A British Columbia court has agreed to seal court files to avoid revealing the existence of an investigation by the B.C. Securities Commission (BCSC) that could harm the subjects of the inquiry.
The B.C. Court of Appeal granted an application brought by five unnamed parties that are reportedly under investigation by the BCSC.
The parties sought an order that would seal court files in the case, citing concerns that disclosure of the mere existence of a regulatory investigation would damage their reputations — particularly as the investigation may not lead to accusations of wrongdoing.
In its decision, the court noted that it is reluctant to keep court files secret.
“The principle of the open court is important and we do not lightly seal a file, the act of which has the effect of foreclosing public knowledge of the contents of the file,” the court stated.
However, the court was ultimately persuaded that the risk — to both the subjects of the investigation and the capital markets generally — was great enough to warrant keeping the file confidential.
“I am satisfied that there is potential harm to the appellants … should the fact of the investigation become broadly known,” the court stated. “I am also satisfied that there is potential harm to the public at large from knowledge of the fact of the investigation without information as to the content of the investigation or where it is likely to lead.”
The court cited an expert opinion from securities lawyer Joe Groia, which noted, among other things, that if the existence of an investigation were revealed, “I would expect that their venture capital and private equity business would be significantly harmed and their personal reputations would be significantly damaged.”
Groia also told the court: “In my experience, many of the commissions’ investigations are closed with no enforcement action being taken. What heightens the unfairness in this case is that the disclosure of the issuance of a freeze order will leave the public with the erroneous impression that the applicants have engaged in some kind of wrongdoing, when no such inference can or should be drawn at this stage.”
The court ordered that the BCSC file remain sealed pending further court order.
The BCSC consented to the sealing order.