CANADA Trends and Developments Contributed by: Linda Fuerst and Melissa MacKewn, Crawley MacKewn Brush LLP
the economic interests of the victim” ( Ontario Securi- ties Commission v Katmarian , 2025 ONSC 4356). Procedural protections for Criminal Code and quasi-criminal offences Charges of fraud laid under the Criminal Code and under Section 122 of the Act for breach of Section 126.1 are tried by a court. At trial, strict rules of evi - dence apply, the accused enjoys the presumption of innocence, and guilt must be established by proof beyond a reasonable doubt. As part of the Canadian Constitution, the Canadian Charter of Rights and Free - doms affords persons who are charged with either the Criminal Code offence of fraud or the offence under securities legislation certain procedural rights and protections. These protections include, for example, the right of suspects to remain silent during pretrial questioning by the authorities. At trial, the accused person cannot be compelled to testify against them - selves. Regulatory Proceedings Before Securities Enforcement Tribunals Framework for regulatory proceedings This contrasts sharply with the third way in which securities fraud can be investigated, tried and sanc - tioned in Canada. Either as an alternative to or in com - bination with the laying of a charge of securities fraud under provincial securities legislation or the Criminal Code, securities regulators may bring regulatory pro - ceedings against a person or company alleging fraud relating to securities or derivatives (in Ontario, breach of Section 126.1 of the Act). In Ontario, for example, the Ontario Securities Commission can commence a regulatory proceeding under Section 127 of the Act that can result in the imposition of sanctions “in the public interest”, including for, but not necessar - ily requiring, breach of the Act (Section 127 (1)). The sanctions that can be imposed where a breach of the Act is proven include: • an administrative fine of up to CAD1 million per breach: • a temporary or permanent ban on a person acting as an officer or director of any company; • a temporary or permanent prohibition on trading in securities; and
• an order for disgorgement of all monies obtained as a result of the wrongdoing (Section 127 (1)). Lowered standards of proof, evidence and procedural safeguards In Ontario, a proceeding under Section 127 is tried by the Capital Markets Tribunal (CMT), a quasi-judicial tri - bunal which is separate from but funded by the Ontar - io Securities Commission. In Section 127 proceedings alleging breach of Section 126.1 of the Act, “fraud” has been interpreted as having the same meaning as in the Criminal Code ( Hogg (Re) , 2024 ONCMT 15). At the hearing of a proceeding commenced pursuant to Section 127, hearsay evidence which is considered by the CMT to be reliable may be admitted into evidence ( Cartu (Re) , 2022 ONSEC 4) and allegations of breach of Section 126.1 need only be proven on a balance of probabilities, which is the standard of proof that applies in civil litigation ( Solar Income Fund Inc (Re) , 2022 ONSEC 2; 3iQ Corp (Re) , 2019 ONSEC 37). This makes it significantly easier for the Ontario Securities Commission to establish liability in comparison to the laying of a charge alleging fraud under the Criminal Code or a prosecution under Section 122. Significantly, as a regulatory proceeding before the CMT alleging securities fraud cannot result in any deprivation of the respondent’s liberty, protections available to persons suspected of or charged with a criminal or quasi-criminal offence carrying penal consequences do not apply. Consequently, a person suspected by the Ontario Securities Commission of having engaged in securities fraud can be subjected to a compulsory examination under oath during an investigation into potential wrongdoing and required to answer questions even if that may result in the per - son incriminating themselves (the Act, Section 13). Should a person summoned to attend before the Ontario Securities Commission to testify under oath or produce documents refuse to do so, they are liable to be committed for contempt by a court (the Act, Section 13 (1)). The only substantive limitations on the subsequent use of compelled evidence obtained by the Ontario Securities Commission during an inves - tigation are: • a statutory prohibition on the admission of such compelled testimony against the person who
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