Ontario Securities Commission Clarifies Test for Severance Motions

Peter Neufeld, B. Soc. Sc., J.D.Administrative Law, Business Litigation, Civil Litigation, Commercial Litigation, Securities Litigation, Tribunals0 Comments

In Hutchinson (Re), 2018 ONSEC 40 (“Hutchinson”), the Ontario Securities Commission (“OSC”) considered the proper framework to assess a motion for severance in the context of a regulatory proceeding before the OSC.

OSC Staff alleged that the respondent, David Paul George Sidders (“Sidders”), engaged in insider trading with respect to three transactions. The OSC also alleged that three other individual respondents, one of which settled, engaged in insider trading and/or insider tipping. Respondent Sidders moved before an OSC Commissioner (“Commissioner”) to request that it sever his hearing from the hearings of the other remaining respondents.

The question before the Commissioner was how to assess, in the context of an OSC proceeding, whether the interests of justice require severance. The Supreme Court of Canada in R v. Last, 2009 SCC 45 (“Last”) listed several factors to consider when balancing the risk of prejudice to the accused with the public interest in a single trial:

  1. the legal and factual nexus between the counts;
  2. the general prejudice to the accused;
  3. the complexity of the evidence;
  4. whether the accused intends to testify on one count but not another;
  5. the possibility of inconsistent verdicts;
  6. the desire to avoid a multiplicity of proceedings;
  7. the use of similar fact evidence at trial;
  8. the length of the trial having regard to the evidence to be called;
  9. the potential prejudice to the accused with respect to the right to be tried within a reasonable time; and
  10. the existence of antagonistic defences as between co-accused persons.

Although a previous OSC Panel in Conrad M. Black et al., 2014 ONSEC 33 applied the Last factors for a severance motion, the Alberta Securities Commission (“ASC”) had applied a different test:

  • Assess whether there is a common question of fact or law, or a common transaction or series of transactions linking the groups of parties; and
  • If there is, and considering the balance of convenience, assess whether severance or continuance as a single proceeding would give rise to material prejudice.

The Commissioner followed the Supreme Court’s test for severance articulated in Last, noting that doing so would provide the OSC with the flexibility to consider each factor on a case-by-case basis without being subjected to a limiting threshold test. The Commissioner acknowledged that the relevant considerations in Last strongly favoured denying severance and dismissed the respondent’s motion.

However, the Commissioner questioned the applicability and weight of some of the Last factors in the context of regulatory proceedings. For example, the Commissioner questioned the applicability or weight afforded to factors (4) (“whether the accused intends to testify on one count but not another”) and (9) (“the potential prejudice to the accused with respect to the right to be tried within a reasonable time”), since those factors related to constitutional protections afforded to accused persons in criminal proceedings that were not applicable in regulatory proceedings. As well, the Commissioner refused to consider the extent that an OSC Panel should consider the existence of antagonistic defences as between co-respondents.

The Hutchinson decision provides valuable insight for individuals subject to an OSC proceeding that may seek to sever their hearing from other joined respondents. While it is likely that the OSC will continue to apply the Supreme Court’s test in Last, an OSC Panel may apply less weight to certain enumerated factors that are more relevant to criminal proceedings.

Some of the lawyers at Gilbertson Davis LLP have experience with securities litigation and representation before tribunals. Please contact us for an initial consultation.

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About the Author
Peter Neufeld, B. Soc. Sc., J.D.

Peter Neufeld, B. Soc. Sc., J.D.

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