The Ontario Securities Commission, like several other regulatory investigators, has extensive power to compel testimony and require the disclosure of documents and information. A recent decision of the OSC, B (Re) (2020 ONSEC 21), has highlighted a gap in the Commission’s power to compel testimony from a witness where such testimony may constitute a breach of the witness’s contractual obligations to a third party.
Staff of the Commission is conducting an investigation pursuant to an investigation order issued by the OSC under section 11 of the Securities Act. Investigation orders empower Staff to issue a summons pursuant to section 13 of the Act, to compel an individual to provide oral testimony under oath and to provide documentary evidence. Section 16 of the Act prohibits the recipient of a summons from disclosing information relating to the summons or the investigation, subject to narrow exceptions.
Staff served upon an individual, identified only as “B”, a summons under section 13 of the Act. Although B was prepared to cooperate with Staff, B was concerned that doing so would violate B’s employment contract, which imposes confidentiality over all matters relating to B’s employment without an exception that is relevant to a regulatory investigation.
As a result, B sought (i) direction from the Commission that testifying in response to the summons would not breach the employment contract, and, in the event the Commission is not prepared to give such direction, (ii) an order under section 17 of the Act permitting B to disclose the existence of the investigation and the fact that B received a summons to the Ontario Superior Court of Justice, so that B can seek assurance from the Court that B’s testimony will not constitute a breach of B’s employment contract. Staff opposed B’s application on several grounds, including section 154 of the Act, which provides protection to anyone who would breach any contractual provision by virtue of disclosing information to the OSC in good faith and in compliance with Ontario securities law.
The Commission concluded that it did not have the authority to give B direction regarding B’s employment contract. The Commission determined that there was no statutory power given to the Commission under which B could request such an order. Conversely, the Superior Court of Justice is vested with this power through the Courts of Justice Act. The Commission noted that it would have power to give an assurance regarding a “proceeding”, however an investigation by Staff under section 11 is not a proceeding.
Staff took the position that answers given in response to a summons issued under section 13 of the Act are in substance compliance with section 13 of the Act, and are therefore given “in compliance with Ontario securities law” for the purposes of engaging the protections in section 154. “Ontario securities law” is defined in section 1(1) of the Act as the Act itself and, in respect of a person, a “decision” to which the person is subject.
In a surprising twist, the Commission noted that the Act does not directly require that a person subject to a summons answer questions in response to it. Rather, a summonsed person’s obligation to answer questions arises as a result of a power exercised under the Act, including most notably the summonsed person’s liability to be committed for contempt by the Superior Court of Justice in the event questions are refused.
The Commission also found that a section 13 summons is not a “decision” to which a person is subject. The Act defines a “decision” as “in respect of a decision of the Commission or a Director, a direction, decision, order, ruling or other requirement made under a power or right conferred by this Act…”. The Commission noted that the ordinary meaning of the word “decision” connotes the weighing of factors, resulting in a choice among options, and that a summons does not naturally fit that definition. The Commission concluded that “[t]he linguistic contortion necessary to conclude that a summons is a decision would… require a clear expression of legislative intent.”
In light of the foregoing, the Commission granted B’s request for a confidential order permitting B to disclose the necessary information to the Ontario Superior Court of Justice in order to resolve the interplay between the summons and B’s employment contract.
What this decision has made clear is that a person providing testimony and documents pursuant to a section 13 summons, and on pain of liability for contempt, will not be regarded by the Commission as having done so “in compliance with Ontario securities law”. Therefore, the protections provided under section 154 to anyone who would breach any contractual provision by virtue of disclosing information to the OSC, appear not to be available.