indicates that the respondent will testify about an issue that is not raised by the Statement of Allegations, then Staff would be well within its rights to object during the merits hearing, if the respondent were to begin to give that irrelevant testimony.
[21] Staff submits that relevance may emerge from defences advanced by respondents. In support of that submission, Staff cited a number of court decisions relating to criminal proceedings. I do not find these decisions helpful. The combination of a detailed Statement of Allegations and a respondent's disclosure obligations makes the Commission enforcement proceeding context sufficiently dissimilar from that of criminal proceedings that I am better guided by first principles than by the context-dependent statements in those decisions.
[22] Similarly, I do not find the Commission's decision in El-Bouji (Re),{2} also cited by Staff, to be helpful. That decision related to a motion brought by the respondents in that proceeding to strike evidence filed by Staff on a pending jurisdiction motion. Once again, the context is sufficiently different that it is better to apply first principles than to adopt in this context an approach that was developed for a different purpose.
[23] I therefore conclude, as a general rule, that relevance should be determined by the Statement of Allegations. In some cases, though, it will not be sufficient to make that determination based only on the words of the Statement of Allegations itself. A Statement of Allegations may refer, directly or indirectly, to documents or other things, in which case consideration may also have to be given to those documents or other things. Whether it is practical and appropriate to refer to those documents or other things on a motion such as this one will depend on the circumstances of the particular case.
[24] For example, if a Statement of Allegations refers to a formal public document such as an offering memorandum, it may be practical and appropriate, in a given case, to consider that offering memorandum as having been incorporated by reference into the Statement of Allegations.
[25] The practicability and propriety of considering, at a preliminary stage, documents or other things referred to in a Statement of Allegations will diminish as one moves from formal public documents to such things as email threads and oral statements.
[26] I turn now to consider whether, in this case, admissibility of the Expert's Report should be resolved at this preliminary stage, and if so, how.
C. Should admissibility be resolved before the merits hearing begins?
1. Introduction
[27] Staff submits that I should not decide the admissibility issue at this stage of the proceeding. Staff says that I should be governed by the 2010 decision of the Court of Appeal for Ontario in Harrop v Harrop,{3} in which the court held that a motion judge should decide the admissibility of expert evidence before trial only in the "rarest of cases".
[28] The court cited four concerns in support of that proposition:
a. the possibility of a multiplicity of proceedings;
b. the need for a full context in which the decision can be made;
c. the risk of the preliminary step being taken for purely tactical reasons; and
d. the risk of different appeal rights depending on whether the decision is made by a motion judge as an interlocutory order or by the trial judge.
[29] The respondents answer by citing a subsequent decision of the Superior Court of Justice, in which that court held that the policy considerations in Harrop v Harrop "have to be re-assessed having regard to the rule amendments that have expanded the court's jurisdiction to rule on issues before a trial."{4} Staff distinguishes the later decision, arguing that the proposed expert opinion in that case was so clearly irrelevant that a preliminary determination on admissibility was possible.
[30] I need not resolve the parties' disagreement regarding these two court decisions because, in my view, I should consider the concerns cited by the Court of Appeal, whether or not the re-assessment contemplated by the Superior Court would have any impact.
[31] Having said that, only one of the four concerns is relevant in this case. In my analysis below, I address the second of the four concerns (the need for a full context). The first concern does not apply here because, despite the respondents' submission to the contrary, determining the principal issue at this time resolves it for all purposes in the proceeding, and the question may not be re-opened. The third concern does not apply here, because there is neither any suggestion, nor any basis to believe, that the respondents are objecting to the Expert's Report for purely tactical reasons. The fourth does not apply here, because an appeal from a Commission decision may come only after the Commission's final decision in the proceeding, and not after an interlocutory decision.
[32] Finally by way of introduction to the issue of timing, it is common ground that in deciding whether it is appropriate to resolve the principal issue at this stage, I should ask the three questions set out in the Commission's decision in Mega-C Power Corp (Re){5} (Mega-C):
a. Can the questions raised in the motion be resolved without regard to contested facts and anticipated evidence at the merits hearing?
b. Is it necessary for a fair hearing that the relief sought on the motion be granted prior to the merits hearing?
c. Will the resolution of the issues make the process materially more efficient or effective?{6}
[33] In Mega-C, the Commission said that if the answer to any of the three questions is yes, it makes sense to hear the motion before the merits hearing, absent strong reasons to the contrary. If, however, the answer to all three questions is no, the Commission should be reluctant to hear the motion before the merits hearing.{7}
[34] I note that in Mega-C, the Commission prefaced the three questions with:
In our view, in exercising its discretion as 'master of its procedure', the Commission ought to have due regard for all of the circumstances described above, as well as concern for not unduly 'judicializing' its processes. While fairness and the procedural rights of the Respondents and affected persons must be ensured... administrative proceedings are intended to be less formal and more procedurally flexible than those of the courts.{8}
[35] In my view, that is a useful caution when considering Staff's reliance in this case on decisions (such as Harrop v Harrop) that deal with court proceedings.
[36] I turn now to address each of the three questions posed in Mega-C.
2. Can the questions raised in the motion be resolved without regard to contested facts and the anticipated evidence at the merits hearing?
[37] Staff says that the principal issue in this motion cannot be resolved without regard to the anticipated evidence at the merits hearing, for two reasons.
[38] First, Staff's proposed expert reviewed 163 documents before preparing the Expert's Report. Those documents have not yet been put into evidence, and no witness has testified about them.
[39] I reject this submission. A party cannot make otherwise inadmissible expert evidence admissible simply by providing documents (some of which may be irrelevant to the proceeding) to its proposed expert.
