An Ontario court has ruled that a series of promissory notes do not qualify as securities. As a result, it dismissed charges of alleged trading violations that had been brought by the Ontario Securities Commission (OSC).

The Ontario Court of Justice ruled against the OSC in its case against former advisor, Daniel Tiffin, and his company Tiffin Financial Corp. (TFC). Tiffin and his firm, which is based in Thornhill, Ont., were charged with three breaches of securities law: trading securities without being registered; trading while prohibited; and trading securities without a prospectus.

The charges stem from 14 interest bearing promissory notes that TFC issued to six clients. The notes were worth a total of $700,000. According to the court’s decision, Tiffin and TFC admit that they were not registered to trade in securities, did not file a prospectus and were prohibited from trading in securities by the OSC.

The question for the court was whether the notes should be considered securities. The OSC argued that the notes constitute securities, whereas the defence argued that they do not. Ultimately, the court sided with the defence.

“The evidence at trial shows that the TFC promissory notes were understood by the parties to be loans to the accused through his business. They were secured against assets of the business and carried no expectation of gain or loss based on the fortune of the business. To apply securities law in this context is contrary to the purposes of the Act,” the court said in its decision.

The court dismissed the charges in the case.

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