FRAUDSTERS BEWARE: THE ONTARIO SECURITIES COMMISSION WILL SCRUTINIZE WHETHER THE DEFENDANT ADMITS TO ENGAGING IN WRONGFUL CONDUCT IN FOREIGN PROCEEDINGS.
On February 28, 2018, the Commissioner of the Ontario Securities Commission refused to rubber-stamp a settlement from a former chairman, chief executive officer, and president of a publicly traded company, MDC Partners, Inc.
The allegations against the former executive were that he improperly received over $10 million for personal expenses and failed to disclose these in the annual proxy statements.
In an enforcement action advanced against this executive by the U.S. Securities and Exchange Commission (“SEC”), the SEC found that he knowingly or recklessly, solicited proxies for his election as a director from investors without disclosing that he took millions worth of unauthorized funds from the Company. In settling the SEC’s claims, which he admitted for U.S. Bankruptcy laws only, he agreed with the allegations of wrongdoing and agree not to serve as an executive or officer of any publicly traded company for five (5) years. In re Miles S. Nadal, Securities Exchange Act of 1934 Release No. 80652 (May 11, 2017).
The Ontario Securities Commission also advanced claims against this executive. The Commissioner, however, refused to accept the quick settlement offer and ordered an oral hearing to answer various outstanding questions about the ramifications of his admissions in the foreign proceeding.
In this case,…, the SEC made findings of fact and of multiple violations of the 1934 Act in its order, and Nadal admitted these findings for specific purposes under the U.S. Bankruptcy Code. The effect of these provisions of the SEC Order, therefore, must be addressed, and the parties should have an opportunity to do so, if so advise, before the Panel makes any determination of the terms of any reciprocal order that may be in the public interest. In re Miles S. Nadal, 2018 ONSEC 9, at para. 32.
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