[40] While documents provided to a proposed expert will not dictate relevance, documents referred to in the Statement of Allegations may well do so. Something that is not apparent from the Statement of Allegations itself may become apparent upon review of a document referred to in the Statement of Allegations.
[41] This complicates the determination of relevance, depending on the document referred to in the Statement of Allegations. Where there is no controversy about the authenticity or content of the document, such as would likely be the case with an offering memorandum, reference to that document at this preliminary stage is unlikely to be problematic. However, any controversy about the authenticity of a document, or about which document(s) the Statement of Allegations refers to, might require a "no" answer to this first question.
[42] Similarly, any reference to facts that for their proof might depend exclusively on oral evidence (and not documents) might be more indicative of a "no" answer.
[43] Staff cites as its second reason for answering "no" to this question its expectation that the respondents will raise defences that the Expert's Report is intended to rebut. Staff submits that the Commission should not exclude the Expert's Report when the Commission is not privy to the full scope of material issues, including the respondents' defences.
[44] That submission, though, does not answer the question asked. The question is whether it is necessary to know the evidence, not whether it is necessary to know the defences. As I have explained above, any evidence to be admitted at the merits hearing, and any defences asserted by the respondents, must be relevant to the allegations.
[45] In other words, the Commission is, at this time, privy to the full scope of material issues in this matter. That scope is defined by the Statement of Allegations. Any evidence called at the merits hearing must fall within that scope. No evidence called at the merits hearing can change the scope.
[46] Accordingly, the answer to the first of the three questions is "yes" -- the questions raised in this motion can be resolved without regard to contested facts and the anticipated evidence at the merits hearing. This conclusion fully responds to the second of the four concerns in Harrop v Harrop.
[47] As the Commission held in Mega-C, if the answer to any of the three questions is "yes", it makes sense to hear the motion before the merits hearing, absent strong reasons to the contrary. While it may therefore be unnecessary to consider the second and third questions, I will do so anyway, for the sake of completeness and to respond to the parties' submissions.
3. Is it necessary for a fair hearing that the relief sought on the motion be granted prior to the merits hearing?
[48] The second question asks whether it is "necessary" that the relief sought here be granted prior to the merits hearing. In this case, it is not necessary, and no party has suggested that it is.
4. Will the resolution of the issues make the process more efficient or effective?
[49] Staff submits that resolving the admissibility issue now commits the Commission to an inefficient and duplicative process. I disagree.
[50] A resolution at this time is more efficient. If the respondents are correct in saying that some or all of Staff's proposed expert testimony is inadmissible, it is better to determine that now, before the respondents feel the need to retain their own expert to respond to the Expert's Report. Determining the issue now may avoid unnecessary cost to all parties. Further, determining the issue now gives all parties, including Staff, greater certainty about how the merits hearing will proceed, thereby avoiding the risk of a mid-hearing adjournment request occasioned by a ruling against Staff at that time.
[51] A resolution now does not result in a duplicative process. The Commission's decision in Pro-Financial Asset Management Inc. (Re){9} (PFAM), on which Staff relies to suggest that it does, is clearly distinguishable. In that case, an individual respondent facing various allegations of misconduct in an enforcement proceeding brought a motion, prior to the merits hearing, relating to his then pending application for registration under the Securities Act{10} (the Act). In dismissing the motion, the Commission observed that the evidence that would be necessary on the motion would almost entirely replicate the evidence to be called at the merits hearing.
[52] The motion in PFAM raised issues that overlapped with those that would be addressed at the merits hearing. However, unlike Staff's motion in this case, the PFAM motion had nothing to do with how the merits hearing would proceed. A decision now about the admissibility of part or all of the Expert's Report will resolve that issue conclusively, absent a change to the scope of this proceeding occasioned by an amendment to the Statement of Allegations or by some other permissible means.
[53] The answer to the third question is "yes".
5. Conclusion as to when the admissibility issue should be determined.
[54] Two of the three questions set out in Mega-C are answered "yes" in this case. That leads to the conclusion that the admissibility issue should be determined now, unless there are strong reasons to the contrary. No such reasons have been advanced. I therefore turn to consider the Expert's Report.
D. Is part or all of the Expert's Report admissible?
[55] Opinion evidence is generally inadmissible. For the Expert's Report to be admitted, Staff must establish that:
a. the Expert's Report is relevant;
b. the proposed expert is qualified to give the opinion evidence; and
c. the expert's intended evidence is necessary, in that it is outside the Commission's experience and knowledge.{11}
[56] I will address each of these requirements in turn.
1. Is the Expert's Report relevant?
[57] Staff submits, and I agree, that when considering relevance, it is useful to distinguish between "logical relevance", which is a threshold criterion of admissibility, and "legal relevance". To be legally relevant, evidence must first be logically relevant, and then (particularly in the context of criminal cases with juries) it must be sufficiently probative.
[58] For the purposes of this motion, I consider whether the Expert's Report is logically relevant. I will begin by reviewing the pertinent facts alleged in the Statement of Allegations. I will then identify the alleged misconduct, which in this case includes alleged contraventions of two provisions of the Act. Staff also alleges "conduct contrary to the public interest", in addition to referring to the two specific provisions of the Act. For reasons I explain below, I disregard this allegation for the purposes of this motion.
[59] Finally, I will review the content of the Expert's Report, consider its admissibility (using the alleged contraventions as a guide), and consider whether any part of the Expert's Report could be made relevant by anything not specifically set out in the Statement of Allegations (e.g., a respondent's summary of anticipated evidence, served on Staff by the respondent as required).
