Undertakings do not Preclude Further Investigations

Entering into an undertaking with a regulator does not constitute a binding conclusion to all future concerns. That is the message from Binance Holdings Limited v The Ontario Securities Commission, 2023 ONSC 3825 (CanLII).

A major online crypto asset trading platform operated in Canada, including Ontario, without registering with the regulator. The company agreed to cease trading in Ontario and wind down its Ontario operations. It also agreed to provide regular reports from a third-party monitor. The regulator agreed to not  initiate proceedings in respect of the specific matters in issue so long as the company fulfilled its obligations.

However, the regulator became concerned that the company was not complying with the undertaking. It also became aware of other concerns about the company. The regulator initiated an investigation and issued a summons for information about the company’s communications about operating in Canada, in particular Ontario. The company sought an interim order staying the investigation and summons until it could challenge the investigation on judicial review.

In refusing to halt the investigation or hold up the summons, the Court noted that the company’s proposed arguments challenging the investigation and summons were weak and lacked merit. The Acknowledgement and Undertaking did not “settle” the matters between the company and the regulator. There was no abuse of process in the regulator pursuing the non-compliance with the Undertaking or looking into the new concerns. The summons, when read as a whole, was not overbroadly worded. The foundation for an argument of unreasonable search and seizure offending s. 8 of the Canadian Charter of Rights and Freedoms was not established. In any event, the privacy interests in the context were minimal.

The Court also found that the company being required to produce the required documents did not constitute irreparable harm even if the company were later to succeed in quashing the summons. The summons was relatively unintrusive, in terms of individual privacy rights, and the company could then argue that any improperly obtained information should not be used against it in any subsequent prosecution.

The Court also held that the balance of convenience favoured the regulator:

A bare claim that responding to a summons implicates constitutional rights to privacy and requires investigative activity to come to a halt pending further proceedings challenging the decision to investigate and collect documents via summons would frustrate the enforcement of securities laws in the public interest. It would also defeat the legislative principle directing the Commission to enforce and administer the Act in a timely, efficient manner.

The motion for a stay was refused and the regulator was permitted to proceed with its investigation, including seeking compliance with the summons.

More Posts

One Appeal or Two?

Many discipline panels conduct their hearings in two parts. The first deals with the merits of the allegations (also known as the “finding” stage). If

Integrity Testing

A constable “was assigned to maintain the perimeter security at a crime scene. He entered the crime scene, leaving its perimeter insecure, and took $300

Void for Vagueness

Law has many pithy expressions that refer to complex legal concepts. For example, the phrase “intrusion upon seclusion” refers to the tort of invading someone’s