By Danica Bennewies
Welcome back to another installment of Friday Finds – the weekly series where we share five of the top corporate and securities law news stories from the past week. It’s been a busy week in the world of securities law, but we’ve narrowed down the news to five of the top headlines that you should know.
The Ontario government released its fall fiscal update on Thursday. In the update, the government announced that it will be reviewing advisor proficiency and oversight measures in an effort to improve customer confidence in the financial advisory business. The government acknowledged the ongoing concerns regarding the lack of consistency in regulatory oversight practices and pronounced its support for the creation of a national securities regulator. You may recall that just last week the Supreme Court of Canada held that the proposed Capital Markets Regulatory Authority (CMRA) is constitutional (you can read more about this decision and Anita Anand’s take on it here). In addition to supporting the CMRA, the government also announced its support for the creation of a new provincial financial regulator, the Financial Services Regulatory Authority of Ontario (FSRA). You can read the government’s full fall fiscal update here.
Speaking of advisory oversight, TD Waterhouse Canada was fined $140,000 by the Investment Industry Regulatory Organization of Canada (IIROC) for failing to properly oversee an advisor’s trading activity. The former advisor, David Gary Durno, generated commissions of just under $1.2 million from his trading activity for three senior clients, an amount far beyond the commission threshold. In a statement, TD Waterhouse said that the clients would have had significantly lower costs in fee-based accounts, and the returns of their investment portfolios were reduced as a result. TD Waterhouse acknowledged that it failed to properly oversee Durno and said that it has implemented a new electronic trade surveillance system to improve oversight of advisors’ commissions.
In other enforcement news, the Ontario Securities Commission (OSC) charged three alleged business associates with fraud and related offences under the Securities Act this Tuesday, after an investigation was conducted by the Joint Serious Offences Team (JSOT). The three individuals, Carlos Da Silva, Sei-Jin Ki, and Kamal Singh “Bobby” Athwal, allegedly sold $140,000 worth of securities in Toronto Scientific Medtech Inc over the period of May 1, 2016 to June 30, 2017 without the required registration and prospectus. In addition to these charges, Da Silva was also charged with trading in securities while permanently prohibited by an order imposed by the Commission in 2008. Da Silva, Ki, and Athwal will appear in court on December 4, 2018.
Quebec’s securities regulator, the Autorité des marchés financiers (AMF) has been busy this week as well. On Thursday evening, the AMF announced that it will be launching a review of the transactions made under Bombardier’s special share sale plan for senior executives, which was implemented in August. The Automatic Securities Disposition Plan (ASDP) allows specified senior executives to exercise stock options as part of their performance-based compensation. The AMF has required that Bombardier stop any sale of securities under the plan until further notice. On top of the ASDP investigation, the AMF is also performing regular systematic checks on movements in Bombardier’s share price. These investigations add additional challenges for Bombardier during a difficult time. Just last week, the company announced that it would be laying off 5000 employees and selling assets for $900 million.
Let’s finish off this week’s post with a more positive story. Recent research suggests that shareholders are increasingly taking environmental, social, and governance (ESG) factors into account in investment decisions. This trend was evidenced this week when LionGuard Capital Management Inc became a signatory to the United Nations-supported Principles for Responsible Investment (PRI). The PRI is a global network of investment managers and asset owners who have committed to integrating ESG considerations into their investment decisions. LionGuard president and chief investment officer, Andrey Omelchak, cited both monetary and social responsibility reasons for joining the PRI. In a statement, Omelchak referred to empirical research suggesting that ESG considerations have a positive effect on long-term investment operations. Furthermore, he stated that engaging in sustainable investment practices will help bring LionGuard’s activities in line with the broader interests of society. Though there is evidence that consideration of ESG factors is beneficial for firm value and for society, the term “ESG” is also very broad. In a recent article for the Globe and Mail, Anita Anand argued that both boards and asset managers should take a more pragmatic approach and treat each ESG factor as a separate issue.
Those are our top headlines for this week, now go get your weekend started! We’ll see you back next week for another issue of Top Five Friday Finds.