The Capital Markets Tribunal Extends Riot Platforms Public Interest Test Beyond Shareholder Rights Plans

In Oasis World Trading Inc (Re), 2026 ONCMT 29 (Oasis),¹ Staff of the Ontario Securities Commission (Staff) alleged (among other things, including unregistered trading, spoofing, wash trading and providing unauthorized direct electronic access (DEA)) that Oasis World Trading Inc. (Oasis) failed to comply with section 32(2) of the (Ontario) Securities Act (the Act). Subsection 32(2) of the Act requires that every registrant that is a registered dealer, registered advisor or registered investment fund manager establish and maintain systems of control and supervision in accordance with the regulations for controlling its activities and supervising its representatives.

The Capital Markets Tribunal (the Tribunal) held that Oasis was not a registrant and was not required to register and therefore did not breach section 32(2) of the Act. However, despite holding that there had been no breach of section 32(2) of the Act, the Tribunal considered and accepted Staff’s alternative argument that Oasis engaged in conduct contrary to the public interest by failing to establish and maintain adequate systems of control and supervision.

It is well established that the Tribunal can make an order in the public interest under section 127(1) of the Act. It recently articulated a test in the context of a shareholders rights plan (SRP) for when a public interest order would be appropriate in Riot Platforms, Inc v Bitfarms Ltd, 2024 ONCMT 27 (Riot Platforms),² but left the door open as to whether that test could be applied beyond the SRP context. In the present case, the Tribunal applied the Riot test, confirming that it can indeed be applied more broadly to determine whether a public interest order is warranted.

Background

Oasis is a self-described proprietary day trading firm that uses DEA to trade on Canadian and Australian markets. Oasis’ head office does not generally engage in any trading; its operations consist of over 600 traders located in China, organized into approximately 52 independent trading offices, each led by a Trading General Manager (TGM). The TGM serves as the sole intermediary between the traders and Oasis’ head office. Oasis was never registered under the Act. Its founder, director and CEO, Zhen (Steven) Pang, served as its Ultimate Designated Person. Rikesh Modi served as director, Chief Compliance Officer and Chief Operating Officer.

In 2015, Oasis and Pang entered into a settlement agreement with Staff. As part of the settlement agreement, Oasis admitted to failing to adequately monitor its traders’ trading activities and failing to ensure that there was an adequate compliance structure to identify and prevent possible manipulative trading. Oasis was also required to hire a compliance monitor, who was approved by Staff.

The allegations

Staff alleged that following the settlement, from 2018 to 2020, Oasis: (a) engaged in unregistered trading without an available exemption; (b) manipulated markets via spoofing on Canadian and Australian markets and wash trading on Canadian markets; (c) failed to maintain adequate systems of control and supervision; (d) improperly provided DEA to unauthorized persons; and (e) Mr. Pang and Mr. Modi, as officers and directors, authorized, permitted or acquiesced in that non-compliance.

Staff alleged in the alternative to the alleged breach of section 32(2) that Oasis, Pang and Modi’s failure to maintain adequate systems of control and supervision nonetheless constituted conduct contrary to the public interest warranting an order under the Tribunal’s section 127(1) jurisdiction.³

The Tribunal’s findings

The Tribunal’s findings were mixed. It found that (a) the Respondents engaged in market manipulation in the form of spoofing, (b) Oasis engaged in conduct contrary to the public interest by failing to establish and maintain adequate systems of control and supervision, (c) Oasis provided DEA to unauthorized persons, and (d) Mr. Pang and Mr. Modi authorized, permitted or acquiesced in Oasis’s provision of DEA to unauthorized persons.

However, the Tribunal held that Staff did not establish (a) that Oasis engaged in unregistered trading without an applicable exemption, as Oasis was not a registrant nor required to be registered and an exemption was available to it, (b) the respondents engaged in market manipulation in the form of wash trading, and (c) Mr. Pang and Mr. Modi engaged in conduct contrary to the public interest.

