2005 BCSECCOM 80

142. Investigation order by commission – (1)The commission may, by order, appoint a person to make an investigation the commission considers expedient
(a) for the administration of this Act,
(b) to assist in the administration of the securities or exchange contracts laws of another jurisdiction,
(c) in respect of matters relating to trading in securities or exchange contracts in British Columbia, or
(d) in respect of matters in British Columbia relating to trading in securities or exchange contracts in another jurisdiction.

(2)In its order, the commission must specify the scope of an investigation to be carried out under subsection (1).

144. Investigator’s power at a hearing – (1)An investigator appointed under section 142 or 147 has the same power
(a) to summon and enforce the attendance of witnesses,
(b) to compel witnesses to give evidence on oath or in any other manner, and
(c) to compel witnesses to produce records and things and classes of records and things
as the Supreme Court has for the trial of civil actions.
. . .
(4)A witness giving evidence at an investigation conducted under section 142 or 147 may be represented by counsel.

34 . . . We must determine the predominant purpose of such an inquiry at which a witness is compelled to attend. In Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 SCR 557, Iacobucci J., writing for the Court referred to the regulatory nature of the Securities Act (at p. 589):

It is important to note from the outset that the [Securities Act] is regulatory in nature. In fact, it is part of a much larger framework which regulates the securities industry throughout Canada. Its primary goal is the protection of the investor but other goals include capital market efficiency and ensuring public confidence in the system . . . .

The goal of protecting our economy is a goal of paramount importance. In Pezim, the preeminence of securities regulation in our economic system was emphasized (at pp. 593 and 595):

This protective role, common to all securities commissions, gives a special character to such bodies which must be recognized when assessing the way in which their functions are carried out under their Acts.
. . .
The breadth of the [British Columbia Securities] Commission’s expertise and specialisation is reflected in the provisions of the [Securities Act]. Section 4 of the Act identifies the Commission as being responsible for the administration of the Act. The Commission also has broad powers with respect to investigations, audits, hearings and orders.
. . .
In reading these powerful provisions, it is clear that it was the legislature’s intention to give the Commission a very broad discretion to determine what is in the public’s interest . . .
. . .
35 Clearly, this purpose of the Act justifies inquiries of limited scope. The Act aims to protect the public from unscrupulous trading practices which may result in investors being defrauded. It is designed to ensure that the public may rely on honest traders of good repute able to carry out their business in a manner that does not harm the market or society generally. An inquiry of this kind legitimately compels testimony as the Act is concerned with the furtherance of a goal which is of substantial public importance, namely, obtaining evidence to regulate the securities industry. Often such inquiries result in proceedings which are essentially of a civil nature. The inquiry is of the type permitted by our law as it serves an obvious social utility.Hence the predominant purpose of the inquiry is to obtain the relevant evidence for the purpose of the instant proceedings, and not to incriminate Branch and Levitt. . . . [our emphasis]

80 Finally, the fundamental fairness of the powers of testimonial compulsion and document production in s. 128(1) of the Act must be evaluated in light of all other rights equally guaranteed under the Charter. Where a company officer is summoned to attend a hearing before investigators, he knows what the subject of the inquiry is. He can prepare himself for the questions. He will generally be accompanied by his lawyers. At the hearing itself, he will be treated with courtesy and will be given every opportunity to consult his lawyers and consider his answers. He will produce those documents requested by the investigators. It would be ironic to conclude that such a proceeding is, itself, contrary to the principles of fundamental justice if the only equally effective alternative reasonable available to the state to pursue a pressing and substantial objective would constitute a far more dramatic intrusion into individual rights. Given the profound asymmetries of information between market players and market regulators in the securities industry, such a reasonable alternative might very well require conferring upon securities regulators broad, intrusive and sweeping search and seizure powers. . . .

81 To recapitulate, although the distinction may be difficult to draw, courts must try to differentiate between unlicensed fishing expeditions that are intended to unearth and prosecute criminal conduct, and actions undertaken by a regulatory agency, legitimately within its powers and jurisdiction and in furtherance of important public purposes that cannot realistically be achieved in a less intrusive manner. Whereas the former may run afoul of s. 7 of the Charter, the latter do not.

