Legal experts say Thursday’s acquittal of three former executives of cannabis producer CannTrust should prompt the Ontario Securities Commission (OSC) to conduct “deep soul-searching.”
The acquittal of former chief executive Peter Aceto, chairman Eric Paul and vice chairman Mark Litwin came a day after the regulator revealed it no longer had a reasonable prospect of convicting the three men on charges of charges related to the alleged unlicensed cultivation of cannabis at a facility in the Niagara region.
The three men, who pleaded not guilty in October, were charged with fraud and authorizing the commission of an offence. MM. Litwin and Paul were also charged with insider trading, and Messrs. Litwin and Aceto of fabricating a false prospectus and a false preliminary prospectus.
Doug Sarro, a lawyer and adjunct professor at the University of Toronto, recalled that the high-profile case involving the former executives of CannTrust Holdings was meant to change the OSC’s perception that it was “weak” when it came to to the application of the regulations. “The OSC had, for some time, a reputation for being weak in enforcement. [des règlements]and this result will not help,” he said.
The regulator, which did not respond to a request for comment, also lost an insider trading case in 2007 against Bre-X Minerals chief geologist John Felderhof. In 2010, he settled a civil suit filed in 1986 on behalf of the shareholders of the real estate company Mascan, after 24 years of litigation.
Sarro believes the acquittal of former CannTrust executives has bolstered the OSC’s reputation for court defeats and should prompt it to take a closer look at how it handles cases. “This was a high-profile lawsuit, which was supposed to really change that perception, and it’s clear that with this outcome, the OSC is going to have to do some soul-searching,” he said.
The OSC declined to comment on Friday, but referred The Canadian Press to a Thursday statement in which it said it was “considering the implications of the decision. [du tribunal] and evaluate its options”. Rather than acquit the defendants, the OSC had asked the court to withdraw the case, which would have allowed it to pursue the charges against the men again. Judge Victor Giourgas denied the takedown request, telling OSC lawyers, “The law seems to be against you. »
The acquittal leaves the OSC with few options to move forward with the case, but Sarro pointed out that the regulator could initiate administrative proceedings in the Capital Markets Tribunal of Ontario. A prison sentence would then not be possible, but the defendants could be prohibited from being directors of public companies.
As Mr. Sarro, law professor Jennifer Quaid of the University of Ottawa, believes that the next step for the OSC will most likely be a “deep soul-searching session” aimed at determining the causes of its low success rate, in particular compared to that of the Securities and Exchange Commission (SEC), the policeman of the markets in the United States, which has more resources.
The outcome of the case involving former CannTrust executives is “not very flattering to the OSC,” she said. “It won’t help his reputation, that’s for sure, and I’m pretty sure the public interpretation of what happened won’t be favorable to him. »