Supreme Court upholds AMF’s jurisdiction

Quebec regulators can assert jurisdiction over alleged securities misconduct with ties to the province, even if residents of British Columbia were allegedly behind the scheme, the Supreme Court of Canada (SCC) ruled.

In a decision handed down Friday, the SCC dismissed an appeal brought by brought four B.C. residents who stand accused of carrying out a pump-and-dump scheme by the Autorité des marchés financiers (AMF).

The allegations have not been proven, as the residents challenged the jurisdiction of the AMF.

That challenge was rejected by the province’s Financial Markets Administrative Tribunal, which found that investors in Quebec allegedly lost money and that the alleged scheme involved a shell company based in Montreal with a director based in Quebec.

The respondents appealed, and the Superior Court of Quebec declined to review that decision. The Court of Appeal for Quebec also rejected an appeal.

The SCC sided with the regulators in a 7-1 decision, with Justice Suzanne Côté dissenting. The majority ruled the tribunal had jurisdiction over the respondents based on the alleged scheme’s ties to Quebec.

“The [tribunal] has jurisdiction to make determinations under the Securities Act, including when there is a ‘real and substantial’ connection, also described as a ‘sufficient connection’, between Quebec and out‑of‑province defendants,” said the majority opinion, written by Chief Justice Richard Wagner and Justice Mahmud Jamal.

“The defendants allegedly used Quebec as the face of their alleged pump‑and‑dump scheme. They participated in marketing or financing efforts and partly targeted Quebec residents,” the opinion said. “It would defeat the purpose of the cross‑border nature of modern securities regulation to allow the defendants to escape the reach of Quebec’s regulatory oversight.”

The opinion also noted that the defendants chose to operate in Quebec, calling the province’s market an integral part of their operation.

“Because contemporary securities manipulation and fraud are often transnational and extend across provincial and national borders, courts and tribunals must take a flexible and purposive approach when applying the principles of order and fairness in the securities context,” the majority concluded.

In her dissent, Justice Côté said the limits of the tribunal’s jurisdiction should be analyzed in light of the rules of private international law. “The application of those provisions in this case leads to the conclusion that the [tribunal] does not have adjudicative jurisdiction over the defendants and therefore cannot hear the matter,” she wrote in her opinion.