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Securities - Securities Act - Fraud. Feng v. Ontario Securities Commission
In Feng v. Ontario Securities Commission (Div Ct, 2025) the Divisional Court dismissed an appeal, here from "decisions of the Capital Markets Tribunal (the “Tribunal”) finding that the Appellants engaged in a course of conduct that they knew or ought to have known perpetrated a fraud on investors" [under SA s.126.1(1)(b)].
Here the court considered the mens rea for securities fraud:[29] The Tribunal stated the test for the mens rea requirement for fraud as follows (Merits Decision, paras. 64 and 65):64. The mens rea element of the fraud analysis consists of subjective knowledge that one is undertaking a prohibited act and that that act could cause deprivation by depriving another of property or could put another’s property at risk [R. v. Theroux, 1993 CanLII 134 (SCC), [1993] 2 SCR 5, p. 15]. The Tribunal has confirmed that a fraud allegation against a corporation is established where the corporation’s directing minds knew or reasonably ought to have known that the corporation perpetrated a fraud [Re First Global Data Ltd., 2022 ONCMT 25, para. 347]. A directing mind can be an officer, director or a person who authorized, permitted or acquiesced in the non-compliance [Re Al-Tar Energy Corp., 2010 ONSEC 11, para. 320].
65. The mens rea for fraud will be established if Feng “knowingly undertook the acts in question” and was “aware that deprivation, or the risk of deprivation, could follow as a likely consequence” [R. v. Theroux, 1993 CanLII 134 (SCC), [1993] 2 SCR 5, p. 22]. It is no defence for a respondent to maintain that they did not think the acts were wrong, or that they hoped that no deprivation would occur. [footnoted authorities in original included parenthetically] [30] The Appellants acknowledge that the Tribunal’s statement of the test for mens rea is correct. ....
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