The Ontario Court of Justice Divisional Court has upheld a pair of decisions by an Ontario Securities Commission (OSC) hearing panel, which found that contracts that were marketed as a tax-planning vehicle amounted to securities.
The OSC panel that contracts sold for computerized trading software for trading financial futures and currencies amounted to investment contracts, and that the firms and people involved with selling them (Edward Furtak, Axton 2010 Finance Corp., Strict Trading Ltd., Ronald Olsthoorn, Trafalgar Associates Ltd., Lorne Allen and Strictrade Marketing Inc.) should have been registered and issued a prospectus.
According to court’s decision delivered in mid-November, the respondents in the case appealed both the OSC’s 2016 merits decision that they violated securities rules, and the 2017 sanctions decision imposing penalties on them, including trading bans, monetary penalties, disgorgement, and costs.
The court dismissed the appeal.
“The lynchpin of the merits decision is the commission’s finding that the Strictrade set of contracts was an investment contract, and therefore a security. … the commission met the reasonableness review standard in making that finding. In doing so, the commission refers to evidence that amply supports its conclusions,” the court stated in its decision.
“Once the commission found that the Strictrade set of contracts was a security, it reasonably followed that the appellants were in breach of the registration and prospectus requirement of the Securities Act,” the court added.
The court also upheld the OSC’s decision on sanctions in the case. It stated: “the sanctions that the commission imposed in this case fell within the broad discretion afforded to the commission to craft sanctions in the public interest, comfortably meeting the review standard of reasonableness.”