(a) Facts alleged
[60] The Statement of Allegations contains detailed factual allegations. The following three allegations are sufficient to define the context for this motion:
a. that the Offering Memorandum represented to investors that the proceeds of the relevant offering "would be used to invest in subsidiaries to acquire, develop, and operate solar energy power installations";{12}
b. that the proceeds were used, however, "for purposes other than those represented to investors" in the Offering Memorandum;{13} and
c. that the Offering Memorandum stated that the business and purpose of the Fund was "to invest in Subsidiaries [a term defined in the Offering Memorandum] which will in turn invest in the acquisition, development, financing and operation of solar energy powered installations... and other ancillary or incidental business activities...".{14}
[61] I note at this point that the above allegations are largely objectively determinable. They do not involve more subjective concepts such as "reasonable" or "low-risk".
(b) Misconduct alleged
[62] Staff alleges contraventions of two provisions of the Act, and alleges "conduct contrary to the public interest".
i. Subsection 44(2) of the Act -- false or misleading statements
[63] The first alleged contravention is of s. 44(2) of the Act, which prohibits the making of any statement that "a reasonable investor would consider relevant in deciding whether to enter into or maintain a trading... relationship" with the person or company who makes the statement, if the statement "is untrue or omits information necessary to prevent the statement from being false or misleading in the circumstances in which it is made".
[64] I note, but disregard for the purposes of this motion, the respondents' assertion that s. 44(2) of the Act does not apply in this case because the respondents did not enter into a trading relationship with any investors. That is an issue to be determined at the merits hearing. For present purposes, the allegation as made determines relevance.
[65] Staff submits that the Expert's Report relates to the question of whether a reasonable investor would consider certain loans to be relevant when deciding whether to enter into or maintain a trading relationship with the respondents. Staff submits that the Commission must have the benefit of the Expert's Report in order to "understand what a reasonable solar industry investor would consider relevant when investing in" the Fund.{15}
[66] In its submissions, Staff refers not only to statements made in the Offering Memorandum (which is explicitly referred to in the Statement of Allegations), but also to the newsletter (referred to in paragraph [11] above) sent to investors by the corporate respondent, which says that certain subject loans were on "commercially reasonable terms". Staff submits that the words "commercially reasonable" make the Expert's Report relevant. However, as the respondents correctly point out, the statements that the Statement of Allegations cites in support of the alleged contravention of s. 44(2) of the Act do not include the newsletter.
[67] Staff also submits, based on Kadonoff's Evidence Summary, that the respondents have given notice that they may assert a defence of having obtained legal advice. If that defence is available for an alleged breach of s. 44(2) of the Act (which is not conceded by Staff), Staff submits that the Expert's Report is relevant to determining whether the advice was reasonable and credible under the circumstances. The respondents did not address that argument in their submissions. As will be evident from my reasons below, it is unnecessary for me to resolve this specific issue. I decline to do so.
ii. Clause 126.1(1)(b) of the Act -- fraud
[68] The second alleged contravention is of s. 126.1(1)(b) of the Act, which prohibits any act, practice or course of conduct relating to securities, where the person or company engaging in the act, practice or course of conduct knows or reasonably ought to know that doing so would perpetrate a fraud.
[69] Staff alleges that the respondents contravened this provision by using the raised funds in a way that was contrary to the purpose and the objectives of the Fund as set out in the Offering Memorandum. In particular, Staff alleges that the respondents caused the Fund to transfer money to a second fund to pay distributions to investors in that second fund, and in other ways, all contrary to statements made in the Offering Memorandum. Staff alleges that by doing so, the respondents exposed investors to risks not disclosed to them, and in some cases caused actual losses to investors.
iii. Conduct contrary to the public interest
[70] As noted above, the Statement of Allegations also includes an allegation that the respondents engaged in conduct "contrary to the public interest". The only relevant portions of the Statement of Allegations are paragraphs 11 and 64, which I reproduce in their entirety:
11. In addition, the Respondents acted contrary to the public interest.
[...]
64. All of the Respondents have also acted contrary to the public interest.
[71] These bald allegations, without any particulars, are a classic example of an all-too-common practice by Staff. Unfortunately, that practice has been tacitly condoned by this tribunal in too many of its decisions.
[72] It is tempting to let this point pass by yet again, for efficiency's sake. However, on this motion, Staff has expressly relied on its allegations of "conduct contrary to the public interest" in support of its position that the Expert's Report is relevant. I will therefore deal with the point now.
[73] The phrase "contrary to the public interest" is found nowhere in the Act.
[74] It is a trope that finds its roots in the opening words of s. 127 of the Act ("The Commission may make... orders if in its opinion it is in the public interest to make the... orders") and that evokes the few instances in which the Commission has found it to be in the public interest to issue an order under s. 127, even without having found a contravention of Ontario securities law.
[75] Those decisions, which include Canadian Tire Corporation, Limited (Re){16} and its progeny, need not be reviewed here. It is sufficient for present purposes to say that in cases where the Commission has decided that it is in the public interest to make an order under s. 127 even absent a contravention of Ontario securities law, the Commission took pains to explain why such an exception was appropriate in the circumstances.
[76] The Statement of Allegations in this case offers no assistance as to why an order under s. 127 might be justified against the respondents even if no contraventions of Ontario securities law are found at the merits hearing. These allegations are nothing but clutter in the Statement of Allegations, and I disregard them for the purposes of this motion.
