1] On April 18, 2022[1], the Administrative Tribunal for Financial Markets (“Tribunal”) issued, ex parte, blocking orders targeting the funds, securities and other property of the respondents and certain defendants and those held for them by the financial institutions in question.
[2] The initial freezing orders were issued as part of an investigation conducted by the Financial Markets Authority (“Authority”) against the respondents. This investigation concerns alleged serious breaches of applicable legislation[2], essentially a market manipulation scheme in which the respondents allegedly participated.
[3] These blocking orders have been extended several times[3].
[4] The Court, on September 28, 2023[4], partially lifted the blocking orders in order to allow the liquidation - at the market price and within 6 months - of six securities held by the respondent Ramy Kamaneh in an account opened with the respondent TD Waterhouse Canada inc. as well as the deposit and conservation of the balance of these cash transactions in this account, all under close supervision by the Authority.
[5] The Authority presented to the Tribunal a request, dated October 5, 2023, aimed at extending the blocking orders currently in force in this case, for a period of 12 months. The Authority alleges that the investigation in the present case is still ongoing and that the reasons which justified the initial blocking orders still exist.
[6] During the pro forma hearing held on October 26, 2023, the respondents' lawyers informed the Court that they intended to contest this request for extension of the blocking orders presented by the Authority. A preparatory conference followed, on November 29, 2023, during which the Court set January 22, 2024 as the date of the hearing during which it will hear, on its merits, this request from the Authority.
[7] As the blocking orders in force in this case expired on November 8, 2023 and, moreover, the Court needs time to render a written decision following the hearing aimed at allowing it to to hear, on its merits, the request for extension presented by the Authority, the Court then decided - in order to continue to protect the public interest - to extend these blocking orders on an interim basis until February 8, 2024.
[8] Subsequently, on January 22, 2024 as planned, the Court heard on the merits the above-mentioned request for an extension from the Authority.
[9] After having taken note of the evidence and the arguments then presented to it by the parties' lawyers with regard to this request, the Court decides, in the public interest and as precautionary measures, to extend the blocking orders currently in force against the respondents and with regard to the third parties until July 7, 2024.
ANALYSIS
[10] For the Court to extend a freezing order, it must determine whether:
(1) the investigation carried out by the Authority with regard to the respondents is still ongoing[5];
(2) the grounds supporting the initial blocking orders still exist[6].
[11] As for the duration of the blocking order, the law provides that it is 12 months, unless the Court decides otherwise[7].
[12] The Authority's lawyer maintains that the initial reasons which justified the issuance of freezing orders in the context of this case still exist and that the Authority's investigation continues.
[13] He pleads for the Court to extend the blocking orders currently in force in this case until November 8, 2024.
[14] The respondents' lawyers do not dispute that the aforementioned initial reasons still exist or that the Authority's investigation is continuing. However, they plead for the blocking orders in force in this case to only be extended for a period of 60 days after their current expiry of February 8, 2024.
[15] During the hearing, a principal investigator from the Authority assigned to this case testified and essentially informed the Court that the entire investigation report and the documentation collected as evidence by the investigators is in possession of the Authority's litigation since October 2023.
16] The litigation must ultimately submit to the Authority's decision-makers a recommendation regarding the future legal progress of this case. Before doing so, the dispute could, however, request one or more additional investigations from the investigators.
[17] The Court recalls that the blocking orders it issued in the context of this case are precautionary measures which aim to prevent the potential squandering of significant sums of money which could have been illicitly collected by the respondents following apparent serious breaches of sections 195.2 and 199.1 of the Securities Act as well as following apparent acts contrary to the public interest, which risk causing irreparable harm to the integrity of financial markets and the investing public, while affecting investor confidence in these markets.
[18] The Court takes note of the fact that the investigation report as well as all the documentation collected as evidence by the investigators have been in the hands of the Authority's litigation since October 2023, i.e. since approximately three months.
[19] The Court also takes note of the fact that no decision as to the follow-up to be given to the aforementioned investigation report has yet been taken by the litigation.
[20] Thus, in the current state of affairs, it remains possible that the investigation report, accompanied by all the evidence collected to date by the investigators, results in a decision by the regulator not to initiate any additional legal proceedings whatsoever against the respondents.
[21] It is also within the realm of possibility that a decision is taken by the Authority's litigation to ask the investigators for one or more additional information and that, subsequently, the regulator decides - following a recommendation from its litigation - to initiate legal proceedings of a criminal or administrative nature against the respondents.
[22] For the moment, the Court can only note that the Authority's investigation, in the broad sense, is continuing and, in light of the testimony given by a principal investigator in the file, the Court is of the opinion that this investigation - in the broad sense - will likely evolve significantly over the next six months or so.
[23] Given the broad scope of the freezing orders it issued in the context of this case and the impact that these orders have on the respondent and respondent parties, the Tribunal is of the opinion that It is reasonable - in the circumstances and in the public interest - to extend the blocking orders currently in force in this case until July 7, 2024.
[24] This additional extension period will allow the Authority's litigation department to continue its analysis of the investigation report and the evidence collected by the investigators as well as possibly ask the investigators to collect additional information. This additional period will also allow litigation to potentially present recommendations to the Authority's decision-makers on the follow-up to be given to this case and for them to take, in the public interest, a decision in this regard.
[25] In the opinion of the Tribunal, it is important that freezing orders only continue for a period when they are absolutely necessary in the public interest.
[26] Furthermore, the Court recognizes the particularly complex nature of investigations related to market manipulation schemes, particularly when a multi-jurisdictional component is associated.
[27] After hearing the evidence and the arguments presented to it by the parties' lawyers, the Tribunal is of the opinion that the reasons which justified the issuance of the initial blocking orders in this case still exist and that the investigation, in the broad sense of the term, by the Authority with regard to the respondents is still ongoing.
[28] Consequently, the Court decides that it is in the public interest to extend until July 7, 2024, as a precautionary measure, the blocking orders currently in force in this case.
FOR THESE REASONS, the Administrative Tribunal for Financial Markets, in the public interest and under section 93 of the Financial Sector Regulation Act[8], sections 249 and 250 of the Securities Act and sections 119 and 120 of the Derivatives Act:
EXTENDS the freezing orders it issued on April 18, 2023, as renewed since, until July 7, 2024, in the following manner, unless they are modified or repealed before the expiry of this term :
ORDERS the respondent Ramy Kamaneh and the respondents SDIT inc. and SDÉT inc. not to, directly or indirectly, withdraw or dispose of funds, securities or other property that they have in their possession or funds, securities or other property in the possession of another person who has the deposit, custody or control for Ramy Kamaneh, SDIT inc. and SDÉT inc., notably in the following bank accounts and brokerage accounts:
ORDERS the respondent Ramy Kamaneh and the respondent Doua'a Ismail not to, directly or indirectly, transfer, encumber, alter, destroy and/or alienate the building with the building built on it bearing the civic number [address 1] , Montreal (Île-Bizard), province of Quebec, [...], known and designated as lot number [...] ([...]) of the Cadastre of Quebec, in the registration division of Montreal;
ORDERS the respondent Toronto Dominion Bank inc., having a branch at 3720, boulevard des Sources, in the city of Dollard-des-Ormeaux, province of Quebec, H9B 1Z9, not to dispose of, directly or indirectly, the funds, securities or other property that it has on deposit or of which it has custody or control for the respondent Ramy Kamaneh and the defendants SDIT inc. and SDÉT inc., notably in the following bank accounts:
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