The Riot Platforms, Inc. test

Section 127(1) of the Act empowers the Tribunal to make protective orders in the public interest without requiring a finding that Ontario securities law has been breached. The meaning of “the public interest” is informed by the animating principles that underpin Ontario’s securities regulatory regime, which are derived from the purpose of the Act:

• Section 1.1: the protection of investors from unfair, improper or fraudulent practices, and the fostering of fair, efficient and competitive capital markets and confidence in those markets; and,

• Section 2.1: restrictions on fraudulent and unfair market practices and procedures and the maintenance of high standards of fitness and business conduct to ensure honest and responsible conduct by market participants.

In Riot Platforms, the Tribunal acknowledged that the public interest test had not always been described consistently by past decisions and set out to synthesize and refine the previous decisions and re-articulate the test for when it should make use of its public interest power.

Riot Platforms involved a dispute regarding a SRP which was adopted in response to Riot Platform Inc.’s (Riot Platforms) accumulation of shares in Bitfarms Ltd. (Bitfarms). The SRP was a poison pill, enabling all but the triggering shareholder to purchase additional Bitfarms shares at half the price. After Bitfarms adopted the plan, Riot Platforms applied to the Tribunal for a cease trade order in respect of the SRP under section 127 of the Act as being contrary to the public interest, despite no allegation that its adoption breached any provision of Ontario securities law. In that context, the Tribunal held that a public interest order may be made absent a contravention only where:

• the plan undermined, in a real and substantial way, one or more clearly discernible animating principles underlying applicable provisions of Ontario securities law; and

• the plan’s existence caused an effect that has a public dimension, such that it is in the public interest for the Tribunal to intervene.⁴

The Tribunal in Riot Platforms left open whether, and to what extent, the test should apply beyond the SRP context. Where Riot concerned a discrete corporate defensive measure challenged by a private applicant, Oasis concerned an enforcement proceeding regarding registrant obligations.

Application of Riot

Staff submitted that the test from Riot should be applied against Oasis as Oasis’ “conduct”, could be substituted for the “plan” analyzed in Riot, such that the facts of this case warranted a finding that Oasis acted contrary to the public interest. The Tribunal agreed with Staff that applying Riot Platforms was appropriate in this case. Neither party made detailed submissions on whether Riot Platforms should apply in this new circumstance but neither objected to its application.

From there, the Tribunal went on to conclude that Oasis failed to maintain an adequate system of supervision and that it lacked a culture of compliance. The Tribunal held that as a market participant, Oasis owed a duty to the public and to the markets grounded in the Act's animating principles. Oasis’s failures to maintain and establish adequate systems of control and supervision undermined, in a real and substantial way, the animating principles of the Act. Oasis’s systems should have operated to restrict improper trading practices and ensure honest and responsible conduct from its more than 600 traders.

The Tribunal further found that Oasis’ conduct had a public dimension warranting intervention, placing weight on Oasis’ status as an active and significant market participant. With more than 600 traders, the firm was responsible, at times, for close to one percent of all trading volume on certain Canadian marketplaces. Its inadequate systems of control and supervision exposed other investors and the markets as a whole to an increased risk of improper trading practices and irresponsible conduct by its large network of traders.

Accordingly, the Tribunal found that Oasis engaged in conduct contrary to the public interest.

The Tribunal’s decision to apply the Riot test in an enforcement proceeding should be noted by market participants seeking greater understanding of how future Tribunal panels may consider exercising their discretion to impose orders in the public interest. Market participants, especially those with novel or disaggregated operating structures, should proactively strengthen their own systems of control, supervision and compliance culture. The Tribunal has shown it will look past technical compliance with securities laws to ask whether conduct, taken as a whole, undermines the principles animating securities regulation and produces effects with a public dimension. As such, firms that treat the absence of a breach as a shield, while neglecting the Act’s broader purpose, may do so at their peril.

Footnotes

1 Oasis World Trading Inc (Re), 2026 ONCMT 29 [Oasis].

2 Riot Platforms, Inc v Bitfarms Ltd, 2024 ONCMT 27 [Riot Platforms].

3 Oasis, at para 174.

4 Riot Platforms, at para 68.