A regulator’s summons seeking to compel evidence in an ongoing enforcement investigation has been upheld by a court in British Columbia.
The Supreme Court of B.C. ruled in favour of the B.C. Securities Commission (BCSC) and one of its investigators, Alisa Smith, as they sought to dismiss a petition seeking a judicial review of summonses that were issued as part of a regulatory investigation.
The summonses were issued in late 2020 to compel three people — Ranvir Brar, Harjit Gahunia and Michael Pawar — to attend an interview with the BCSC and answer questions under oath.
“The petitioners have refused to respond to the summonses,” the court noted in its decision. “As a result, in June 2021 the commission filed contempt proceedings against them.”
The contempt case is due to be heard on Oct. 12. In the meantime, the three filed a petition seeking a judicial review of the decision to issue the summonses.
The Supreme Court ruled that the petition was statute-barred, and it dismissed the effort to challenge the regulator’s summonses.
Under securities law, BCSC investigators have the same power to compel witnesses as the Supreme Court in civil cases, it noted. And investigators have legal immunity, as long as they are acting in good faith.
According to the court’s ruling, the petitioners argued that the immunity provision doesn’t prevent the court from reviewing the actions of investigators for fairness.
The court disagreed. “Absent an allegation of bad faith, the privative clause shields the respondent investigator from any action including this judicial review,” the court said in its decision.
The immunity provision requires the bid for a judicial review to be struck down, it said, adding that beyond that, the petition doesn’t establish a legal basis for a review.
“The petitioners claim that they have not been provided with any information regarding what the investigator wants to question them about. They question whether they themselves are under investigation,” the court said.
As a result, they contend that the issuance of summonses was unfair.
Whether that’s true or not, the court ruled that they “failed to establish that they are owed a duty of fairness.”
At the investigation stage, fairness isn’t much of a consideration, it suggested.
“An investigation order is not ‘final’ in any sense; it merely initiates an investigation that may or may not have legal consequences for the subject. If and when a hearing is ordered, the legal position changes,” the court said.
It noted that it would be problematic to require regulators to justify their orders at the investigative stage, which would require them to disclose what an investigation has shown so far, and what it’s expected to reveal as it progresses.
“In my opinion, such disclosure would open the door to the subjects of such orders to take evasive actions to forestall the discovery of possible contraventions of the [Securities Act],” the court said in its ruling. “Many investigations would grind to a halt or bog down into ‘pre‑hearings’ that would delay and distract the commission from completing the investigation.”
Ultimately, the court concluded that investigations should be allowed to run their course before higher standards of procedural fairness are required.
“Overall I find that the petition is based on groundless assertions that the investigator’s action in issuing the summonses was unfair and unreasonable,” it said.