Ontario Securities Commission (OSC) Fines, Administrative Penalties, Disgorgement Orders, and Bankruptcy

Summary

Long story short: Administrative penalties levied by a securities commission such as the Ontario Securities Commission are dischargeable by a Bankruptcy or Consumer Proposal, while Disgorgement orders are not.

The Details

In 2014 the British Columbia Securities Commission decided that a number of parties had engaged in, or participated in conduct that they knew, or ought to have known would result in or contribute to a misleading appearance of trading activity in a public company.  [2014 BCSECCOM 318].

As a result the securities commission ordered the parties to pay millions of dollars in administrative penalties and disgorgement orders levied under the Securities Act of British Columbia.  Disgorgement orders compel the surrender of profits obtained illegally.

After an unsuccessful appeal the parties made voluntary assignments in bankruptcy on April 20, 2018.  Their discharge from bankruptcy was then opposed by the British Columbia Securities Commission and Canada Revenue Agency.

The British Columbia Securities Commission applied to the Supreme Court of British Columbia for a declaration that the debts represented by the administrative penalties and disgorgement orders not be released by any order of discharge, pursuant to s. 178(1)(a), (d) and (e) of the Bankruptcy and Insolvency Act (Canada).

The Supreme Court of British Columbia ordered that the administrative penalties and disgorgement orders not be released on discharge from bankruptcy.

The parties appealed to the highest court in Canada the Supreme Court of Canada who on July 31, 2024 reversed the lower court’s decision and found that that administrative penalties are dischargeable while disgorgement orders survive bankruptcy pursuant to s. 178(1)(e) as they result from “obtaining property or services by false pretenses or fraudulent misrepresentation.”  Find a link to the case in brief: Poonian v. British Columbia (Securities Commission) here.

Let Us Help

If your facing, or have been ordered responsible for an administrative penalty that you are unable to pay then please contact us for a free consultation with a Licensed Insolvency Trustee.  We’ll take the time to review your unique situation, discuss your options, and answer your questions.

Our office can be reached at (416) 246-7771 and we look forward to hearing from you.