Grigoras Law represents investors, issuers, directors, and market intermediaries in securities disputes across Ontario. We act on both sides of the “v.” in matters involving primary and secondary market misrepresentation, continuous disclosure issues, registration and advisory conduct, fund management disputes, and governance failures that spill into securities liability. Our work often runs in parallel with regulatory oversight by the Ontario Securities Commission and other Canadian regulators, coordinating civil claims, class proceedings, and settlement strategy where enforcement risk and private exposure overlap. We focus on early control of the evidentiary record, clear damages theory, and practical outcomes, whether that means targeted injunctive relief, negotiated resolutions, or hard-fought litigation to restore confidence, protect capital, and resolve high-stakes market disputes.
Advice and representation on statutory civil liability for misrepresentation and material non-disclosure in public and exempt markets, including how statutory remedies interact with common law claims and regulatory enforcement. Jump to section
Claims and defences arising from alleged misrepresentations in prospectuses and other primary market disclosure, including rescission, damages, allocation of responsibility among issuers, directors, officers, underwriters, and experts, and the use of due diligence defences. Jump to section
Litigation involving misrepresentation in offering memoranda and exempt-market documents, blending statutory rights of rescission and damages with common law misrepresentation, contract, and fiduciary duty theories in closely held and specialized offerings. Jump to section
Secondary market misrepresentation and failure-to-disclose claims under statutory regimes, including responsible issuer exposure, material change analysis, liability caps, and forward-looking information defences. Jump to section
Guidance on standing, leave motions, and certification in secondary market class proceedings, including strategic use of expert evidence, market impact analysis, and the interaction between leave and class action tests. Jump to section
Negligent and fraudulent misrepresentation, economic torts, and contractual claims arising from securities transactions, including how they complement or diverge from statutory civil liability remedies. Jump to section
Civil and derivative-style accountability actions for insider trading and tipping, including profit disgorgement claims, issuer-led recovery, and coordination with regulatory investigations. Jump to section
Navigating OSC investigations, settlements, and hearings alongside civil or class proceedings, including use of regulatory records, no-contest settlements, and the distinct objectives of public and private enforcement. Jump to section
Strategy and execution in securities class actions, including certification, damages modelling, event studies, funding arrangements, and negotiation of court-approved settlements. Jump to section
Practical guidance for issuers, boards, and investors on preventing and managing securities disputes, including disclosure processes, audit committee oversight, limitation period monitoring, and cross-border coordination. Jump to section
Securities litigation in Ontario sits at the intersection of capital markets, investor protection, and corporate governance. It arises when investors claim they were misled about a security, when insiders misuse confidential information, or when issuers fail to comply with the disclosure obligations that underpin fair and efficient markets. Modern securities law in Canada assumes that robust, accurate disclosure allows investors to assess risk and allocate capital rationally. When disclosure breaks down, the law provides both regulatory and civil tools to restore confidence and compensate those who have suffered losses.
In practice, securities disputes in Ontario often involve public issuers whose securities trade on the Toronto Stock Exchange or other Canadian marketplaces, but the same principles can apply to exempt-market offerings, investment funds, and complex financing structures. Issuers, underwriters, directors, officers, investment dealers, portfolio managers, and other gatekeepers may all face exposure when disclosure is alleged to be false or incomplete. Investors may sue individually, but the regime is designed with class proceedings in mind, recognizing that many investors suffer similar harm when misrepresentations affect market price.
Ontario’s system distinguishes between public enforcement, carried out by regulators such as the Ontario Securities Commission (OSC) through administrative and quasi-criminal proceedings, and private enforcement, where investors seek redress in the civil courts. The same underlying conduct, such as misleading continuous disclosure or insider trading, can trigger both administrative sanctions and civil liability. The civil side rests heavily on statutory civil liability provisions in the Securities Act (Ontario) and parallel statutes in other provinces, which supplement and, in many respects, improve upon traditional common law claims like negligent misrepresentation or fraud.
Canadian securities legislation creates a framework of statutory civil liability (SCL) that applies in defined situations, including misrepresentation in a prospectus, an offering memorandum, or certain circulars, trading or tipping while in possession of material non-public information, and misrepresentation in continuous disclosure or other public statements in the secondary market.
The central concept is the statutory definition of “misrepresentation,” which captures both an untrue statement of a material fact and an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the circumstances. A material fact is one that would reasonably be expected to have a significant effect on the market price or value of the securities. By focusing on the effect of information on investment decisions and market pricing, the legislation aims to match civil liability to the economic harm that results when the market trades on an inaccurate picture of the issuer’s business, operations, or capital.