(c) Comparison of the allegations to the Expert's Report
[77] With the two specific alleged contraventions of the Act in mind, I turn to the four questions that were asked of Staff's proposed expert. I deal with them in two groups: (i) the first three questions, which invoke prevailing solar power industry norms, and (ii) the fourth question, which addresses the reasonable expectations of investors in the solar energy industry.
i. Questions that invoke solar power industry norms
[78] The first three questions asked of Staff's proposed expert may be paraphrased as follows:
a. Did the terms of a specified debenture (by which the Fund made a loan) and a specified acquisition (by which the Fund purchased shares of a related entity) meet or depart from prevailing solar power industry norms, and specifically, did the transactions involve commercially reasonable levels of risk?
b. Did loans by the Fund to a related fund meet or depart from prevailing solar power industry norms, and specifically, did they involve commercially reasonable levels of risk?
c. Did certain other specified loans from the Fund meet or depart from prevailing solar power industry norms, and specifically, did they involve commercially reasonable levels of risk?
[79] Staff submits that the Expert's Report will assist Staff in "rebutting any inference in the Respondents' evidence or argument that these transactions were commercially typical or reasonable."{17}
[80] The respondents submit, and I agree, that there is nothing in the Statement of Allegations that explicitly invokes solar power industry norms, or that connects to the question of how typical or reasonable the impugned transactions were. The allegations say that the funds were deployed to destinations different from those promised to investors. There is no allegation that the funds were deployed in violation of subjective criteria, e.g., level of risk, or commercial reasonableness. The alleged contraventions are about the entities to which the funds flowed, not why the funds flowed to those entities.
[81] As discussed above, however, it is appropriate on a motion at this stage to go beyond the Statement of Allegations itself and consider documents that are referred to, directly or indirectly, in the Statement of Allegations. In its submissions, Staff cites both the Offering Memorandum and the newsletter, but as I have explained above, there is nothing in the Statement of Allegations that would bring the newsletter within the scope of this proceeding.
[82] As for the Offering Memorandum (which is included in the material filed on this motion), section 1.3, titled "Reallocation", says (in full): "We intend to spend the available funds as stated. We will reallocate funds only for sound business reasons."
[83] Staff submits, and I agree, that the words "sound business reasons" in the Offering Memorandum might enable a respondent to argue at the merits hearing that all of the impugned transactions met that standard. In light of this possibility, Staff had good reason to retain an expert to provide opinions about the soundness of the transactions.
[84] Because of those words in the Offering Memorandum, I would have ruled that the three opinions that invoke solar power industry norms were admissible at the merits hearing. However, the respondents' written submissions on this motion prompted a different decision.
[85] In their submissions, the respondents state that they "have no intention to lead or elicit evidence that would render [the] first three opinions relevant". In other words, the respondents waived their right to lead or elicit evidence designed to support a submission that they reallocated funds for sound business reasons.
[86] That waiver might have resolved the question of the admissibility of the first three opinions, except that I was uncertain about the precise extent of the respondents' commitment. I could imagine the respondents choosing not to lead or elicit evidence that would make the opinions relevant, but still making a submission at the merits hearing that might make the opinions relevant. If they were to do so, even inadvertently, it would be unfair to Staff for me to exclude the Expert's Report at this stage.
[87] After reviewing the parties' written submissions, I decided that if the respondents wished to extend their commitment beyond evidence to include submissions (i.e., to waive their right to argue, based on whatever evidence was properly admitted at the merits hearing, that any reallocation of funds was done for sound business reasons), the first three opinions in the Expert's Report would be inadmissible on that basis. If the respondents were not willing to extend their commitment, the opinions would be admissible.
[88] Because of my uncertainty, I convened a teleconference hearing, in which I explained my decision and identified the uncertainty. Soon after that teleconference hearing, the respondents confirmed in writing that they will make no submission at the merits hearing that would make the three opinions relevant.
[89] That commitment fully resolves the question. The three opinions, which would have otherwise been relevant, have been made irrelevant by the respondents' waiver. Staff therefore need not, and may not, adduce the three opinions at the merits hearing.
ii. Question regarding the reasonable expectations of investors in the solar energy industry
[90] The fourth question asked of Staff's proposed expert may be paraphrased as follows: Could the loans made by the Fund have been reasonably understood by a solar energy investor to be investments in the acquisition, development, financing and operation of solar energy powered installations as described in the Offering Memorandum?
[91] The respondents do not dispute that the expert's answer to that question is relevant.
(d) Conclusion as to relevance
[92] For the foregoing reasons, all four of the opinions given by the expert would be relevant, but for the respondents' waiver with respect to the first three.
2. Is this witness qualified to give opinion evidence re issues that are properly before the tribunal?
[93] I turn now to the second of the three questions regarding admissibility. That is, is Staff's proposed expert qualified to give the opinions contained in the Expert's Report?
[94] While this question is moot in light of my decision, I did consider it, especially given my uncertainty about the extent of the respondents' commitment about relevance.
[95] The respondents neither admitted nor acknowledged the proposed expert's qualifications, but they did not dispute those qualifications or argue that the proposed expert was unqualified. Based on the background and qualifications of the proposed expert, as set out in the Expert's Report, I had no difficulty concluding that he would be qualified to give the opinions contained in the report.
3. Necessity
[96] The last of the three questions regarding admissibility asks whether the tribunal requires the assistance of the expert to determine the issues addressed by the expert's proposed evidence.
[97] I need not consider this question with respect to the first three opinions in the Expert's Report, for the reasons set out above. I must consider it only with respect to the fourth opinion, which answers the question referred to in paragraph [90] above; namely, "Could the loans made by the Fund have been reasonably understood by a solar energy investor to be investments in the acquisition, development, financing and operation of solar energy powered installations as described in the Offering Memorandum?"
[98] Staff submits that this opinion is necessary so that the Commission can understand how the word "financing" is typically understood by participants in the solar energy market.
