A court has upheld the British Columbia Securities Commission’s (BCSC) decision to deny a bid to lift a freeze order against a firm facing an enforcement action.

In a decision released Thursday, the Court of Appeal for B.C. denied an appeal by Bossteam E-Commerce Inc., Yan Zhu (aka Rachel Zhu), and Guan Qiang Zhang, from a decision of the BCSC refusing to set aside an order it made in April 2012 freezing the company’s bank accounts amid allegations of securities law violations. Those allegations have not been proven.

In the meantime, the respondents in the case applied to the BCSC to lift the freeze orders. The commission denied that application, and so they appealed that decision to the court.

In its decision, the court said that the issue on appeal “ultimately turns on whether the decision of the commission refusing to revoke the freeze order… was reasonable.”

It said that the appellants in the case argued that the commission applied the wrong test in making its decision, and that the decision “was based on an inadequate evidentiary foundation and was, therefore, arbitrary.”

The commission argued that the courts should not set criteria for regulatory freeze orders, and that it should be under the broad discretion that regulators enjoy. Moreover, if regulators had to establish a prima facie case of a breach before it can issue a freeze order, this “could almost instantly result in the disappearance or dissipation of any funds which might otherwise be available to compensate members of the public who have been, or may be, harmed by misconduct on the part of the parties being investigated.”

In this case, the court found that the BCSC’s decision was reasonable. It noted that there was an admitted breach of securities law, and “evidence of other breaches… albeit not to the level of a prima facie case. There was also evidence linking the admitted and alleged breaches to the accounts frozen; and, finally, it was apparent that proof of the breaches… could give rise to a substantial monetary remedy.”

“In all of the circumstances, having regard to the breadth of the commission’s mandate to act in the public interest in the area of its expertise, and the broad discretion available to it… I find that the commission’s decision not to revoke the freeze order was reasonable,” judge Prowse concluded in dismissing the appeal.