An Ontario Securities Commission panel has ruled that a firm’s involvement in a charitable gifting scheme violated securities laws by trading without registration.

The OSC issued its decision Thursday concerning allegations made against Z2A Corp. (Z2A) and Christine Hewitt by OSC staff charging that their involvement in a charitable gifting program, Innovative Gifting Inc. (IGI), amounted to trading in securities without being registered.

Following a hearing earlier this year, Thursday’s decision concludes that Z2A and Hewitt did trade improperly, and thereby violated the public interest. Sanctions in the case will be determined following a future hearing.

Back in 2011, OSC staff settled allegations against IGI. At the hearing this year, OSC staff alleged that Hewitt and Z2A violated the laws through their alleged involvement in the IGI program. According to the decision, the program involved soliciting charitable donors, who would give money to charities and, in exchange, they’d receive shares in a company listed on the Frankfurt Stock Exchange (purportedly worth six to eight times the value of their monetary contribution to the charity). Donors could either keep those shares, or donate them to the charity and receive a larger tax credit as a result.

OSC staff said that Hewitt became involved in late 2008, signing an agreement with IGI, on behalf of Z2A, to provide administrative services to the scheme, primarily by facilitating the transfer of the shares to donors. Staff argued that, given that the distribution of the shares was contingent upon the payment of money by the donors to the charities, the distribution of these shares amounted to a trade in securities under securities laws. And, it said that Hewitt and Z2A performed acts in furtherance of these trades by arranging for the issuance of shares in the names of the donors.

The OSC panel found that staff did prove their case, ruling that their actions “constituted acts in furtherance of trades”, which was integral to the gifting scheme. It also found that, as an officer and director of Z2A, “Hewitt clearly authorized, permitted and acquiesced in Z2A’s breaches of Ontario securities law and is therefore deemed to have [acted] contrary to the public interest.” Additionally, the decision noted that Z2A received $229,453 from IGI, which was “obtained as a result of its non-compliance with Ontario securities law.”

The panel set August 12 as the date when it aims to schedule a further hearing on sanctions and costs in the case.