One of the most important differences between statutory civil liability and common law misrepresentation is the allocation of burdens. At common law, an investor generally must prove misstatement, reliance, negligence or fraud, and causation. Under the statutory regime, misrepresentation and certain other elements are framed in a way that shifts much of this burden onto defendants as defences. Reliance, negligence, and causation issues that would traditionally form part of the plaintiff’s case become matters the defendant may invoke in order to reduce or escape liability. This design reflects an explicit policy choice: to make it easier for investors to pursue meritorious claims while still recognizing that defendants should not be treated as insurers against all market losses.
Statutory civil liability provisions in Canadian securities law were designed to correct specific weaknesses in traditional misrepresentation actions. At common law, an investor alleging negligent or fraudulent misrepresentation must usually demonstrate that the defendant owed them a duty of care, that the impugned statement was untrue, inaccurate, or incomplete in a material way, that the investor actually relied on it, and that this reliance caused their loss. Those requirements are difficult to satisfy in a public markets context, where investors trade based on a mix of disclosure documents, analyst commentary, index inclusion, and market signals, many of which are not traceable to a particular statement or moment in time. The jurisprudence also struggled with how to treat reliance and causation when securities are bought and sold on exchanges rather than through one-on-one communications.
The statutory regime for civil liability responds to these challenges by imposing clearly defined obligations on issuers and certain other market actors in relation to prescribed categories of disclosure, and by relaxing the reliance burden on investors. In the primary market, the prospectus and related documents are treated as the central disclosure vehicle. In the secondary market, continuous disclosure documents and public oral statements are treated as the key channels through which information reaches the market. Legislatures in Ontario and other major provinces crafted provisions that deem investors to have relied on prescribed disclosure in certain circumstances, or that dispense with individual reliance altogether for secondary market claims, while still requiring proof that a misrepresentation or failure to disclose a material change occurred.
At the same time, statutory civil liability does not displace common law misrepresentation. Plaintiffs often plead both statutory and common law causes of action arising from the same disclosure events. The statutory route may offer advantages such as presumptions about reliance, defined measures of damages, and streamlined standing rules for classes of investors. Common law claims can still be valuable where the statutory provisions do not apply, where the plaintiff seeks different heads of damages, or where the fact pattern is better captured by fraud, negligent misrepresentation, or related economic torts. Courts therefore treat statutory civil liability as adding an additional set of tools rather than eliminating traditional remedies. From a defence perspective, this combined landscape means that challenges to causation, reliance, and loss must be tailored differently depending on whether the claim is brought under the Securities Act or at common law.
The statutory provisions also introduce detailed defences and liability allocation mechanisms that have no real counterpart at common law. For example, the legislation provides for due diligence defences and, in some circumstances, proportionate liability between multiple defendants, reflecting a policy choice to encourage rigorous disclosure processes without exposing participants to unlimited and unpredictable damages. These features are meant to strike a balance: they enhance investor protection while also recognizing the complexity of modern capital markets and the importance of maintaining a viable environment for public issuers, underwriters, and professionals.
Prospectus liability deals with the primary distribution of securities to the public. When an issuer conducts a public offering, it must file and deliver a prospectus that discloses all material facts relating to the securities being offered. If that prospectus contains a misrepresentation, purchasers who acquired securities under the document during the distribution period have a statutory right of action.
The statutory cause of action generally allows investors to seek either rescission or damages. Rescission effectively unwinds the transaction by permitting the investor to return the securities in exchange for the original purchase price, whereas damages compensate for the difference between the price paid and the value the securities would have had if the prospectus had been accurate. Responsibility can extend to the issuer, every director at the time of filing, certain officers, underwriters, and experts such as auditors or engineers whose reports are included or referred to in the prospectus. This allocation of liability reflects the shared responsibility for disclosure and the expectation that each gatekeeper will exercise meaningful due diligence before allowing their name to be associated with an offering.
In many jurisdictions, the regime softens the traditional requirement that each investor prove individual reliance on specific statements in the prospectus. The law recognizes that investors, particularly in public offerings, rely on the integrity of the disclosure system as a whole. If a material misrepresentation is established, reliance may be presumed for purchasers who acquired under the prospectus within the prescribed time frame, subject to the statutory defences available to each defendant. That presumption makes litigation more manageable where hundreds or thousands of purchasers have been affected.
Offering memoranda (OMs) are used in many exempt-market offerings when securities are sold without a full prospectus. Even though these offerings target narrower groups (often accredited investors or those with specific connections to the issuer), the legislation still recognizes that disclosure can go wrong, and it extends statutory civil liability to misrepresentations in an OM. Purchasers who receive a misleading offering memorandum generally obtain a right of action similar to that in the prospectus context, again framed around rescission or damages for misrepresentation.
