An Ontario court has upheld an Ontario Securities Commission (OSC) ruling that found a former mutual fund advisor traded without registration, but the court also ruled that the OSC erred in determining its sanctions against the advisor.

Specifically, the Divisional Court of the Superior Court of Justice has upheld the OSC’s decision that Kevin Loman, a former mutual fund rep, violated securities laws by engaging in unregistered trading of shares in Majestic Supply Co. Based on the evidence before the OSC at its hearing into the allegations, “it was reasonable for it to conclude” that he traded in unregistered shares, states the court’s ruling, Loman v. Ontario Securities Commission, 2015.

“In this case, the reasons are clear and intelligible,” the ruling adds. “There is no basis for interfering with the commission’s factual findings, or its ultimate conclusions on liability.”

However, the court ruled in favour of Loman on the question of whether the sanctions the OSC imposed on him — which included a 10-year ban, a $75,000 administrative penalty, $145,250 in disgorgement and $30,000 in costs — were appropriate.

In particular, the court found that the OSC improperly considered a previous trading ban that regulators in Alberta imposed on Loman as a factor in setting its penalty against him.

“We find that the commission erred by misapprehending the facts relating to sanctions imposed on the appellant by the Alberta Securities Commission (ASC),” the court says.

In 2009, Loman entered into a settlement agreement with the ASC that included a three-year ban, which the OSC cited as one of the factors that it considered in imposing its penalty on him.

However, the Alberta sanctions were imposed on Loman after the unregistered trading the OSC is seeking to punish took place. Therefore it shouldn’t be considered a factor in determining the OSC’s penalty against him, the court notes.

“The Alberta sanction could not have deterred the Majestic trades because it had not yet occurred. The commission’s reasons demonstrate that this misapprehension affected the sanctions imposed in relation to bans and the administrative penalty,” the ruling states.

“We cannot be certain that the commission would have imposed the same sanctions had it properly apprehended the timing of the Alberta ban,” the court ruled, allowing the appeal on sanctions and sending that issue back to the OSC for a fresh decision.