Canada: Simply Creating A Website For A Business Is Not Unregistered Trading Or "An Act In Furtherance Of A Trade", Court Rules

Last Updated: April 12 2018
Article by Masiel A. Matus

Charges were dismissed by the Ontario Court of Justice in R v. Lowman against two individuals who, in connection with their creation of a website, were alleged to have engaged in unregistered trading, issuing securities without filing a prospectus and making a prohibited representation that securities would be listed on an exchange with the intention of effecting a trade in breach of the Ontario Securities Act.


Mark Lowman and Dave Jarrett made a website for a new company created for a waste to energy project that planned to be listed on the stock exchange in the future. Between 2012 and 2013 the company name and place of incorporation had changed a number of times. The company was eventually called Asia Power Solutions and was incorporated in the British Virgin Islands. Several versions of a website had been created for Asia Power and its predecessors. The content for each version of the website created was generally the same, including the Investors page, which indicated shares were not available to be traded given the company was not listed with a regular stock exchange. The Investors page of the website also stated that the company was seeking a listing of its shares on a stock exchange. Asia Power was eventually listed on the GXG First Quote Market in May 2013 but trading of Asia Power shares was suspended indefinitely in July 2013.

Sales representatives purporting to be from foreign investment brokerages contacted several foreign investors to purchase shares in Asia Global Energy (Asia Power's former company name) in late 2012 and early 2013. The sales representatives defrauded some of the private investors contacted by selling them shares that did not exist in the company. There was evidence that some of the private investors were directed to the Asia Global website but no evidence that any of the investors had contacted the Asia Global email address listed on the website for investors or shareholders. There was no direct evidence of any connection between the purported sales representatives and the individuals behind the website, Lowman and Jarrett. There was also no direct or circumstantial evidence of direct or indirect contact between Lowman and Jarrett and the foreign investors.

Neither Lowman nor Jarrett were registered to trade in securities with the Ontario Securities Commission. No prospectus was filed with the OSC by Asia Global or Asia Power.

Unregistered trading or acts in furtherance of a trade

The OSC took the position that the website for Asia Global was designed and created to "excite the reader" and that that in isolation was an act in furtherance of a trade. The OSC submitted that if a link could be established between the accused and the purported sales representatives and/or if the Asia Global website was created for the purpose of "exciting the reader" and therefore inducing investors to buy shares those were breaches of sections 25(1) and 53(1) of the Securities Act and offences under the Act. The OSC also took the position that the Asia Global website made a prohibited representation in stating its shares would be listed for trading and referencing a time frame for that listing because they were made with the intention to effect a trade of those shares, which is a breach of section 38(3) of the Securities Act and an offence under the Act.

The court disagreed with a majority of the OSC's position and held that at a minimum the Asia Global website must have been created for the purpose of promoting an anticipated sale or disposition of shares.

The requirement for registration under section 25(1) of the Securities Act is triggered by a trade or an act in furtherance of a trade for a business purpose or by a person or company holding itself out as being in a business. In this case, the issue was whether Lowman and Jarrett were engaged in a business arrangement to market the securities of the issuer, Asia Global. The only 'act' that the OSC could point to was the creation of the Asia Global website.

There was nothing on the Asia Global website which indicated that either of the accused were promoting the sale or disposition of shares, which did not even exist, the court held. There was also no evidence that Lowman or Jarrett knew about the purported sales representatives' sale of Asia Global shares to foreign investors. The accused were not engaged in any activities that assisted or aided the illegal activities of those sales representatives. In the court's view there was no sufficiently proximate connection to an anticipated trade to constitute an act in furtherance of a trade. In addition, at the time that website was created neither of the accused held themselves out as engaging in the business of trading in securities.

The website alone was not an act in furtherance of a trade. Given that there was no evidence that either of the accused were involved in actual acts of trading the shares of Asia Global to foreign investors and the fact that the website was not proven to be created for the purpose of "exciting the reader" to buy shares, a breach of section 25(1) of the Securities Act was not proven and that charge was dismissed. Similarly, a breach of section 53(1) of the Securities Act was not made out because there was no evidence that either of the accused engaged in acts of trading in, or distributing, a security.

Regarding the alleged breach of section 38(3) of the Securities Act, there must be a representation made with a factual intention to effect a trade in a security. The court found that the Asia Global website did make a written representation in violation of the Act. However, given that there was no evidence of Lowman or Jarrett engaging in acts of trading or acts in furtherance of a trade the court dismissed that charge against the accused.


Merely creating a website for a company that intends to sell shares on a stock exchange in the future is not enough to constitute an act in furtherance of or a securities trade under the Securities Act. The court's common sense approach to the meaning of a 'trade' under the Act in this case provides some comfort to those remotely or indirectly involved in the securities industry. Not just any conduct will be considered a trade or an act in furtherance of a trade and trigger compliance with the Act. There must be a sufficient proximate connection between the act and the trade or anticipated trade in securities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Masiel A. Matus
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