[99] I disagree. How a reasonable investor would read the word "financing" in an offering memorandum, and how a reasonable investor would assess whether certain transactions conformed to that language, are questions that are squarely within the expertise of the Commission. I reject Staff's suggestion, unsupported by any authority, that the Commission should admit expert industry-specific opinion evidence when considering the perspective of a reasonable investor.
[100] The fourth opinion is, therefore, inadmissible at the merits hearing.
[101] The first three opinions in the Expert's Report would have been admissible at the merits hearing, absent the respondents' commitment not to lead or elicit evidence, or to make any submission, that would make those opinions relevant.
[102] The fourth opinion in the Expert's Report is relevant, but is not needed, and is therefore inadmissible.
[103] As a result, the Expert's Report is inadmissible at the merits hearing.
Dated at Toronto this 18th day of January, 2021.
{1} RSO 1990, c S.22
{2} 2019 ONSEC 19, (2019) 42 OSCB 5065 at para 22
{3} 2010 ONCA 390
{4} Awada v Glaeser, 2017 ONSC 1094 at para 21
{5} 2007 ONSEC 4, (2010) 33 OSCB 8245
{6} Mega-C at para 34
{7} Mega-C at paras 35-36
{8} Mega-C at para 34
{9} 2015 ONSEC 32, (2015) 38 OSCB 8057 at paras 47-48
{10} RSO 1990, c S.5
{11} Paramount (Re), 2020 ONSEC 12, (2020) 43 OSCB 4475 at para 5, citing R v Mohan, [1994] 2 SCR 9 at paras 17, 26
{12} Statement of Allegations at para 6
{13} Statement of Allegations at para 7
{14} Statement of Allegations at para 17
{15} Staff's written submissions at para 50
{16} (1987) 10 OSCB 857
{17} Staff's written submissions at para 49
Temporary, Permanent & Rescinding Issuer Cease Trading Orders
Company Name |
Date of Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/Revoke |
|
||||
THERE IS NOTHING TO REPORT THIS WEEK. |
||||
Company Name |
Date of Order |
Date of Revocation |
|
||
CanaFarma Hemp Products Corp. |
January 12, 2021 |
__________ |
|
||
Edgewater Wireless Systems Inc. |
October 15, 2020 |
January 14, 2021 |
Temporary, Permanent & Rescinding Management Cease Trading Orders
Company Name |
Date of Order |
Date of Lapse |
|
||
THERE IS NOTHING TO REPORT THIS WEEK. |
||
Outstanding Management & Insider Cease Trading Orders
Company Name |
Date of Order or Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/Expire |
Date of Issuer Temporary Order |
|
|||||
Performance Sports Group Ltd. |
19 October 2016 |
31 October 2016 |
31 October 2016 |
__________ |
__________ |
Company Name |
Date of Order |
Date of Lapse |
|
||
Agrios Global Holdings Ltd. |
September 17, 2020 |
__________ |
|
||
Greenbank Capital Inc. |
December 1, 2020 |
__________ |
|
||
Nutritional High International Inc. |
December 1, 2020 |
__________ |
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160953
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160967
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160982
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160438
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3159197
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3159747
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3138140
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3159743
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3159748
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160278
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3159393
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3159585
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160061
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160047
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160602
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160863
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3159822
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3159843
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3148234
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3154945
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3114985
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147745
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3151246
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3158770
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160490
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3139722
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3151162
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3161346
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160864
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160139
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3149448
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3114687
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3018443
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3160009
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Type |
Company |
Category of Registration |
Effective Date |
|
|||
Amalgamation |
Mackenzie Financial Corporation and Greenchip Financial Corp. |
Investment Fund Manager, Exempt Market Dealer, Portfolio Manager and Commodity Trading Manager |
January 1, 2021 |
To form: Mackenzie Financial Corporation |
|||
|
|||
Voluntary Surrender |
Queensville Global Securities Inc. |
Exempt Market Dealer |
January 8, 2021 |
|
|||
Voluntary Surrender |
Clearbridge Rare Infrastructure (North America) PTY Limited |
Portfolio Manager |
January 18, 2021 |
|
|||
Amalgamation |
Fidelity (Canada) Asset Management ULC and Fidelity Investments Canada ULC |
Investment Fund Manager, Exempt Market Dealer, Portfolio Manager, Mutual Fund Dealer and Commodity Trading Manager |
January 1, 2021 |
To form: Fidelity Investments Canada ULC |
|||
Mutual Fund Dealers Association of Canada (MFDA) -- Amendments to MFDA Rule 1.1.1(a) (Business Structures -- Members) -- Notice of Approval
The Ontario Securities Commission has approved the proposed amendments (Amendments) to MFDA Rule 1.1.1(a) (Business Structures -- Members). The Amendments allow Approved Persons to sell securities issued by a credit union to its members:
• as an employee of a credit union for the account of, and through the facilities of, the credit union rather than the MFDA member; and
• in accordance with local credit union and securities legislation.
The Amendments are similar to an exception currently available under MFDA Rule 1.1.1(a) to Approved Persons dually employed by banks.
The Amendments were published for public comment on October 24, 2019. No comment letters were received. The Amendments will be effective on a date to be subsequently determined by the MFDA.
In addition, the British Columbia Securities Commission; the Alberta Securities Commission; the Financial and Consumer Affairs Authority of Saskatchewan; the Financial and Consumer Services Commission of New Brunswick; the Manitoba Securities Commission; the Nova Scotia Securities Commission; and the Prince Edward Island Office of the Superintendent of Securities have either not objected to or have approved the Amendments.
