A three-year delay in a legal effort to pursue the collection of enforcement sanctions by the British Columbia Securities Commission (BCSC) was “inexcusable,” a B.C. court ruled — yet, the delay wasn’t severe enough to kill the regulator’s case.
The Supreme Court of B.C. rejected an application from Frank Penko, who sought to have proceedings brought against him by the BCSC — seeking forfeiture — dismissed for a lack of prosecution.
The case stems from an enforcement action against Penko’s wife, Renee Penko, in 2016, when she was ordered to pay $155,000 in disgorgement and a $40,000 penalty, after it found that she illegally distributed securities to investors.
According to the court’s decision, the BCSC attempted to collect the sanctions from Renee Panko, “with only nominal success” — and, in 2019, she filed for bankruptcy.
In 2020, securities law in B.C. was changed to allow the BCSC to pursue enforcement collections against a family member that receives property from the target of regulatory sanctions at less than fair value — and later that year, the BCSC launched a proceeding against Frank Penko seeking forfeiture of $95,000 that his wife transferred to him in 2016.
In early 2021, settlement talks between Penko and the BCSC began, and those dragged into 2024. At the same time, his wife was seeking a discharge from bankruptcy, which the BCSC opposed, and was also before the court.
In the meantime, in June, Frank Penko filed an application to dismiss the regulator’s forfeiture proceeding against him, alleging that it has been delayed for too long.
“Mr. Penko argues the commission has failed to prosecute its claim against him for roughly 4-1/2 years and that this qualifies as inordinate delay,” the court said.
The BCSC opposed the application, arguing that the delay has not been excessive, that Penko requested that the regulator not pursue the forfeiture action while settlement talks were ongoing, and that “Penko’s failure to deliver a response to the petition is an invitation to delay.”
Ultimately, the court found that the case has faced an “inordinate” delay, but that some portion of the delay was excusable because the two sides were actively engaged in settlement talks.
“The parties did engage in intensive settlement discussions in 2021. These appear to have culminated in January 2022, when Mr. Penko was examined and produced documents to the commission. At that point the discussions appear to have reached an impasse,” the court found — and the regulator’s focus shifted to opposing Ms. Penko’s application for a discharge from bankruptcy.
Yet, the court said the bankruptcy case shouldn’t have prevented the BCSC from pursuing its forfeiture application — from that point on (after March 2022), the delay in the case was “inexcusable” the court said — finding that the proceeding has faced more than three years of excessive delay.
Nevertheless, it found that the delay wasn’t so severe that the case should be tossed.
The court said the BCSC argued that “it is in the public interest that the petition be allowed to proceed,” that the disgorgement order represents money obtained from misconduct, and that money that’s collected would be returned to harmed investors.
“I agree there is a significant public interest component to this litigation,” the court said, adding that the regulator has a potentially-viable claim.
As a result, it concluded that “it is in the interests of justice” to dismiss Penko’s application.