The existence of OM liability reflects a policy judgment that even sophisticated or exempt investors should be able to rely on written disclosure provided in connection with an offering. However, the litigation dynamics can be somewhat different from public offerings. The investor pool is usually smaller and more concentrated, which can shape whether claims proceed individually or via class proceedings. The facts tend to be more idiosyncratic as well, particularly when exempt offerings are used in closely-held ventures where investors may also have private communications or contractual arrangements with the issuer or promoters. In practice, civil claims in this space often combine statutory OM misrepresentation provisions with common law theories such as negligent misrepresentation, fraud, breach of contract, or breach of fiduciary duty.
Statutory civil liability also extends to misrepresentations in certain circulars, particularly in the context of take-over bids, issuer bids, arrangements, and other corporate transactions that require securityholder approval. When shareholders are asked to vote on a transaction or decide whether to tender into a bid, they ordinarily receive circulars that describe the terms, the rationale, the risks, and the board’s recommendations. If those circulars contain a misrepresentation, any securityholder who receives the document may have standing to sue.
Litigation over circular misrepresentation often turns on questions of materiality, conflicts of interest, and the adequacy of fairness opinions or other expert reports. Courts must balance the need for fulsome disclosure against the practical reality that complex transactions cannot be reduced to a few simple sentences. The test remains whether omitted or inaccurate information would reasonably be expected to affect a securityholder’s decision to vote or tender. When liability is found, remedies usually focus on compensating those who transacted in reliance on the circular or on unwinding or adjusting the transaction where that is feasible. These cases frequently overlap with fiduciary duty and oppression claims, especially when control transactions are perceived to favour insiders at the expense of minority securityholders.
Primary market statutory civil liability does not stop at full prospectus offerings. The same policy concerns about accurate disclosure, informed investment decisions, and fair capital raising apply when securities are sold under an offering memorandum or other exempt-market structure. Legislatures have therefore extended statutory rights of action to misrepresentations in offering memoranda and certain types of circulars, recognizing that investors in exempt distributions can be just as vulnerable to incomplete or misleading information as those in a traditional prospectus offering.
When a company raises capital using an offering memorandum, investors are entitled to expect that the document contains no misrepresentation of a material fact. If the offering memorandum is misleading by omission or commission, investors generally have a statutory right to rescind their purchase within a tight time frame, or to claim damages within longer limitation periods. The statutory scheme specifies who may be sued, typically including the issuer, its directors, promoters, and, in some cases, influential shareholders or others who sign the document or appear to stand behind it. The structure of liability and the availability of due diligence defences broadly mirror the prospectus regime, but the context is often more closely held or specialized exempt markets where the quality of disclosure and investor sophistication can vary significantly.
Statutory civil liability also attaches to misrepresentations in circulars used in connection with take-over bids and issuer bids, including directors’ circulars and directors’ or officers’ circulars. These documents are central in transactional settings where existing securityholders must decide whether to tender their securities or maintain their position. If the circular misstates material facts about the bid, the issuer, or the strategic alternatives, affected securityholders may be entitled to claim damages or rescission under the relevant provisions. The regime recognizes that, in the heat of contested transactions, the incentive to present information in a strategic or slanted way is strong, and statutory civil liability helps to align participants’ incentives with full and fair disclosure.
In practice, disputes about offering memoranda and bid circulars often turn on the level of detail provided about risks, conflicts of interest, and contingent events. Courts look closely at the drafting process, the role of counsel and experts, and whether the defendants can demonstrate that they made a reasonable investigation having regard to the circumstances. Where the evidence shows that the document was prepared carefully and that recognized uncertainties were clearly disclosed, a due diligence defence may succeed. Where important problems were downplayed, ignored, or left to implication, courts are less sympathetic, particularly if the issuer or insiders stood to benefit significantly from the transaction.
Limitation periods play an important role in primary market civil liability and require careful attention by both plaintiffs and defendants. For statutory claims involving a prospectus, offering memorandum, circular, or insider trading or tipping, there are typically two distinct limitation periods, one tied to rescission and another to damages. Investors seeking rescission of a purchase usually must act within a relatively short period, often measured in months from the date of the transaction. By contrast, an action for damages can usually be brought within the earlier of a fixed number of years from the transaction and a shorter period after the investor first had knowledge of the facts giving rise to the cause of action.
These dual limitation periods reflect a policy choice about fairness and finality. Legislatures want investors who wish to undo a transaction altogether to decide quickly, so that issuers and intermediaries are not left indefinitely uncertain about whether capital raised may have to be returned. At the same time, it may take investors longer to uncover the full extent of a misrepresentation or to appreciate its impact on value, particularly in complex offerings. The knowledge-based aspect of the damages limitation period recognizes that reality but prevents open-ended liability by coupling it with an absolute outer limit measured from the transaction date. For counsel, this structure reinforces the importance of early investigation, document gathering, and timely decisions about whether to pursue rescission, damages, or both.
