One of the most difficult questions to come up at the negotiating table is also one of the most fundamental: “What is it worth?” To bridge the almost inevitable vendor-purchaser valuation gap, parties to an M&A transaction will often agree to tie part of the purchase price to some measure of post-closing business success.
On September 3, 2014, the US federal banking regulators (the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of Comptroller of the Currency) announced the final adoption of the liquidity coverage ratio for large financial institutions under their supervision.
On September 11, 2014, the Office of the Comptroller of the Currency (OCC) published final Guidelines setting out heightened risk management standards for large banking organizations under its jurisdiction.
In a recent blog post, we discussed the implications of the Ontario Superior Court of Justice’s decision in Excalibur Special Opportunities LP v. Schwartz Levitsky Feldman LLP and, in particular, the findings in respect of the preferable procedure requirement for class certification.
On September 3, 2014, the US banking agencies (the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of Comptroller of the Currency) issued a final rule adjusting the calculation of the supplementary leverage ratio in order to conform to recently adopted recommendations of the Basel Committee of the Bank for International Settlements, which issues standards for bank supervision.
A “Core” Decision: Lessons On the Leave Test for Alleged Misrepresentations in U.S. Disclosure Documents
In providing a statutory right of action in respect of misrepresentations contained in secondary market disclosure, the Ontario Securities Act (OSA) distinguishes between those misrepresentations contained in “core documents” and misrepresentations contained in non-core documents.
Under section 380.1(1) and (1.1) of the Criminal Code, courts are required to consider the following non-exhaustive list of factors as being aggravating circumstances in the context of fraud.
- significant magnitude, complexity, duration or degree of planning of the fraud;
- an actual or potential adverse effect on the Canadian economy or financial system, or on investor confidence;
- large numbers of victims, particularly if the fraud had a significant impact due to the victims’ personal circumstances;
- failure to comply with applicable professional standards;
- concealment or destruction of documents related to the fraud; and
- whether the total value of fraud exceeds one million dollars.
Usually an individual’s good reputation in the community is an important mitigating factor in sentencing, but not so for sentencing on a fraud conviction. Rather, an individual’s reputation for trustworthiness and good character is viewed neutrally, if not unfavourably, as fraudsters typically make use of their reputation to persuade victims to part with their money.
Many of these aggravating factors were considered by Justice Corrick in a recent July 2014 decision in R. v. Lewis. The accused, Mr. Lewis, was found to have defrauded investors of over $7.5 million between 2004 and 2011. The Court highlighted a number of aggravating factors. First, the Court noted that the scheme was a “large scale sophisticated fraud that was perpetrated over several years.” Second, the Court found that Mr. Lewis had breached the trust of his investors and that he “used any and all means to develop a rapport with his victims to extract their money.” Third, the Court noted that Mr. Lewis’ crimes were driven by pure greed and had had a devastating effect on his investors. Finally, the Court emphasized that Mr. Lewis did not appear to acknowledge his wrongdoing or to show remorse, which increased his risk of re-offending. With these considerations in mind, the Court sentenced Mr. Lewis to seven years imprisonment.
Canadian courts have typically handed down sentences of between six and eight years imprisonment for those convicted of perpetrating Ponzi or other investment schemes. In one of the largest investment schemes in Saskatchewan’s history, the primary architect of the scheme, who had defrauded investors of approximately $16.7 million over the course of four years, was sentenced to seven years imprisonment. You can read more about the R. v. Fast case in our earlier blog post.
It is important to recognize that, for any fraud perpetrated before September 2004, the maximum penalty that can be ordered is ten years imprisonment. Generally, our judges were awarding on the high-end of the sentencing range for those found to have run Ponzi schemes. For fraud perpetrated after 2004, the penalty has been increased to 14 years imprisonment and we therefore expect to see higher sentences in the future.
* The author wishes to thank Jennifer Bernardo, Student-at-Law, for her assistance.
On September 10, 2014 the Over-the-Counter (OTC) Derivatives Regulators Group (ODRG), consisting of derivatives market regulators from Australia, Brazil, the European Union, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland, and the United States (CFTC and SEC) released a report to the G20 that provided an update on the resolution of key cross-border derivatives reform implementation issues.
In a recent blog post , we discussed the Ontario Court’s consideration of the existence of an identifiable class in deciding whether or not to certify a class action, both from an objective perspective (i.e. the existence of an identifiable class) and from a subjective perspective (i.e. whether or not the petitioner must prove that the members of the class “desire to pursue their claims by way of a class action”).
Paul Fitzgerald and Tracey Kernahan have produced a client update on the announcement by the Minister of Finance that the provinces of British Columbia, Ontario, Saskatchewan and New Brunswick and the Canadian federal government have signed a memorandum of agreement formalizing the terms and conditions of a cooperative capital markets regulatory system.