Neo Exchange Inc. -- Listing Manual Amendments -- Notice of Approval
January 21, 2021
NOTICE #: 2021-001
In accordance with the Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto, Neo Exchange Inc. ("NEO Exchange") has adopted and the Ontario Securities Commission has approved an amendment to the NEO Exchange Listing Manual.
On December 3, 2020, NEO Exchange published for comment a Public Interest Rule Amendment relating to decreasing the number of public securityholders required for minimum distribution of supplemental listings. For additional details, please refer to the Notice of the Amendments and Request for Comments published on December 3, 2020. No comments were received.
The Public Interest Rule Amendment is effective as of the date hereof.
A copy of the Listing Manual can be found on the NEO Exchange website, click here.
T: (416) 933-5959
E: NEOListingsSales@neostockexchange.com
W: http://neo.exchange
155 University Ave., Suite 400
Toronto, Ontario M5H 3B7
Nasdaq CXC Limited -- Notice of Proposed Changes and Request for Comment
Nasdaq CXC Limited (Nasdaq Canada) has announced plans to implement the changes described below in the first half of 2021 subject to regulatory approval. Nasdaq Canada is publishing this Notice of Proposed Changes in accordance with the requirements set out in the Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto (Exchange Protocol). Pursuant to the Exchange Protocol, market participants are invited to provide the Commission with comment on the proposed changes.
Comment on the proposed changes should be in writing and submitted by February 24, 2021 to:
Market Regulation BranchOntario Securities Commission20 Queen Street West, 22nd FloorToronto, ON M5H 3S8Email: marketregulation@osc.gov.on.ca
And to:
Matt ThompsonChief Compliance OfficerNasdaq CXC Limited25 York St., Suite 900Toronto, ON M5J 2V5Email: matthew.thompson@nasdaq.com
Comments received will be made public on the OSC website. Upon completion of the review by OSC staff, and in the absence of any regulatory concerns, notice will be published to confirm the completion of Commission staff's review and to outline the intended implementation date of the changes.
Nasdaq Canada has announced plans to introduce the following change in the first half of 2021 subject to regulatory approval. Nasdaq Canada is publishing this Notice of Proposed Changes in accordance with the requirements set out in the Exchange Protocol.
The CX2 Trading Book (CX2) currently employs a price-broker-time order matching priority across all priced securities available for trading. Nasdaq Canada is proposing matching priority for securities below one dollar, where large size displayed orders that meet a minimum size threshold of 30,000 shares (Large Size Order) will have priority over orders that do not meet the minimum size threshold (Small Size Orders) irrespective of the time a Large size Order is entered (price/broker/large-size/time). Where multiple Large Size Orders are posted in the order book, priority will be given to the Large Size Order with the largest displayed quantity. If the size of a Large Size Order decreases as a result of a partial execution falling below the minimum size threshold, the order will be considered a Small Size Order and be given execution priority based on the time stamp it was given when first received.
How it Works
Example 1: CX2 -- Current Matching Priority
BID Size |
BID |
ASK |
ASK Size |
|
|
||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
||
|
||||
Order 1 (9:45:01) |
1000 (09) |
|||
|
||||
Order 2 (9:45:02) |
500 (07) |
|||
|
||||
Order 3 (9:45:03) |
1000 (79) |
|||
Action: A sell order is entered for 1000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 1 because it has time priority as it was the first order entered at 0.60 at 9:45:01.
Example 2: CX2 -- Proposed Large-Size Matching Priority
BID Size |
BID |
ASK |
ASK Size |
||
|
|||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
|||
|
|||||
Order 1 (9:45:01) |
1000 (09) |
||||
|
|||||
Order 2 (9:45:02) |
35,000 (07) |
||||
|
|||||
Order 3 (9:45:03) |
1000 (79) |
||||
Action: A sell order is entered for 1000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 2. Although Order 1 has time priority, Order 2 meets the minimum size threshold for a Large Size Order and therefore receives execution priority.
Example 3: Matching Priority between Multiple Large Size Orders
BID Size |
BID |
ASK |
ASK Size |
|
|
||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
||
|
||||
Order 1 (9:45:01) |
1000 (09) |
|||
|
||||
Order 2 (9:45:02) |
35,000 (07) |
|||
|
||||
Order 3 (9:45:03) |
30,000 (79) |
|||
Action: A sell order is entered for 1000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 2. Although Order 1 has time priority, Order 2 and Order 3 are both Large Size Orders and therefore have execution priority over Order 1. The incoming sell order interacts with Order 2 because it is has a larger displayed size than Order 3.
Example 4: Matching Priority between Multiple Large Size Orders
BID Size |
BID |
ASK |
ASK Size |
|
|
||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
||
|
||||
Order 1 (9:45:01) |
1000 (09) |
|||
|
||||
Order 2 (9:45:02) |
35,000 (07) |
|||
|
||||
Order 3 (9:45:03) |
50,000 (79) |
|||
Action: A sell order is entered for 1000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 3. Order 2 and Order 3 have execution priority because they are both Large Size Orders. The incoming sell order interacts with Order 3 because it has a larger displayed size than Order 2 even though Order 2 was entered first.
Example 5: Residual quantity of a Large Size Order falls below the Minimum Size Threshold
BID Size |
BID |
ASK |
ASK Size |
|
|
||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
||
|
||||
Order 1 (9:45:01) |
1000 (09) |
|||
|
||||
Order 2 (9:45:02) |
30,000 (07) |
|||
|
||||
Order 3 (9:45:03) |
1000 (79) |
|||
Action: A sell order is entered for 5000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 2 because it is a Large Size Order. The residual size of Order 2 decreases to 25,000 shares which is below the minimum size threshold.
