An order requiring a firm to cease trading while regulators investigate suspected misconduct should not be imposed indefinitely, Ontario’s Capital Market Tribunal has ruled.

In early March, the Ontario Securities Commission (OSC) sought to extend a temporary cease-trade order (CTO) against an unregistered offshore company, Nova Tech Ltd., which is based in St. Vincent and the Grenadines and is suspected of breaching Ontario securities law by trading securities without registration or a prospectus.

According to the commission’s initial CTO against the firm, which was issued on Feb. 16, NovaTech appears to be trading securities with investors in a scheme that promises investors weekly profits of 3% generated from trading crypto and foreign exchange on their behalf, and uses a multi-level marketing model to promote the scheme.

The original order was issued to protect investors while the OSC continued investigating NovaTech’s activities. So far, no enforcement allegations have been brought against the company, and no wrongdoing has been proven.

When the regulator sought to extend the original CTO, which expired after 15 days, it asked the tribunal to impose the restriction until enforcement proceedings conclude: i.e., until a merits hearing, a sanctions hearing or a settlement is reached with the company.

According to the tribunal’s decision, there’s no precedent for imposing a CTO for that long.

The tribunal ruled that, while an extension was warranted, it would only apply for six months or until 10 days after the OSC formally brings enforcement proceedings against the firm.

“I concluded that in this case it would not be in the public interest to extend the temporary order for a less definite, and possibly much longer, period of time,” the tribunal said in its decision.

The tribunal noted that a CTO that’s in effect until enforcement proceedings end could remain indefinitely if new evidence results in the regulator not bringing enforcement action. Nothing in the tribunal’s rules would require the OSC to rescind the order, and there’s no mechanism for the tribunal itself to reopen the issue, the decision noted.

“In my view, it is inconsistent with the tribunal’s objectives of ensuring fair, efficient, and cost-effective hearings to have a proceeding pending indefinitely with no further steps scheduled,” it said.

The tribunal also concluded the regulator isn’t being unfairly rushed to bring enforcement proceedings before it’s ready. While the tribunal acknowledged the case may be complex, it said the regulator can always bring allegations and amend them if the investigation turns up new evidence.