In April 2012, the Alberta Securities Commission (ASC) issued an
investigation and a Summons to a Witness (the "Summons")
pursuant to section 42 of the Securities Act, requiring
Scott Beuadette, the CEO and sole employee of Sunpeak Ventures
Inc., to attend for examination at the ASC and to produce
documents, for potential contraventions of the Securities
Act. Following receipt of the Summons, counsel for Mr.
Beaudette wrote the ASC and took the position that the proposed
examination would violate Mr. Beaudette's Charter rights unless
the ASC could provide written assurances that any evidence
compelled from Mr. Beaudette would be kept confidential and would
not be shared with US law enforcement agencies such as the SEC and
the US Department of Justice. Mr. Beaudette chose not attend the
ASC for the examination and the ASC commenced proceedings in the
Court of Queen's Bench seeking various orders. Mr. Beaudette
brought an application challenging the constitutionality of
sections 42 and 46 of the Securities Act.
The wording of section 42, briefly stated, empowers the ASC to
summon a witness, to compel that witness to give testimony and to
compel that witness to produce documents. Section 46 provides the
power to the ASC to share information with other securities or
financial regulatory authorities, law enforcement agencies or other
governmental or regulatory authorities in Canada and elsewhere.
The Alberta Court of Queen's Bench dismissed Mr.
Beaudette's application and confirmed that effective securities
law enforcement demands that there be inter-jurisdictional
cooperation and reciprocal assistance between the regulatory
agencies including between Canada's regulatory enforcement
agencies and the United States regulatory enforcement agencies (the decision is found here). We had previously
commented on the Court of Queen's Bench decision (found here).
On appeal, Mr. Beaudette again argued that the requirement to
provide information concerning his securities activities in North
America, coupled with the possibility that the ASC might share that
information with the SEC and the US Department of Justice, would
infringe on his right to liberty as guaranteed under section 7 of
the Canadian Charter of Rights and Freedoms.
The Alberta Court of Appeal upheld the constitutionality of the
summons and information sharing powers under the Charter and held
that sections 42 and 46 of the Securities Act did not
violate Mr. Beaudette's Charter rights. The Court of Appeal
held that section 7 of the Charter is engaged "where state
compulsions or prohibitions affect important and fundamental life
choices" and such choices did not include the election to
participate in a highly regulated industry.
While immunity from the use of self-incriminating evidence in
subsequent proceedings is recognized in Canada to prevent such
evidence from being used in the criminal law context, the Court of
Appeal noted that an ASC investigation is not by its very nature,
criminal. The Court of Appeal also noted importance of Canadian
securities regulators and found that even though securities
legislation allows for the investigation of offences committed both
in Canada and elsewhere, the ASC has a legitimate regulatory
purpose. The regulatory purpose and objectives of securities
regulation is to protect investors, to facilitate capital market
efficiency, and to ensure public confidence in the capital markets,
and this could not be achieved without the ASC being able to compel
testimony and share information with other regulatory
The Court of Appeal held that section 42 and the Securities
Act as a whole "strike a balance between the privilege
against self-incrimination and the principle that relevant evidence
should be available in a search for the truth". Even though
evidence could potentially be used in American proceedings,
Canadian courts are not authorized to evaluate or control the
investigative and judicial processes of a foreign authority.
The decision by the Court of Appeal again confirms that in a
highly regulated industry, such as the securities market, the
individual is aware, and accepts justifiable state intrusions. The
purpose of the securities legislation and enforcement agencies are
to regulate the market, something that often requires
inter-jurisdictional sharing of information. This decision
highlights that even the Charter does not prevent the ASC from
sharing information with foreign authorities.
Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).