Ascendion Law argued the first-ever appeal involving the new freeze order powers of the British Columbia Securities Commission.
Here, the Commission had issued a Notice of Hearing, commencing a regulatory action against our client. Almost immediately afterward, the Commission issued an order freezing our client’s assets. However, the Commission introduced no evidence showing that their allegations might be true. The frozen money was connected to the funds raised by the alleged securities violation. The freeze order was necessary to preserve the assets. Anyone practicing in the criminal and civil courts will know that a party in a civil case or the Crown must prove elements before a judge will freeze property. The Commission does not believe it needs to do so under new powers granted under the amended Securities Act.
When it issued the freeze order, the Commission relied only on a Notice of Hearing to support giving the order. The Commission froze our client’s assets without notice, without a hearing, and with no evidence of the underlying offence to justify the order. The appeal required the court to consider, for the first time, the proper interpretation of the new section 164.04 of the Securities Act and to consider how to interpret that section given the Court of Appeal’s past decision in Party A v. British Columbia (Securities Commission), 2020 BCCA 382 (“Party A”). In Party A, this court established a minimum evidentiary standard that the Commission must meet before it froze assets under the Securities Act. The Commission, in this appeal, sought to distinguish Party A from our appeal because Party A involved a freeze order granted at the investigatory stage, and Party A was decided under a former statute.
We argued it the Commission must do more than simply prove that it intends to start an investigation, has started an investigation, or started an enforcement action. We argued the Commission cannot act arbitrarily by freezing orders without demonstrating their claims might be true. The Commission argues the opposite and maintains the new statute allows them to do just that.
The case is now on reserve. The Court of Appeal will probably issue its judgment and reasons in the late spring of 2022. Stay tuned for more news. Meanwhile, securities solicitors will want to watch this decision carefully. A ruling against us affirms the Commission has substantial powers to interfere with an issuer’s operations. The Commission decision is found here.