BID Size |
BID |
ASK |
ASK Size |
|
|
||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
||
|
||||
Order 1 (9:45:01) |
1000 (09) |
|||
|
||||
Order 2 (9:45:02) |
25,000 (07) |
|||
|
||||
Order 3 (9:45:03) |
1000 (79) |
|||
Action: A sell order is entered for 1000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 1 because it has time priority over all other orders. Order 2 no longer meets the minimum size threshold for a Large Size Order. Order 2's execution priority returns to the time priority it was originally assigned based on the time stamp when the order was received.
Example 6: Increasing the residual size of a Large Size Order
BID Size |
BID |
ASK |
ASK Size |
|
|
||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
||
|
||||
Order 1 (9:45:01) |
1000 (09) |
|||
|
||||
Order 2 (9:45:02) |
60,000 (07) |
|||
|
||||
Order 3 (9:45:03) |
50,000 (79) |
|||
|
||||
Order 4 (9:45:04) |
35,000 (02) |
|||
Action: A sell order is entered for 35,000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 2 because it has the largest displayed size of all Large Size Orders (Order 2, Order 3 and Order 4). The residual size of Order 2 is decreased to 25,000 shares which is below the minimum size threshold.
Action: Member 07 increases the size of Order 2 by 30,000 shares to 55,000 shares at 9:46:00.
BID Size |
BID |
ASK |
ASK Size |
|
|
||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
||
|
||||
Order 1 (9:45:01) |
1000 (09) |
|||
|
||||
Order 2 (9:46:00) |
55,000 (07) |
|||
|
||||
Order 3 (9:45:03) |
50,000 (79) |
|||
|
||||
Order 4 (9:45:04) |
35,000 (02) |
|||
Action: A sell order is entered for 1000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 2 because it has the largest displayed size of all Large Size Orders (Order 2, Order 3 and Order 4) even though the order was modified to increase its quantity.
Example 7: Increasing the residual size of a Large Size Order
BID Size |
BID |
ASK |
ASK Size |
|
|
||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
||
|
||||
Order 1 (9:45:01) |
1000 (09) |
|||
|
||||
Order 2 (9:45:02) |
60,000 (07) |
|||
|
||||
Order 3 (9:45:03) |
50,000 (79) |
|||
|
||||
Order 4 (9:45:04) |
35,000 (02) |
|||
Action: A sell order is entered for 35,000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 2 because it has the largest displayed size of all Large Size Orders (Order 2, Order 3 and Order 4). The residual size of Order 2 decreases to 25,000 shares which is below the minimum size threshold.
Action: Member 07 increases the size of Order 2 by 5,000 shares to 30,000 shares at 9:46:00.
BID Size |
BID |
ASK |
ASK Size |
|
|
||||
NBBO (CX2 BBO) |
0.60 |
0.62 |
||
|
||||
Order 1 (9:45:01) |
1000 (09) |
|||
|
||||
Order 3 (9:45:03) |
50,000 (79) |
|||
|
||||
Order 4 (9:45:04) |
35,000 (02) |
|||
|
||||
Order 2 (9:46:00) |
30,000 (07) |
|||
Action: A sell order is entered for 1000 shares on CX2 with a limit price of 0.60.
Result: The sell order executes against Order 3 because it has the largest displayed quantity of all Large Size Orders (Order 2, Order 3 and Order 4). Order 2 no longer has priority because it has a smaller size than Order 3 (and Order 4).
Rationale for the Proposal
The Proposed Change is being made to create size improvement opportunities for participants by incentivizing larger displayed passive orders which in turn will increase liquidity and transparency. By providing execution priority to Large Size Orders, competition between liquidity providers will be intensified as liquidity providers will be required to compete based on order size.
Specifically, the Proposed Change will address the need for improved market breadth for securities trading below one dollar, created by the new requirement under UMIR Rule 6.6 that an order to meet a notional value of $30,000 in addition to the current 50 standard trading unit requirement to trade against a dark order without receiving price improvement. As a result of this new requirement, orders below the threshold seeking NBBO execution on dark venues must now trade on visible marketplaces. By introducing an incentive to display Large Size Orders, the Proposed Change will increase liquidity on CX2, resulting in superior executions.
Expected Date of Implementation
Subject to regulatory approval, we are expecting to introduce the Proposed Change in the first half of 2021.
Expected Impact on Market Structure
The Proposed Change is expected to result in greater available displayed liquidity at the NBBO on the CX2 Trading Book for securities trading below one dollar. Members sending large size active orders for securities priced below one dollar should be able to satisfy the full quantity of their orders on CX2 more often without having to split parent orders into smaller child orders routed to multiple venues. As a result of the Proposed Change liquidity providers will need to consider the size of their posted displayed orders as they compete for order flow.
Expected Impact on the Exchange's Compliance with Ontario Securities Law
The Proposed Change is in compliance with applicable securities laws and does not impact fair access to markets or Nasdaq Canada's ability to maintain a fair and orderly market.
Consultation and Review
Prior to filing Amendment 56 Nasdaq Canada held consultations with participants that trade on CX2. Consultations included soliciting feedback from trading desks typically sending active order flow (include retail trading desks) and members that provide passive liquidity and/or provide electronic access to liquidity providers.
Estimated Time Required by Subscribers and Vendors (or why a reasonable estimate is not provided)
There are no changes required by members or vendors to make to their Systems in response of the Proposed Change.
Will Proposed Fee Change or Significant Change introduce a Fee Model or Feature that Currently Exists in other Markets or Jurisdictions
Yes. In Canada the NEO-N Book incorporates consideration for order size into its matching logic. Larger sized orders are given priority over order entered first (Size-Time) at each level of the priority matching process (broker -- NEO Trader -- DMM -- other orders).
