Court rejects ex-broker’s appeal in OSC case

An Ontario court has rejected an appeal from former industry executive Mark Valentine, who sought to overturn the Capital Markets Tribunal’s finding that he violated securities law by breaching a trading ban.

In 2004, in a settlement with the Ontario Securities Commission (OSC), Valentine was banned from trading for 15 years and permanently banned from serving as a director or officer, after he admitted to violating securities law by engaging in conflicted transactions and breaching self-regulatory organization requirements.

Last year, the Capital Markets Tribunal found that Valentine breached both of those bans — by acting as a director for numerous companies since the director and officer ban was imposed, and by facilitating certain securities trades.

As a result, it ordered that he be permanently banned, imposed a $1 million penalty and $300,000 in costs, and ordered him to disgorge $3.3 million and US$10.7 million.

Valentine sought a judicial review of the tribunal’s finding that he breached the trading ban, arguing that his role in facilitating various “stock secured financings” involving Hong Kong equities didn’t amount to prohibited trading.

According to a decision from the Ontario Superior Court of Justice, “Valentine’s role in the stock-secured financings included sourcing the financing for the transactions and analyzing the value of the pledged equities, which the Tribunal found Mr. Valentine knew the lenders intended to sell.”

The tribunal concluded that when the securities were sold, these amounted to trades, and that by facilitating these transactions, Valentine had acted “in furtherance” of these trades, which breached his trading ban.

On appeal, Valentine argued that the tribunal erred in concluding that the transactions amounted to trades, and that it erred when it found that he enabled those “trades.”

“Mr. Valentine submits that the tribunal erred in law by relying on irrelevant factors to conclude that he acted in furtherance of the lenders’ trades of the pledged securities. According to Mr. Valentine, all of the evidence that the tribunal relied upon either did not relate to the relevant trades or was insufficiently proximate to them,” the court noted.

However, the court rejected those arguments, siding with the tribunal and dismissing the appeal.

The court noted that there is no hard and fast rule for what counts as acting in furtherance of a trade, and that determining whether specific activities amount to trading “is a contextual exercise that turns on the facts of each case.”

“In this case, the tribunal had ample evidence of Mr. Valentine’s connection to the lenders who sold the pledged securities and ample evidence of the connection between Mr. Valentine’s compensation and the sale of the pledged securities,” the court ruled.

To successfully challenge the tribunal’s conclusion, an appeal must establish that it committed “a palpable and overriding error,” the court said.

“As there was no error of law or palpable and overriding error of fact in the tribunal’s findings that Mr. Valentine acted in furtherance of a trade, the appeal should be dismissed,” it concluded.