From a defence perspective, limitation periods can be outcome-determinative. Defendants often argue that sophisticated investors, or those who received early warning signs, should be taken to have discovered the relevant facts earlier than they suggest. Plaintiffs, in turn, emphasize the difference between suspicion and sufficient knowledge to appreciate that a legal claim is available. Courts must evaluate what a reasonable investor in the circumstances would have understood, drawing on disclosure history, analyst coverage, internal communications, and the timing of corrective announcements.
One of the most significant developments in Canadian securities litigation has been the introduction of secondary market statutory civil liability. Historically, investors who bought or sold shares on the open market faced serious hurdles if they wanted to sue for misrepresentation in continuous disclosure documents such as annual reports, interim financial statements, and press releases. At common law, each investor generally had to prove that they actually read and relied on the impugned statements, an unrealistic expectation in a liquid market where investors may trade based on price movements, analyst reports, or index inclusion.
The secondary market SCL provisions respond to these difficulties. They create a statutory right of action against “responsible issuers,” certain influential persons, and those with authority to speak on their behalf, where a public document or public oral statement contains a misrepresentation, or where there has been a failure to make timely disclosure of a material change. Any person who acquired or disposed of the issuer’s securities during the period between the misrepresentation and its public correction (or between the time a material change should have been disclosed and the time it was disclosed) has standing to sue, without needing to prove individual reliance.
The legislation tempers this plaintiff-friendly structure with a number of safeguards. Plaintiffs must obtain leave of the court before they can proceed, and the court must be satisfied that the action is brought in good faith and has a reasonable possibility of success. The Supreme Court of Canada has clarified that this threshold is more than a mere speed bump (see Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18); judges must undertake a reasoned consideration of the evidence to ensure that the case has some merit, while stopping short of conducting a mini-trial.
In addition, the Acts impose liability caps and detailed defences, recognizing that open-market issuers face a constant stream of disclosure decisions and that exposure to uncapped damages could deter companies from listing or from making legitimate forward-looking statements. Liability is generally proportionate to each defendant’s responsibility, and there are specific defences for forward-looking information that is identified as such and accompanied by appropriate cautionary language. Courts assessing these defences look closely at the processes used to verify information, the involvement of experts, the role of audit committees, and how quickly issuers responded once problems were discovered.
Secondary market cases are almost always brought as class proceedings. The statutory provisions give standing to anyone who acquired or disposed of the issuer’s securities during the misrepresentation period, which naturally lends itself to a class definition centred on purchasers and sellers within a defined time frame. Courts have developed a sophisticated body of law on certification, class definition, and the interaction between common law and statutory claims in this context.
To obtain certification, plaintiffs must satisfy the usual class action criteria, including an identifiable class, common issues, and the preferable procedure requirement. In Ontario, recent amendments to the Class Proceedings Act have raised the bar by requiring that a class proceeding be superior to other reasonably available means of resolving the dispute and that common issues predominate over individual ones. Courts have recognized that securities class actions often serve goals of access to justice, judicial economy, and behavioural modification, but they also emphasize that certification is not automatic. In the securities context, judges have had to grapple with whether common law negligent misrepresentation claims can be certified alongside statutory claims, particularly in light of the individual reliance requirement and the possibility that the statutory route may be the preferable procedure for secondary market misrepresentation.
The leave requirement for secondary market claims adds another procedural filter. Plaintiffs must persuade the court that there is a reasonable possibility the action will be resolved in their favour. Leading decisions, including those involving drug approval processes, mining issuers, and financial institutions, underscore that courts scrutinize the alleged misrepresentation, the timing of disclosure, and the evidence of market impact. Some cases have been allowed to proceed where the alleged misrepresentation or omission appears capable of affecting a reasonable investor’s decision, while others have been stopped at the leave stage where the evidence does not support a material change or where the disclosure record is found to have met statutory expectations.
Secondary market statutory civil liability provisions were introduced later than primary-market rules and reflect a careful balance between investor protection and market efficiency. They were developed in response to long-standing recommendations and policy reports that identified the difficulty of bringing common law misrepresentation claims in an impersonal, exchange-traded environment. The legislative schemes in Ontario and other major provinces share common features, including a defined class of responsible issuers, a focus on misrepresentations in public documents and public oral statements, and specific remedies for failures to make timely disclosure of material changes.
