The Supreme Court of British Columbia has rejected an application by the founder of Vancouver-based brokerage house Global Securities Corp. to have a pending insider trading hearing tossed out.

Art Smolensk sought both prerogative and Charter relief to preclude the B.C. Securities Commission from hearing an allegation of insider trading against him regarding an incident that has already been settled with the stock exchange.

The allegation relates to the trading of shares in Trooper Technologies Inc. by Global Securities on the Vancouver Stock Exchange, now known as the TSX Venture Exchange. In March 2001, after the amalgamation that formed the CDNX, an agreement was reached whereby Smolensky made certain admissions to settle the matter with the exchange and accepted the imposition of sanctions: a $115,000 fine and the suspension of his trading privileges for 30 days.

In August 2001, four months after the settlement with the exchange was approved by the CDNX hearing panel, and after he had paid his fine and served his suspension, the executive director of the BCSC obtained an investigation order. A year after obtaining the investigation order, the BCSC issued a notice of hearing against him.

According to the decision, Smolensky says the sanctions the commission could impose on him would destroy his business and his career, prevent him from rebuilding his reputation, and adversely affect the lives of many who rely on the continued existence and prosperity of Global.
In his application for prerogative relief Smolensky argued that he has already been subjected to the investigation by the exchange and that faced with a disciplinary hearing, he negotiated a settlement that required him to make admissions, pay a fine, and suffer a suspension. He argued the BCSC could have intervened in the CDNX settlement if it thought it was insufficient. He also contended there has been an abuse of the regulatory process and that the BCSC is biased against him.

The BCSC contests these arguments, but takes the position that there is no place in the circumstances for judicial review in any event.

The high court ruled that an earlier decision in a similar case involving renowned Vancouver stock promoter, Murray Pezim, forecloses the judicial review that Smolensky seeks. “To my mind, there is no sound basis on which it can be said that Mr. Smolensky’s application for judicial review to prohibit the commission from hearing the allegation against him should be considered when the applicant in Pezim was denied the prerogative relief he sought in the same circumstances under the same statute.”

The court also says it sees little merit in the argument that a perception of bias would cloud any decision the commission might make regarding the complaint Smolensky has with the conduct of its executive director.

Smolensky also challenged the constitutional validity of the section of the Securities Act relating to investigations and audits on the basis that this provision violates the Charter and entitles him to a stay of the proceedings.

The court rejects this, noting that this section has withstood previous challenges. It says that his Charter rights have not been violated, noting, “Mr. Smolensky has chosen to engage, for personal gain, in an industry premised on intense regulation, timely public disclosure, and accurate self-reporting, all of which are designed to discourage questionable behaviour and protect the integrity of the markets and the investing public. He must accept that his commercial behaviour will be monitored and questioned.”