YBM Magnex International Inc - Street Wire
YBM's Wilder strikes out at OSC
YBM Magnex International Inc
YBM Shares issued 44,362,092 May 13/1998 close $14.35
Mon 20 Mar 2000 Street Wire
LAWYERS ARE RESPONSIBLE TOO
by Dan Westell
Three judges of Ontario's Divisional Court could not find a single reason for exempting lawyers from the Ontario Securities Act, the written rationale for a recent oral judgment show.
Madam Justice Katherine Swinton, writing for the panel, dismissed all the arguments advanced by lawyers for Lawrence Wilder and the Law Society of Upper Canada during a hearing Feb. 15.
Mr. Wilder, a securities lawyer at Cassels Brock and Blackwell, was named in an Ontario Securities Commission notice of hearing last fall for allegedly misleading commission staff about affairs at his client, YBM Magnex International, during a prospectus review in 1997.
Following release of the allegations, Mr. Wilder's lawyer moved to challenge the OSC's jurisdiction, arguing that the commission could not discipline lawyers acting as lawyers (as opposed to lawyers acting, for example, as company officers or directors).
The Law Society supported Mr. Wilder, claiming that the Law Society Act gave it the exclusive right to discipline lawyers.
The panel did not even hear from the OSC during the Feb. 15 hearing, rejecting the appeal without reasons after listening to Mr. Wilder and the Law Society.
In the written reasons just released, endorsed by both other judges, Judge Swinton noted that "persons and companies" are covered by the section under which the allegation was made.
"There is nothing in the wording of s.127(1)6 which would indicate that it does not apply to lawyers," she wrote. The applicants pointed to the OSC's lack of success in trying to get lawyers specifically included when the Securities Act came up for amendment in the early 1990s, and therefore concluded it lacks power to discipline lawyers acting in professional capacity.
"This conclusion does not follow," the judge wrote, because the OSC was given powers to reprimand persons or companies in 1994. That was change from the previous wording, which restricted the commission's jurisdiction to registrants. In rewriting the act, the legislature "chose words which do not preclude their application to lawyers."
The Law Society argued it alone can discipline lawyers, but "there is nothing inconsistent between the Law Society's role in regulating the legal profession and the Ontario Securities Commission's proposed exercise of jurisdiction in the circumstances of this case. The Law Society and the Ontario Securities Commission both exercise public interest functions, but the public interests which they seek to protect are not the same." Nothing in the Law Society Act says lawyers are exempt from the OSC. The applicants also complained that the U.S. Securities and Exchange Commission's broad powers to discipline lawyers have a "chilling effect," discouraging lawyers from advocating their clients' positions as strongly as possible. The OSC "is not claiming powers here like those possessed by the SEC," Judge Swinton wrote.
A constitutional issue was also raised, a claim that an independent judiciary depends on an independent bar. "The proposed proceeding against Mr. Wilder does not represent an encroachment on the independence of the bar. All the commission seeks to do here is to ensure that lawyers, among others, do not mislead the commission, in the way that Mr. Wilder is alleged to have done."
The commission is concerned about a letter Mr. Wilder wrote to staff on July 8, 1997, when staff were worried about YBM's prospectus, which would eventually qualify $100-million in-stock and convertible debentures when finally approved in November.
Staff was worried about rumours that YBM was connected with the Russian mafia. Mr. Wilder wrote that there had been "uniformly positive results" from all of YBM's due diligence.
The OSC claims a report YBM commissioned almost a year earlier indicated potential problems. The OSC said it was not aware of the report until after YBM was placed in receivership in 1998.
An April 5 date has been set to consider scheduling the hearing, which also names the company's officers, directors and underwriters.
(c) Copyright 2000 Canjex PublishingLtd.
canada-stockwatch.com
KJC |