A central feature of these regimes is the requirement that plaintiffs obtain leave of the court before proceeding. This leave requirement is intended to screen out weak or tactical claims without turning the process into a full trial. The court must be satisfied that the action is brought in good faith and has a reasonable possibility of success at trial. In applying this standard, judges review the pleadings and available evidence with more rigor than in a simple motion to strike. They assess whether the alleged misrepresentation or failure to disclose is arguably material, whether there is some basis in fact to link the impugned disclosure to market price movements, and whether the proposed defendants fall within the statutory categories. At the same time, the court does not finally resolve disputed facts, credibility issues, or expert contests at the leave stage; those matters are generally reserved for trial if the claim proceeds.
Secondary market claims also frequently proceed as class actions, which adds another layer of procedural complexity. Certification in a class proceeding requires the proposed representative plaintiff to show that the pleadings disclose a cause of action, that there is an identifiable class, that the claims raise common issues, that a class proceeding is the preferable procedure, and that the representative can fairly and adequately represent the class. In the secondary market context, courts assess whether the alleged misrepresentations and failures to disclose raise common issues suitable for class-wide determination and whether a class proceeding provides meaningful access to justice, judicial economy, and behaviour modification compared with individual actions. The overlap between the leave and certification motions has led courts and commentators to scrutinize the efficiency and gatekeeping role of each step.
Critiques of secondary market class actions often focus on their costs and the distribution of benefits. Defending such actions can be expensive and time-consuming, and settlement funds may ultimately be paid out of corporate resources, indirectly borne by current shareholders. Some commentators question whether the marginal recovery to individual class members, after fees and administrative costs, justifies the burden on issuers and their stakeholders, and whether the risk of such litigation discourages companies from going public or remaining listed. Others see these actions as a necessary complement to regulatory enforcement, providing a meaningful deterrent and compensation mechanism in cases where regulatory sanctions alone might be insufficient. The statutory civil liability regime thus operates within a broader debate about the optimal mix of public enforcement and private litigation in maintaining market integrity.
Limitation periods for secondary market statutory civil liability are framed differently than those for primary-market prospectus or offering memorandum claims. Rather than tying the clock to the date of a particular transaction, the legislation generally links the limitation period to the date of the impugned conduct and to a subsequent news release disclosing that leave to commence a secondary market action has been obtained. For example, the statutory scheme in Ontario sets an outer limit measured from the date of the misrepresentation or failure to disclose and a shorter period running from the issuance of the leave news release. This structure acknowledges that secondary market misrepresentations may affect numerous investors over extended trading windows and that investor awareness of a potential claim often arises only after a leave decision becomes public.
Case law has grappled with how these statutory limitation periods interact with general limitation statutes and with procedural rules governing class proceedings. Earlier decisions in Ontario raised the possibility that, if leave was not obtained within the applicable time frame, secondary market claims could be statute-barred even where a class proceeding had been commenced in time. This created significant uncertainty and risk for investors. Subsequent appellate and Supreme Court decisions, including the Green v. CIBC line of cases, clarified that the limitation period could be suspended in favour of putative class members in appropriate circumstances and restored coherence to the regime. Legislative amendments to class proceedings statutes have also adjusted how limitation periods are tolled in the class context, reinforcing the need for careful attention to timing when planning or defending secondary market claims.
Secondary market civil liability also raises complex jurisdictional questions in an era of globally integrated capital markets. Investors resident in one province may purchase securities of an issuer incorporated or primarily operating elsewhere, listed on multiple exchanges. Courts have held that, for secondary market civil liability, the governing law will often be the law of the jurisdiction where the investor acquired the securities, provided that the issuer has a real and substantial connection to that jurisdiction as defined by the legislation. In some cases, Canadian courts have stayed or declined to hear proposed secondary market class actions in favour of foreign proceedings, particularly where the issuer has minimal continuing ties to Canada or where parallel litigation elsewhere is more closely connected to the dispute. These jurisdictional and forum issues can significantly affect litigation strategy, class definition, and settlement design.
Despite the breadth of statutory civil liability, common law causes of action continue to play a significant role in securities litigation. The modern basis for common law civil liability in this area traces back to cases such as Hedley Byrne & Co. v. Heller & Partners Ltd., which established that a party who carelessly makes a statement upon which another reasonably relies can be liable in negligence. In the securities sphere, this principle underlies claims of negligent misrepresentation and fraud brought against issuers, directors, auditors, underwriters, and others involved in disseminating information to investors.
Common law misrepresentation claims require the plaintiff to prove that a false statement was made, that it was material, that the defendant was at least negligent in making it, that the plaintiff relied on it, and that the reliance caused the claimed losses. In individual suits, such as claims involving private placements, investment advice, or bespoke financing arrangements, these elements can often be established with direct evidence. In large secondary market cases, however, individual reliance and causation can be much harder to prove on a class-wide basis. That difficulty was one of the key drivers behind the creation of the secondary market statutory regime, which relaxes reliance requirements and substitutes a more structured set of presumptions, defences, and damage limits.
