The Ontario Securities Commission (OSC) today issued its reasons for a decision made earlier this year, where it ruled that compelled testimony and hearsay evidence is admissible in an enforcement hearing.
The OSC published its reasons on a motion brought by OSC staff seeking an order to admit excerpts from transcripts of compelled examinations into evidence in its case alleging insider trading and tipping against various industry figures. The allegations have not been proven.
A hearing on the motion was held behind closed doors back in September. And, around the same time, the commission settled with one of the most prominent respondents in the case, Goldcorp Inc. chairman, Ian Telfer. (See Investment Executive, Goldcorp chairman settles with OSC, September 20, 2013.)
In October, the panel issued an oral ruling on the motion, indicating that excerpts from transcripts of compelled examinations are admissible into evidence in the context of regulatory proceedings. However, it agreed with the respondents in the case, who argued that the best evidence would be direct testimony at the hearing; so, it said that transcripts can be submitted at the end of the hearing for respondents that haven’t chosen to testify.
On a cross-motion for confidentiality, the panel also found that all materials and transcripts should remain confidential, but that the panel’s decision should be public.
In its reasons, the panel finds that the Securities Act permits OSC staff to produce compelled testimony at a hearing. “We agree that if the legislature had intended to prohibit the use of compelled testimony in section 127 proceedings it would have done so expressly,” it says, adding that the legislature’s silence on that issue “can be taken as deliberate”.
“To find otherwise would also prohibit the use of documentary evidence compelled by staff pursuant to section 13 of the Act, which cannot have been the legislative intention given the context of the scheme of the Act in respect of investigations and enforcement,” it notes.
It also says that transcripts of the compelled testimony are relevant hearsay and are therefore admissible under procedural rules. “The Act does not make the compelled testimony inadmissible in an administrative hearing and the Act does not expressly limit the extent to or purposes for which the compelled testimony may admitted or used in evidence at an administrative hearing under the Act,” it notes. “Further, we were not satisfied that the other statutes cited by the respondents make the compelled testimony inadmissible in an administrative hearing under the Act or expressly limit the extent to or purposes for which the compelled testimony may be admitted or used in evidence at an administrative hearing under the Act.”
The panel acknowledges that it is “mindful of the dangers of hearsay evidence” and notes that the weight this evidence will receive in a hearing will be determined by the panel.
In ruling that the testimony should not be entered into evidence until the conclusion of the case, the panel says, “This provides the respondents with an opportunity to consider the evidence tendered by staff before determining whether they will undertake to testify at the merits hearing while also attempting to avoid any unfairness that could result from staff splitting its case.”