Under Ontario securities law, capital markets participants may be held liable for misleading or untrue statements that are communicated to the public. If the Ontario Securities Commission (the Commission) pursues allegations against a corporation, the individuals authorizing the publication of those communications (i.e., directors and officers) will also often be subject to enforcement proceedings. Statutory mechanisms exist for imposing liability against directors and officers, but what about a corporation’s employees or external consultants who may have prepared the communications, but did not otherwise authorize their publication?
This question was recently considered by the Capital Markets Tribunal (CMT) in Ontario Securities Commission v. Akbar,[1] where the CMT held that a lawyer who drafted press releases containing misleading and false statements was not liable under s. 126.1(1)(b) and s. 126.2(1) of the Ontario Securities Act (the Act)[2] for the corporation’s publication of those press releases. This was the case notwithstanding the CMT’s finding that the lawyer’s conduct was reprehensible and unworthy of a lawyer and trusted advisor in the capital markets context.
Legal framework
Section 126.1(1)(b) of the Act says a person or company shall not, directly or indirectly, engage or participate in any act, practice or course of conduct relating to securities, derivatives or the underlying interest of a derivative that the person or company knows or reasonably ought to know perpetrates a fraud on any person or company.
Section 126.2(1) states that a person or company shall not make a statement that the person or company knows or reasonably ought to know,
(a) in a material respect and at the time and in the light of the circumstances under which it is made, is misleading or untrue or does not state a fact that is required to be stated or that is necessary to make the statement not misleading; and
(b) would reasonably be expected to have a significant effect on the market price or value of a security, derivative or underlying interest of a derivative.
Background
The central issue in Akbar was whether Ahmed Kaiser Akbar (Akbar) perpetrated a fraud and made misleading or untrue statements in relation to two press releases issued by SoLVBL Solutions Inc. (SoLVBL).
Akbar was a lawyer with experience in securities law and the capital markets. Akbar, along with others, were instrumental to SoLVBL’s predecessor, Agile Blockchain Inc. (Agile). SoLVBL was formed through a reverse takeover of Agile and continued to carry on the business of Agile. SoLVBL had serious financial problems and relied on loans from Akbar and other SoLVBL investors and lenders to fund its operations. Akbar was not employed as SoLVBL’s in-house legal counsel but acted in that capacity.
In April 2021, Akbar, along with his colleagues from Agile, incorporated New Foundation Technologies Corp. (New Foundation) to use SoLVBL’s technology to produce non-fungible tokens (NFTs). Akbar was New Foundation’s sole director and officer.
Later that month, SoLVBL entered into a technology licensing agreement with New Foundation which granted New Foundation an exclusive, worldwide license to use SoLVBL’s technology in exchange for CA$120,000. Funding for the payment was provided through Akbar and his colleagues. No work was performed under the license agreement and New Foundation had no business, employees, revenue, products or customers.
On May 13, 2021, and June 3, 2021, SoLVBL issued press releases (the Press Releases) regarding the license agreement. Akbar prepared the initial drafts and sent them to his colleagues and SoLVBL’s CEO for review.
In July 2021, SoLVBL completed two private placements. Akbar, in his role as legal counsel to SoLVBL, was involved in completing the private placements. SoLVBL raised a total of CA$4 million through the private placements, the proceeds of which were used to repay the loans to Akbar, pay operating expenses and to pay Akbar’s fees under an independent contractor agreement.
The Press Releases
The Press Releases made statements about a request for proposal from New Foundation that was won by SoLVBL, New Foundation being an international company, the upcoming signing of the license agreement, and New Foundation’s customers and employees. The Press Releases omitted the fact that New Foundation was incorporated in Ontario, Akbar was its sole officer and director, New Foundation and SoLVBL shared common shareholders and office space, and those shareholders had outstanding loans to SoLVBL.[3]
Decision
Despite finding that the Press Releases were false and misleading, the CMT held that Akbar did not contravene either s. 126.1(1)(b) or s. 126.2(1) of the Act.