Courts have recognized that plaintiffs frequently advance both statutory and common law claims in the same proceeding. One reason is that statutory schemes may cap damages or limit liability for certain actors, encouraging plaintiffs to invoke common law theories to seek fuller recovery where the facts support it. Another is that some fact patterns do not fit squarely within statutory definitions, particularly where the alleged wrongdoing is intertwined with contractual disputes, corporate governance failures, or broader patterns of deceit. At the same time, courts have cautioned against using common law claims to circumvent the carefully balanced policy choices in the statutory regime, especially where reliance rules and damage caps were specifically designed to manage systemic risk to issuers and capital markets.
While much of our practice focusses on civil and commercial litigation, investors and issuers operate in an environment where regulatory enforcement is never far in the background. Securities regulators investigate suspected misconduct, hold administrative hearings, and can impose sanctions ranging from cease-trade orders and director-officer bans to significant monetary penalties. Breaches of securities law can also give rise to quasi-criminal or criminal charges in more serious cases. Administrative, civil, and quasi-criminal responses are complementary, not mutually exclusive. A single course of conduct (such as a long-running misrepresentation in continuous disclosure), can trigger OSC investigations, settlement discussions, and parallel or follow-on civil suits by investors.
From a litigation standpoint, enforcement activity can have several important effects. First, regulatory investigations often generate documentary records, witness interviews, and expert analyses that later become relevant in civil proceedings. Where settlement agreements or reasons for decision are made public, plaintiffs may draw on regulators’ findings to support their claims, although courts retain an independent role in assessing evidence. Second, the existence of administrative penalties or sanctions can influence settlement dynamics in civil suits: issuers and directors may be more inclined to resolve investor claims after addressing regulatory risk, or they may seek to coordinate global settlements that cover both regulatory and private actions. Third, regulators in some jurisdictions have standing to pursue accountability actions on behalf of issuers when the issuer fails to pursue claims against insiders engaged in insider trading or tipping, which can intersect with private enforcement and derivative-style remedies.
Civil courts remain careful, however, not to simply adopt regulators’ conclusions wholesale. Evidence of regulatory findings may be admissible but not determinative, especially where settlements are negotiated on a no contest basis. In addition, the standards of proof and the policy objectives in enforcement proceedings differ from those in civil actions. Litigation primarily aims to compensate investors for losses caused by wrongs, while regulatory enforcement focuses on deterrence, market integrity, and the public interest. Appreciating these differences is a key part of designing litigation strategy in complex securities cases.
Statutory civil liability is not limited to disclosure documents. It also extends to insider trading and tipping – trading or recommending trades while in possession of material non-public information (MNPI). Canadian statutes treat this conduct as a serious breach of market integrity because it allows informed insiders to profit at the expense of uninformed market participants. In addition to administrative sanctions and potential quasi-criminal charges, insiders and tippees may face civil actions from those on the other side of their trades, along with accountability actions brought on behalf of the issuer itself.
In an accountability action, the issuer can sue an insider, affiliate, or associate who has traded or tipped while in possession of MNPI, seeking to recover the profit made or the loss avoided. If the issuer fails to act, legislation allows the securities commission or a securityholder to ask the court for permission to pursue the claim in the issuer’s name. The court must be satisfied that the action is in the best interests of the issuer and its securityholders, balancing the anticipated costs against the likely benefits. If a securityholder or the commission is granted standing, the issuer may be ordered to pay their costs, recognizing that these actions vindicate the company’s rights and reinforce market integrity.
For private investors, civil claims related to insider trading and tipping often take the form of statutory actions by persons who traded contemporaneously with the insider, along with common law claims where misrepresentations or omissions are alleged. These cases can be challenging from an evidentiary standpoint, as plaintiffs must establish the existence of MNPI, show that it was material, and link trading patterns to the use or communication of that information. Where regulators have already investigated and issued findings, plaintiffs may benefit from that record; where no such record exists, civil discovery and expert analysis of trading data assume greater importance.
While much of securities civil liability revolves around misrepresentation in disclosure documents, Canadian statutes also create civil remedies related to insider trading and tipping. These provisions reflect the view that trading on undisclosed material information, or selectively providing such information to favoured counterparties, undermines market fairness and investor confidence. In addition to regulatory sanctions imposed by commissions, investors and issuers may have statutory rights of action where insider trading or tipping has caused them loss or unjustly enriched the wrongdoer.
