Finding the limits on regulators’ inquiries

The Supreme Court of Canada has granted the Ontario Securities Commission (OSC) leave to appeal a lower court decision, which found that an investigation order and summons issued in connection with an investigation into crypto platform, Binance Holdings Ltd., was too broad and effectively unconstitutional.

In a decision handed down in November of last year, the Court of Appeal for Ontario ruled that an investigative summons obtained by an OSC investigator against Binance in 2023 — which made wide-ranging demand for documents from the firm — was so broad that it authorized an unreasonable search, breaching the Charter of Rights and Freedoms.

Among other things, the appeal court said that a production order from an OSC investigator needs to be limited to “documents that may be relevant to an inquiry” into suspected violations of securities law. But, in this case, it found that the order, which sought all communications between anyone who did any work for Binance over a two-and-a-half year period throughout Canada, was too sweeping.

“This demand, enforceable by the threat of contempt proceedings, is staggering in its breadth and in my view was made without apparent concern about the relevance of what was being demanded, beyond mere speculation that there could be something relevant that would otherwise be missed,” the court said in ruling that the summons was “unconstitutionally overbroad.”

The OSC sought leave to appeal that ruling, and today the Supreme Court granted that leave — meaning that it will now consider where to set the limits on regulators’ investigative summonses.

Binance originally asked the Divisional Court of the Ontario Superior Court of Justice to strike down the investigation order and summons, but in a 2023 decision, that court declined to review the Charter issues raised by Binance, and it upheld the investigative order and summons.

The firm then asked that Capital Markets Tribunal to revoke the summons — but, in a 2024 ruling, that panel said that it didn’t have jurisdiction to revoke an investigation order and summons.

The Court of Appeal’s decision reconsidered both those rulings together, ultimately deciding that the summons was too expansive.

As a result, the appeal court ordered the seizure of documents obtained under that summons, saying that the OSC shouldn’t be allowed to retain documents collected under an unlawful summons — and, it directed the regulator to generate a new summons that doesn’t breach the Charter.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.