In the United States there are currently no equity exchanges that support price-size priority. In the past Nasdaq PSX was the first US equity exchange to operate a price-size priority model.
Any questions regarding these changes should be addressed to Matt Thompson, Nasdaq CXC Limited: matthew.thompson@nasdaq.com, T: 647-243-6242
Large Size Order |
An order that meets a minimum size threshold (Large Size Threshold) determined by the Exchange. |
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Small Size Order |
An order that does not meet the Large Size Threshold. |
5.7.2 CX2 Book
CX2 is a lit book matching orders for higher priced securities based on price/broker/time priority.
Orders for lower priced securities are matched based on price/broker/large-size/time priority. Large Size Orders receive execution priority over Small Sized Orders. Large Size Orders with larger displayed sizes received execution priority first.
Visible orders have a higher priority over hidden orders at the same price. Orders that are not immediately matched are posted in the CX2 Book.
CX2 orders are attributed by default and are automatically eligible for broker preferencing. Members may not opt-out of broker preferencing for attributed orders.
Anonymous orders and jitney orders are not eligible for broker preferencing.
CX2 supports round lot, mixed lots and odd lot orders.
Outback Goldfields Corp. (formerly Skarb Exploration Corp.) -- s. 4(b) of the Regulation
Consent given to an offering corporation under the Business Corporations Act (Ontario) to continue under the Business Corporations Act (British Columbia).
Business Corporations Act, R.S.O. 1990, c. B.16, as am., s. 181.
Ont. Reg. 289/00, as am., s. 4(b), made under the Business Corporations Act, R.S.O. 1990, c. B.16, as am.
UPON the application of Outback Goldfields Corp. (formerly Skarb Exploration Corp.) (the Applicant) to the Ontario Securities Commission (the Commission) requesting a consent from the Commission for the Applicant to continue in another jurisdiction pursuant to section 181 of the OBCA (the Continuance);
AND UPON considering the application and recommendation of the staff of the Commission;
AND UPON the Applicant representing to the Commission that:
1. The Applicant was incorporated under the OBCA by articles of incorporation effective March 6, 2018 under the name Skarb Exploration Corp. The Applicant filed articles of amendment effective December 9, 2020 to change the name to Outback Goldfields Corp. and to consolidate the Common shares (the Amendment).
2. The Applicant is an offering corporation under the OBCA.
3. The Applicant's registered office is currently located at 4 Brule Gardens, Toronto, Ontario M6S 4J2 and its head office is located at Suite 700 -- 1090 West Georgia Street, Vancouver, British Columbia, V6E 3V7.
4. The authorized share capital of the Applicant currently consists of an unlimited number of Common shares (the Common Shares). The Common Shares are listed for trading on the Canadian Securities Exchange (CSE) under the symbol "SKRB". As at the close of business on November 19, 2020, the Applicant had 74,901,500 issued and outstanding Common Shares. Following the Amendment, the Applicant had 25,037,197 issued and outstanding Common Shares.
5. The Applicant intends to apply to the Director under the OBCA pursuant to section 181 of the OBCA (the Application for Continuance) for authorization to continue as a corporation under the Business Corporations Act (British Columbia), S.B.C. 2002, c. 57, as amended (the BCBCA).
6. The Continuance is being proposed by the Applicant as it would provide additional flexibility to the Applicant and the Applicant's mind and management is located in British Columbia. The BCBCA provides increased flexibility with respect to capital management, resulting from more flexible rules relating to dividends, share purchases and redemptions, and accounting for capital.
7. The material rights, duties and obligations of a corporation governed by the BCBCA are substantially similar to those of a corporation governed by the OBCA. The principal differences are highlighted for holders of Common Shares (the Shareholders) in the management proxy circular dated October 20, 2020 (the Information Circular) that was sent to shareholders in connection with the Applicant's annual and special meeting of shareholders held on November 19, 2020 (the Meeting).
8. The Applicant is a reporting issuer under the Securities Act, R.S.O. 1990, c. S.5, as amended (the Act) and the securities legislation in the province of British Columbia (the Legislation). The Applicant will remain a reporting issuer in these jurisdictions and will continue to be listed for trading on the CSE following the Continuance.
9. The Applicant is not in default of any of the provisions of the OBCA, the Act, or the Legislation including the regulations made thereunder.
10. The Applicant is not in default of any of the rules, regulations or policies of the CSE.
11. The Applicant is not subject to any proceeding under the OBCA, the Act or the Legislation.
12. The British Columbia Securities Commission (the BCSC) is the principal regulator of the Applicant. Following completion of the Continuance, the registered and head office of the Applicant will be located in Vancouver, British Columbia and the BCSC will continue to be the Applicant's principal regulator.
13. The Information Circular described the proposed Continuance and disclosed the reasons for it and its implications. The Information Circular also disclosed full particulars of the dissent rights of the Applicant's shareholders under section 185 of the OBCA.
14. The Shareholders authorized the Continuance at the Meeting by a special resolution approved by 75.29% of the votes cast. No Shareholder exercised dissent rights pursuant to section 185 of the OBCA.
15. Pursuant to subsection 4(b) of the Regulation, where a corporation is an offering corporation, the Application for Continuance must be accompanied by a consent from the Commission.
AND UPON the Commission being satisfied that to do so is not prejudicial to the public interest;
THE COMMISSION HEREBY CONSENTS to the continuance of the Applicant under the BCBCA.
DATED at Toronto, Ontario this 12th day of January, 2021.