Ontario’s Divisional Court has upheld an OSC appeal, finding that the Capital Markets Tribunal applied an incorrect legal standard when dismissing fraud allegations against a securities lawyer.

An Ontario court has overturned a Capital Markets Tribunal decision that dismissed securities fraud allegations against lawyer Ahmed Kaiser Akbar. The Ontario Securities Commission (OSC) successfully appealed the ruling after arguing that the tribunal applied an incorrect legal test. The Divisional Court of the Ontario Superior Court of Justice agreed and ordered the matter returned for reconsideration.

The case involves two misleading press releases prepared for SoLVBL Solutions Inc. in the spring of 2021. The releases described licensing agreements with New Foundation Technologies Corp. involving technology for producing non-fungible tokens (NFTs). They portrayed New Foundation as an established multinational business. However, the company had no employees, revenue, products, customers or operating business. SoLVBL subsequently raised $4 million through two private placements.

In January, the tribunal acknowledged that the releases created a misleading impression of SoLVBL’s business. However, it dismissed the fraud allegation against Akbar because he prepared the documents but did not publish them himself. The panel also concluded that his involvement did not relate to securities while the releases remained internal documents.

The Divisional Court rejected that reasoning, finding the tribunal had imposed an excessively restrictive standard for establishing fraud. The court determined that Akbar’s actions could contribute to investor losses even if others controlled the publication process. It also found that the releases were directed at investors and could influence their expectations. The court concluded that the tribunal had made errors in assessing both causation and the connection to securities.

Although the OSC sought a direct finding of securities fraud, the court declined to make that determination. The tribunal had not examined whether Akbar knew his conduct could expose investors to financial harm, a necessary element of fraud. The case will therefore return to the tribunal, preferably before the original panel, for further consideration. The court’s decision does not establish that Akbar committed securities fraud.

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Originally published on Canadian Fraud News.