United States: Ontario Superior Court Decision Confirms That "Public Correction" Requirement Is A Temporal Marker

Under the Ontario Securities Act ("OSA"), a statutory right of action exists for secondary market misrepresentation for any person who acquires or disposes of an issuer's securities within the relevant time period. An action for secondary market misrepresentation requires leave of the court under s. 138.8. Such leave may only be granted where a plaintiff has met his burden of showing, to a reasonable possibility of success, both an alleged misrepresentation and a public correction of that misrepresentation. While the case law on the former prong is relatively clear, the latter has been largely undefined. The recent decision of Superior Court Justice Edward P. Belobaba in Swisscanto v. Blackberry sheds some light on what, exactly, a plaintiff must show to meet its burden of establishing the existence of a public correction.

In Swisscanto, the Plaintiff, a European investment fund that bought 1,700 BlackBerry shares during the proposed class period, sought leave to bring a class action suit for secondary market misrepresentation. The claim stemmed from the release of the BlackBerry 10 smartphone ("BB 10"), a product that BlackBerry hoped would revitalize its business. On launch, BlackBerry's revenue recognition policy was of the "sell-in" variety, where BlackBerry booked the sale when the product was sold to its distributors, rather than waiting until the distributors actually sold the product (which would constitute "sell-through" accounting). This practice is permitted under GAAP only if the seller can make "reasonable estimates of the actual amount of adjustments that might be needed to help move the product from distributors to end-users."

Between January 30, 2013 and June 1, 2013, sales of the BB 10 to end-users were extremely disappointing. Only about a quarter of the BB 10 phones shipped to distributors were actually purchased by end users, leading to several concessions by BlackBerry that failed to increase sales. To that end, on September 20, 2013, BlackBerry announced its results for 2Q14. The Release noted that BlackBerry would write off by way of inventory charge almost $1 billion in unsold BB 10 smartphones, eliminate 40 percent of its global work force, limiting its focus to corporate and professional customers, and pursuing a buyer. At the bottom of the first page, BlackBerry also noted that, going forward, it would change its revenue recognition practice from sell-in to sell-through. When the price of BlackBerry's shares dropped by 15 percent, the instant suit was filed.

At issue was whether there was an alleged misrepresentation and, if so, whether there was a public correction. The court concluded that the plaintiff presented at least enough evidence to show a reasonable possibility of a misrepresentation. More interesting was the court's discussion of whether a public correction occurred. The plaintiff argued that BlackBerry's announcement of a change to sell-through recognition constituted a public disclosure. The defendant argued that it was merely a footnote, and one unconnected to the failure of the BB 10.

Justice Belobaba laid out very specific criteria to use in determining whether the public correction requirement of s. 138.3 of the OSA had been satisfied. He proposed that courts consider the following:

1. Whether the public correction was pleaded with sufficient precision to provide fair notice to the defendant, using specific words or figures that allegedly constitute the public correction of the alleged misrepresentation, along with its timing.

2. Whether there is some linkage or connection between the pleaded public correction and the alleged misrepresentation. The correction need not be a "mirror-image" of the misrepresentation, or a direct admission of a previous falsity, but it must at least share the same subject matter of, and relate back to, the misrepresentation.

3. Whether the public correction is reasonably capable of revealing to the market the existence of the misrepresentation. The correction need not be understood by the ordinary investor. It is sufficient that market participants with specialized knowledge and expertise can understand that the language of the release equates to a public correction of a misrepresentation.

4. The form taken by the public correction. Justice Belobaba took care to note that the correction may take "any number of forms" and need not come from the defendant corporation. The source of the correction can be third parties like media reports or internet postings.

Taking these factors into consideration, the court concluded that the public correction requirement was satisfied by the language in the September 20, 2013, statement. It essentially concluded that the statement could be fairly understood to inform sophisticated market participants that BlackBerry was correcting the sell-in method of revenue recognition that had been used during the class period.

This decision is relevant to investors because it lays out a very clear set of guidelines to be considered in determining whether the public correction requirement has bene met. It also clarifies that the public correction requirement is really a temporal marker for assessing damages. It essentially bookends the class period, which runs from the date of the misrepresentation to the date of the public correction of that misrepresentation. It is not a substantive hurdle to be cleared; it is simply the end date of the class period, and its importance thus pales in comparison to the requirement of showing an alleged misrepresentation.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
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).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.