The Court of Appeal recently affirmed the BC Securities Commission’s decision to impose significant fines on a purported financial advisor selling exempt market products in Michaels v. British Columbia Securities Commission, 2016 BCCA 144. Michaels touted himself as a “Certified Senior Advisor”. However, he was not authorized to give advice about purchasing securities. Nonetheless, he made $5.8 million in commissions and marketing fees through advising almost 500 elderly clients. The Commission ordered that Michaels cease trading in securities and disgorge the $5.8 million. It also imposed a $17.5 million administration penalty, finding his misconduct severe and predatory. Michaels appealed the misrepresentation and fraud findings and argued that the Commission imposed an unreasonable penalty. He further explained that the Commission unlawfully convened two different panels to determine his liability and his penalty.

The Court of Appeal found that Michaels failed to address risks with his clients and exaggerated benefits. Disclaimers buried in the material he gave the clients did not change this fact. The Court of Appeal also found that Michaels based his entire business model on deceiving clients. He knew he was not acting in clients’ best interests. Each of the two Commission panels heard the matter they were deciding, and s. 6(2) of the Act empowers the Chair to refer the matter of penalty to the sanctions panel. The sanctions panel gave clear, principled and intelligible reasons for its administrative penalty, and the Court of Appeal upheld the panel’s decision.

This case does not create any new legal principle. It affirms the principle that the Court of Appeal will defer significantly to the findings of the Securities Commission. The case also confirms the standard practice that the Commission will decide questions of liability and sanction separately. One would argue that the hearing of both issues would cause greater unfairness to a respondent as it would force them to meet both issues simultaneously. However, the case is noteworthy because of the high financial penalty and disgorgement. In Ascendion Law’s model of BCSC penalties, the presence of this case creates some significant statistical movements to the data, causing modern average penalties imposed by the Commission to advance markedly higher.