The CMT found that the Press Releases were false or misleading because (1) there was no request for proposal, (2) New Foundation was an Ontario company with no international ties, (3) New Foundation had no employees or teams, (4) New Foundation had no customers and (5) the license agreement was signed prior to the publication of the Press Releases.[4] While the Press Releases contained false or misleading statements, Akbar did not commit an offence under s. 126.1(1)(b) or s. 126.2(1) because it was SoLVBL that ultimately published the Press Releases.[5]
To establish fraud under s. 126.1(1)(b), the Commission was required to establish that (1) a fraud occurred, and (2) the respondent, directly or indirectly, participated in an act or conduct, related to securities, that they knew (or reasonably ought to have known) perpetrated the fraud.[6]
The CMT held that the Commission did not establish that the Press Releases, initially drafted by Akbar, were “related to securities.” In the CMT’s view, the Press Releases only became “related to securities” when they were published by SoLVBL. Until they were published, they were simply internal documents which were unavailable to investors or the capital markets.[7] There was also no evidence that Akbar caused SoLVBL to issue the Press Releases. To the contrary, while SoLVBL’s CEO relied heavily upon Akbar’s advice, the CEO circulated the drafts for comments from other management staff and ultimately approved the Press Releases himself.[8]
Similarly, the CMT held that Akbar did not make misleading or false statements contrary to s. 126.2(1). The CMT relied on its prior decision in TeknoScan Systems Inc (Re),[9] where it held that a misleading statement made by a corporation to investors was not a statement of the individual corporate managers or directors who prepared and approved the statement.
Any intent by the legislature to impose liability on individuals for corporate misrepresentations was limited by the language of s. 129.2, which extends liability to officers and directors who authorize, permit or acquiesce in the misrepresentations of the corporation but not to others such as employees or external consultants.[10]
Notwithstanding the CMT’s findings on liability, the CMT remarked that Akbar’s conduct was “reprehensible and unworthy of a lawyer and trusted advisor in the capital markets context,” and had the Commission framed the allegations differently, sanctions may have been imposed on Akbar under s. 127 of the Act, even absent a contravention of the Act.[11]
Key takeaway
Akbar provides important lessons for respondents in securities proceedings. First, Akbar distinguishes between the corporation’s liability for false and untrue statements and the corporation’s employees and consultants. In this case, a lawyer who acted as the corporation’s legal counsel and in that role drafted communications, will not be liable for the publication of those communications even if the statements within are misleading and untrue. We note that if, for example, a lawyer who is also a director and/or officer of a corporation authorized, permitted or acquiesced to the communications, section 129.2 could apply to extend liability.
Second, the CMT in Akbar has provided a clear reminder that its oversight is not limited to enforcing technical breaches of the Act. Section 127 of the Act provides the CMT with broad public interest powers. The CMT can act where conduct is abusive of the capital markets or undermines investor confidence. This means that behaviour that may not be a strict violation of Ontario securities law can still attract regulatory scrutiny and remedies. People who occupy positions of trust in the capital markets, such as directors, officers, registrants, lawyers and other professionals, are expected to meet particularly high standards of honesty and integrity. Professionals under investigation by staff who occupy positions of trust in capital markets should be especially aware of the CMT’s public interest powers when assessing potential enforcement outcomes and remedies they may be subject to.
For more information on this topic, please reach out to the authors, Raphael T. Eghan, Brandon Barnes Trickett and Janson Fu.
[1] 2026 ONCMT 3 [Akbar].
[2] Securities Act, RSO 1990, c S.5.
[3] Akbar, supra note 1 at paras 22-24.
[4] Ibid at para 25.
[5] Ibid at para 36.
[6] Ibid at para 39.
[7] Ibid at para 55.
[8] Ibid at paras 59-60.
[9] 2024 ONCMT 32.
[10] Akbar, supra note 1 at para 78.
[11] Ibid at para 80.