One type of civil claim allows a person who traded with, or on the other side of the market from, an insider or tippee who possessed undisclosed material information to seek compensation for the advantage gained through that informational asymmetry. These actions are conceptually similar to misrepresentation claims in that they focus on information that should have been available to the market but was not. However, the structure of the remedy is tailored to the nature of the misconduct: courts may focus on disgorging the benefit obtained by the insider or tippee rather than reconstructing a hypothetical “correct” market price at a particular moment.
Another type of claim is sometimes described as an accountability action, in which the issuer itself seeks to recover profits realized by insiders who have breached their statutory and fiduciary duties by trading on undisclosed material information. In such cases, securities legislation may authorize the issuer to sue, or may allow securityholders to bring a derivative action on the issuer’s behalf if the company fails to act. This aligns with broader principles of corporate governance: insiders owe duties to the corporation, and it is the corporation, at least in the first instance, that is entitled to the proceeds of any corporate opportunities or advantages improperly appropriated by those insiders.
Limitation periods and standing rules again play a significant role in these insider trading and tipping claims. The statutes generally impose short limitation periods measured from the date of the impugned trade or from the time the plaintiff became aware of the misconduct, reflecting the expectation that unfair trading advantages should be identified and addressed swiftly. Knowledge of insider trading may emerge from regulatory investigations, whistleblowers, or market surveillance reports, and plaintiffs must decide quickly whether to commence civil proceedings, coordinate with regulatory enforcement, or pursue other remedies. The combination of public enforcement and private civil accountability is intended to deter insider misconduct, promote timely disclosure, and preserve confidence that capital markets operate on a level informational playing field.
Securities class actions have become a prominent feature of the Canadian litigation landscape. All provinces now have legislation that can be used to bring class proceedings, though they do not share identical approaches. In Ontario, British Columbia, Québec, Alberta, and more recently Prince Edward Island, courts have developed detailed jurisprudence on when securities cases should be certified and how to manage them efficiently. Certification is not a judgment on the merits but a procedural gateway designed to determine whether a class action is a fair and efficient way of resolving common issues compared to multiple individual suits or alternative processes.
Judges consider whether there is an identifiable class, whether common issues predominate, whether a class proceeding is the preferable procedure, and whether there is an appropriate representative plaintiff who can fairly and adequately represent the class. In securities cases, the common issues often focus on the existence of a misrepresentation, the materiality of omitted information, the timing and adequacy of corrective disclosure, and the role of each defendant. Where common law negligent misrepresentation claims are advanced alongside statutory ones, courts wrestle with whether reliance issues can be addressed efficiently, and in some instances have declined to certify common law claims while allowing statutory SCL claims to proceed.
Damages in securities class actions are typically calculated by comparing the price at which class members bought or sold securities during the misrepresentation period with the price that would likely have prevailed had the truth been known. Economists may perform event studies to isolate the portion of price movement attributable to the misrepresentation as opposed to general market or industry factors. The texts emphasize that this can be an intricate exercise; models such as proportionate trading approaches have been discussed to estimate how many securities were held by class members at different points in time, although courts remain cautious about complex methodologies that may be difficult to prove.
From a practical perspective, defendants must decide whether to oppose certification, whether to contest the leave test for secondary market claims, and when to consider settlement. Certification and leave motions can be costly and time-consuming, but a successful challenge may significantly narrow or terminate the case. At the same time, the prospect of a single binding judgment or settlement that resolves the claims of all class members can be attractive to both sides. Securities class actions may also involve third-party litigation funding and cost-sharing arrangements, especially in jurisdictions where unsuccessful plaintiffs are exposed to adverse costs awards. Courts carefully scrutinize these arrangements to ensure they do not create undue conflicts of interest and that they remain consistent with access to justice.
Securities litigation is highly fact-specific, but several recurring themes emerge from the Canadian jurisprudence and commentary. For issuers and their boards, one central lesson is that process matters. Courts assessing defences such as due diligence, reasonable investigation, and forward-looking information protections look closely at how disclosure decisions were made. They ask whether audit committees met regularly, whether management engaged qualified experts, whether concerns were raised and properly addressed, and whether documentation supports the conclusion that the issuer took disclosure obligations seriously. Robust governance structures and a culture of compliance do not guarantee immunity from litigation, but they can significantly strengthen the defence position and may persuade courts that any misstatements were inadvertent and promptly corrected.
For investors contemplating litigation, the regime offers a range of strategic choices. Plaintiffs must decide whether to proceed individually or as part of a class; whether to rely primarily on statutory civil liability or to add common law and contractual claims; and how to coordinate with parallel regulatory processes or foreign proceedings where the issuer has cross-border listings. They must also grapple with practical issues such as limitation periods, funding arrangements, and the evidentiary challenges of proving loss causation and damages in dynamic markets. The textbook materials emphasize that access to justice, judicial economy, and behaviour modification remain the guiding goals of class proceedings, even as procedural requirements become more rigorous in some provinces.
