Court rejects fine for trading ban breach

An Ontario court declined to order a fine against a couple who violated a prohibition on trading imposed by the Ontario Securities Commission (OSC).

The Ontario Court of Justice rejected the OSC’s call for a $15,000 fine against Chandramattie Dave and Ravindra Dave after they pleaded guilty to trading while prohibited.

In 2015, the pair reached a settlement with the OSC that saw Chandramattie Dave, a former mutual fund rep, banned for life, and Ravindra Dave, who was never registered with the OSC, banned for 20 years after they admitted to violating securities law.

The pair subsequently breached those prohibitions when they sold memberships in a cooperative travel scheme that amounted to securities. They also participated in seminars to sell those memberships and helped investors complete documents.

The pair later admitted that their activities amounted to acts in furtherance of a trade, which violated the OSC ban.

In terms of sanctions, the OSC and the defendants agreed that two years of probation was appropriate, but the regulator also sought a $15,000 fine.

However, the court declined to order the fine, ruling that “both defendants are impecunious and in poor health, with no reasonable prospect of having any significant funds in the future to pay a fine that might be imposed.”

Apart from their health and financial circumstances, the court also noted that the couple relied on a legal opinion, which indicated that the scheme didn’t involve trading in securities, and that they’d made it clear to the founder of the scheme that they didn’t want to violate their settlement with the OSC.

The court found this to be a significant mitigating factor, noting that while relying on an incorrect legal opinion doesn’t represent a valid defence, “it provides strong support for a finding of diminished moral blameworthiness.”

“Both defendants had no intention of breaching the OSC order, although they did do so, from a legal and factual perspective,” the court said.

While the court acknowledged that “deterrence is paramount for regulatory offences,” it ultimately ruled that, given the facts of the case, two years probation and a suspended sentence “is a fair, just and appropriate sentence.”

In the absence of a fine, the court also ruled that the $2,250 that they were paid for their participation in the scheme is forfeited to the OSC as a term of their probation.

“The public interest in this case can be protected through the imposition of a suspended sentence and probation, including the forfeiture of the $2,250. The terms of the probation will hold the defendants liable for their misconduct, but it will also promote their rehabilitation,” the court said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.