Morabito v. British Columbia (Securities Commission)
Page 20
appellants had made their allegations of misconduct and delay “around four main
propositions”, which the panel summarized as follows:
a) The investigation has gone on for too long, some 33 months as of the date
of the application. They add that the investigation has had significant
impacts on the Applicants, especially in light of the ongoing freeze order
and undertaking. The Applicants also note that the mere fact of having the
investigation hanging over their heads is a burden and it is problematic
that some of their confidential advisors have necessarily become aware
that they are under investigation for securities related conduct.
b) The investigation was prompted by a single trade between the Applicants
in February 2018, but the investigation has intruded into many aspects of
the Applicants’ lives wholly-unrelated to the trade in question. The
investigators exceeded the scope of the Order, or at minimum interpreted
it in an overly broad manner, when they made very significant requests for
documents and other information from the Applicants and from other
parties. The Applicants submit that these requests are excessive,
particularly in light of the significant efforts expended in complying with
them.
c) The investigation began with a visit to the residence of the Applicants at a
time of day when it would be reasonable to assume that only
Ms. Executive would be at home. They submit that there can be no proper
motive for such a visit, and that it in fact caused significant distress.
d) The investment advisor who arranged for the execution of a key sell order
by the family trust has evidence which might exonerate the Applicants and,
so far, the investigators have elected not to interview that individual.
The Applicants submit that the evidence is sufficient for us to draw an
inference that the investigators were motivated by an improper purpose. The
Applicants put the point this way in their application:
More than two years on, Staff move the investigation forward, if at all, at
less than a glacial pace. The only reasonable inference to be drawn is that
this investigation, like perhaps others, is being prolonged for improper and
collateral purposes, namely to induce the Applicants to seek to make a
voluntary resolution. The record supports the conclusion that Staff have
artificially prolonged and weaponized the investigation process. This ought
to be a matter of significant concern to the Commission, including in its
supervisory function. [At paras. 27–8; emphasis added.]
[51] With respect to the conduct of the investigation, the panel noted that the
Supreme Court in Branch had made it clear that the degree of fairness afforded to
an individual is lower during the investigation phase of an enforcement proceeding
than during the hearing phase. There is always a reasonable expectation that
market participants who choose to participate in a highly-regulated industry might be
“questioned by a regulator”, and securities investigations by their very nature are