In a first for the Ontario Securities Commission (OSC), an adjudicator of the Capital Markets Tribunal removed themselves from a hearing panel — in this case, the panel that is set to hear greenwashing allegations against fund manager Purpose Investments Inc. and its CEO, Som Seif — at the request of the regulator.
Following an expedited hearing on Friday, commissioner Andrea Burke, recused herself from the proceeding, which is slated to start next month.
In that case, the OSC has alleged that Purpose and Seif breached securities rules by making various misleading statements about their consideration of ESG factors in the funds’ investment decisions.
Those allegations have not been proven, and a prolonged hearing is expected in the case, with 18 days currently set aside for the proceeding.
Unusually, it was the OSC that applied for removal of the adjudicator from the case, citing the risk of a “reasonable apprehension of bias” based on Burke’s social relationship with its key witness in the case, a former Purpose executive.
According to the OSC’s filing in the case, Burke worked with the former Purpose executive’s wife between 2007 and 2010 at Davies Ward Philips & Vineberg LLP, she attended their wedding, and they have an ongoing social relationship.
Moreover, the regulator noted that the former executive will be the commission’s primary witness, apart from one of its investigators, and that his evidence will be crucial to the regulator’s case.
“The witness is a central witness to the commission’s case and the panel’s credibility findings regarding the witness’s testimony at the merits hearing may have significant impact on the outcome of this proceeding; and it would be best for another adjudicator to be assigned to the merits hearing, in the place of adjudicator Burke,” the regulator said in its motion.
At the hearing, counsel for Purpose and Seif opposed the motion, insisting that there was no need for Burke to remove herself from the case.
They argued, among other things, that Bay Street is a relatively small community, so the fact that adjudicators would know potential participants in tribunal proceedings was to be expected, and shouldn’t give rise to concerns about perceived bias.
Indeed, Burke concluded, on a preliminary basis, “that the potential conflict does not preclude her from sitting on the panel,” the commission noted in its motion.
Yet, in the hearing, the regulator stressed that its concern was not that actual bias exists, but that the pre-existing relationship between the adjudicator and a key witness could create a public perception of bias in the proceeding.
The commission also pushed back against arguments from the respondents’ counsel who pointed out that the removal of an adjudicator could delay a case that they have fought to have heard sooner rather than later.
The hearing was originally scheduled to start on May 11, running through June 10.
In light of Burke’s removal and the need to appoint a new adjudicator, it’s possible that the hearing schedule will be revised.
Following her decision to recuse herself, Burke asked counsel for both sides to find possible dates when they are all available, if the hearing needs to be rescheduled as a result of the change.