Can subjects named in an investigation order seek pre-hearing disclosure as well as a stay to prevent the Executive Director from reviewing materials seized under a search order? In an unusual case, the Commission ordered the Executive Director to disclose certain documents relied upon in obtaining an investigation order and a business search order. The Commission also ordered that the Executive Director be prohibited from reviewing materials seized following a search order pending further applications.

Background

The applicants were all named as subjects in an investigation order relating to the trading of one company. In conjunction with that order, the Commission issued a non-disclosure order under s. 148(1) of the Securities Act. Ten days later, the Commission issued a search order and staff of the Executive Director searched the business premises of the subjects and removed various documents and records, as well as the cell phone of one of the applicants.

All of the applicants brought various disclosure applications relating to the issuance of the original and amended investigation orders as well as the search order. One of the applicants brought an application for form of stay to prohibit Commission staff from reviewing materials obtained under the search order.

Commission orders pre-hearing disclosure

The Commission ordered disclosure of all materials and evidence relating to the issuance of the investigation and search orders. While the Commission noted that disclosure obligations without a notice of hearing are not triggered, it had the authority to require disclosure in the circumstances of this case

The orders used by the Executive Director to further its investigation were broad in scope and used a significant power (i.e. search order). The Commission found that procedural fairness required disclosure in those circumstances in order to fully advance their applications that the investigation and/or search orders were done in violation of their Charter rights. The impact of such disclosure would not be significant on the Executive Director’s investigation.

Commission issues stay

The Commission held that it had authority to issue a stay pursuant to s. 171 of the Act and found that it would be a “form of variance” of the investigation and search orders. The stay would be, in effect, a restriction on the application of those orders (i.e. restricting staff from reviewing materials obtained under that order).

The Commission held there could be irreparable harm on the basis of the “intrusive nature of the search”, the nature of the materials seized (the cell phone contained personal information) and “the fact that the intrusion is ongoing (the cell phone remained in the possession of the Executive Director). If either order was held to be invalid, the applicant would suffer irreparable harm.

The Commission found that the balance of convenience favoured the stay as it would be limited in nature and not inhibit the Executive Director’s investigation powers in this or future cases to protect the public.