Counsel representing former CEO question 'fictitious distinction' between OSC and its staff
The arguments being advanced by the staff of the Ontario Securities Commission (OSC) to justify the public disclosure of compelled testimony from ex-Bridging Finance CEO David Sharpe don’t hold water, according to lawyers representing him.
In a filing dated December 10, lawyers from Crawley Mackewn Brush LLP questioned the OSC staff’s position that the “Commission” and the “Staff” are distinct entities, only the “Commission” can bring a court application, and it’s not subject to the confidentiality provisions in Part VI of the Securities Act.
Staff argued that in filing the court application to put Bridging Finance under receivership in April, they were acting as agents of the commission and therefore enjoyed the same immunity from confidentiality restrictions.
But lawyers for Sharpe called it a “fictitious distinction.” Standard language used in section 11 orders, they noted, states that compelled evidence is for the “exclusive use of Commission Staff,” highlighting that there’s no separation between the commission and commission staff when exercising the powers under section 11 of the act.
“Within the structure of the Ontario Securities Commission, only the decision-making function of the adjudicative tribunal is recognized as being independent from the investigative and regulatory functions of the Commission,” they said. “There can be no debate that Staff are subject to sections 16 and 17 of the Act.”
Sharpe’s legal team also rebutted two other lines of argument that OSC staff put forward. In the first, OSC staff asserted that those compelled to provide evidence should not expect that the evidence they submit will be kept confidential or private.
The team acknowledged that respondents to OSC section 11 investigations should understand that some of the compelled evidence they reveal may become part of the public record in proceedings before the commission. However, they maintained that respondents in those proceedings should also expect that they “will be afforded procedural and natural justice rights, including notice and the opportunity to object and/or seek confidentiality orders.
“None of the decisions cited by Staff deal with the disclosure of compelled evidence in the circumstances of this case, during an ongoing investigation and prior to the commencement of an enforcement proceeding,” the filing said.
OSC Staff also asserted that if they are required to seek approval from the commission’s adjudicative tribunal before filing compelled evidence with the court, the efforts of the enforcement branch would grind to a halt.
Lawyers for Sharpe, however, said that argument “should be disregarded as unsubstantiated conjecture.” A regulator that operates prudently, they suggested further, should want to exercise a supervisory role over the dissemination of compelled evidence.
“It was not prudent to post compelled testimony on the website of the receiver (including the entire rough draft of Mr. Sharpe’s April 29 Transcript), making it available to anyone in the world with access to the internet,” they said.
As a remedy to the confidentiality breach, Sharpe’s team is seeking a revocation of the section 11 order that led to his testimony. OSC staff see as a “punitive measure,” according to the filing, which the lawyers representing Sharpe said was a “misplaced” assertion.
“Mr. Sharpe’s expectation of privacy and his confidentiality and Charter rights have been disregarded as a consequence of the public disclosure of evidence obtained pursuant to the powers of compulsion conferred by the Section 11 Order,” they said. “The relief requested is prophylactic and is required to restore compliance with the Act.”