82 As such, notwithstanding thatone of the primary purposes of an investigation under s. 128(1) of the Securities Act is to engage in a form of civil discovery of the witness as well as of the company to illuminate or investigate irregularities or suspicious conduct [our emphasis], I agree with Sopinka and Iacobucci JJ. that it has not been demonstrated that testimonial compulsion at these proceedings would be fundamentally unfair to the witnesses. As I recognized in [Thomson Newspapers Ltd. v. Canada (Director of Investigation and Research, Restrictive Trade Practices Commission), [1990] 1 SCR 425], at p. 578, “[c]ompelling the attendance of witnesses is an established investigatory tool in this age of governmental regulation of the economy”. Although such powers of investigation may not always be necessary in regulatory contexts, I conclude that they are indeed necessary in the present instance, given the profound asymmetry of information facing securities regulators, the close relationship between such investigatory powers and the obligations voluntarily undertaken by those participating in this regulated activity, and the lack of a less intrusive alternative means to investigate and deter market irregularities and improper conduct by market players.

32 The Commission has a duty to specify the scope of an investigation pursuant to s. 126(2) of the Securities Act. The very purpose of the investigation is to provide facts to the Commission for it to decide if there is sufficient information to proceed with a Hearing. The effect of the Investigating Order setting out the scope of the investigation is, in effect, defining what is relevant. It would be unrealistic to restrict the area of investigation further when many of the facts are solely with the witness and not known to the Commission. To this extent the procedure differs from that involving the state in a manner involving criminal law offences against an individual. In a regulatory proceeding what has taken place is the predominant issue at the investigation stage. In criminal law proceedings the state must produce evidence, without the individual’s assistance, that an offence has been committed by that individual.

120 The Court held that persons may be compelled to give evidence for a legitimate public purpose, such as proceedings under the Act, but they cannot be compelled if the predominant purpose of the summons is to incriminate them in a subsequent criminal or quasi-criminal proceeding. Although Mr. Justice Wood, the trial judge in [Branch] distinguished between the “investigative” stage and the “adjudicative” stage of the Commission’s proceedings, the Supreme Court of Canada did not.

121 Branch establishes that a summons issued for the purpose of an administrative hearing under the Act is not contrary to fundamental justice because of the limited scope of the inquiry. The Act is regulatory and its purpose is to serve legitimate social goals; thus the requirement that the infringement of the liberty interest be in accordance with fundamental justice is satisfied. In a particular case, however, it is necessary to determine whether the investigators’ purpose in compelling the testimony is for a legitimate purpose connected with the instant proceedings or for an incriminatory purpose related to future criminal or quasi-criminal proceedings.

122 . . .The Notice of Hearing, with its detailed allegations, was issued after 18 months of investigation. Indeed, one of the allegations against Johnson is that he made false statements to the investigators in the course of his first two interviews. . . . The probable purpose of a further interview is to obtain information which may be used against Johnson at the Hearing itself. However, this would appear to be a permissible purpose under the reasoning in Branch. S. 144 imbues the investigators with broad powers analogous to those of the Supreme Court in a civil action. [our emphasis]

11 In my view, the reasoning in Branch, together with the protection available to Mr. Johnson in the form of use or derivative-use immunity should criminal or quasi-criminal proceedings be taken against him, lead to the conclusion that there is no reasonable likelihood that he would succeed on appeal . . . . The case is simply covered by Branch. As in that case, there is no indication in the evidence of an intention by the Securities Commission or Crown to misuse the information to be obtained at the hearing, and of course, the use of immunity rule ensures that that could not occur.

12 Nor do I think any distinction in principle can be made on the basis that the investigation phase of this proceeding has closed or has nearly closed. As Madam Justice Allan pointed out in her Reasons, the distinction made between the investigative and adjudicative phases made by Wood J. (as he then was) at the trial level in Branch, was not taken up by the Supreme Court of Canada in Branch or any other case.