Finally, the interplay between statutory schemes and common law continues to evolve. Courts are still refining the boundaries between statutory and non-statutory remedies, the extent to which reliance can be presumed in different contexts, and the role of foreign legal theories such as fraud on the market. The Canadian approach reflects a deliberate decision not to simply import U.S. models, but to adapt them in light of domestic policy choices about market integrity, investor protection, and the health of public capital markets. For practitioners and clients engaged in securities litigation, staying attuned to these developments, both doctrinal and practical, is essential to navigating a field where legal rules, market practices, and regulatory expectations are closely intertwined.
Disclaimer: The answers provided in this FAQ section are general in nature and should not be relied upon as formal legal advice. Each individual case is unique, and a separate analysis is required to address specific context and fact situations. For comprehensive guidance tailored to your situation, we welcome you to contact our expert team.
Securities litigation refers to legal disputes involving violations of securities laws, which govern the issuance, trading, and regulation of financial instruments such as stocks, bonds, and derivatives. This type of litigation typically arises from allegations of misrepresentation, insider trading, market manipulation, or breaches of fiduciary duty.
Misrepresentation can occur when companies provide false or misleading information in their financial statements or prospectuses, leading investors to make decisions based on incorrect data. Insider trading involves trading based on non-public, material information, giving an unfair advantage.
Market manipulation includes actions like pump-and-dump schemes, where the value of a security is artificially inflated to sell at a profit, followed by a sharp decline in value. Breaches of fiduciary duty occur when corporate directors or officers fail to act in the best interests of shareholders.
Securities litigation aims to protect investors, ensure market integrity, and maintain investor confidence by holding wrongdoers accountable. It can involve class actions, regulatory enforcement actions, or individual lawsuits, and may result in remedies such as damages, disgorgement of profits, and injunctive relief. Understanding securities litigation is crucial for investors, corporations, and legal professionals to navigate the complexities of the financial markets and uphold legal and ethical standards.
Common types of securities law violations include misrepresentation, insider trading, market manipulation, and breaches of fiduciary duty. Misrepresentation involves providing false or misleading information about a company’s financial health or prospects, typically in prospectuses, financial statements, or public announcements. This can lead investors to make decisions based on inaccurate information, resulting in financial losses.
Insider trading occurs when individuals with access to non-public, material information about a company trade its securities, exploiting this privileged knowledge for personal gain. Market manipulation encompasses a variety of tactics used to artificially affect the price or volume of a security, such as spreading false rumours, engaging in wash trades, or conducting pump-and-dump schemes. These activities distort the true value of securities, misleading investors and destabilizing markets.
Breaches of fiduciary duty involve corporate directors or officers failing to act in the best interests of shareholders. This can include self-dealing, conflicts of interest, or neglecting to disclose critical information. Each of these violations undermines market integrity, erodes investor trust, and can result in significant financial harm.
Regulators like the Ontario Securities Commission (OSC) and the Investment Industry Regulatory Organization of Canada (IIROC) enforce securities laws to detect, investigate, and penalize these violations. Legal recourse for affected investors includes civil litigation to recover losses and regulatory actions that impose fines, sanctions, and corrective measures to prevent future misconduct.
Typically, no. One hallmark of Ontario’s secondary market liability regime is that plaintiffs do not have to prove they individually read or directly relied on the issuer’s continuous disclosure. Instead, the law presumes that material misrepresentations or omissions cause market prices to be artificially inflated (or deflated) and thus harm all who trade in that window. This approach mirrors the “fraud-on-the-market” concept: because shares on a public exchange reflect the perceived content of corporate disclosures, anyone who buys at the inflated price is effectively impacted.
However, the plaintiff class must still establish that the misrepresentation or omission was indeed material, meaning it would have significantly influenced a reasonable investor’s decision. Once that is shown, statutory liability often shifts the burden onto defendants to prove defences such as having performed rigorous due diligence or lacking knowledge of the falsehood. Some directors or officers attempt to demonstrate they undertook reasonable investigations and that the final incorrect statement was not due to any personal negligence. While each plaintiff typically must show they acquired or disposed of shares during the period of misrepresentation, demonstrating direct reliance on a press release is not mandatory. This statutory shift eases the litigation process, enabling large groups of investors—who might not have read every corporate announcement in detail—to hold issuers accountable for misleading the market at large.
The potential outcomes of securities litigation can vary widely depending on the specifics of the case, but generally include monetary damages, injunctive relief, settlements, and regulatory penalties. Monetary damages are the most common outcome, where the court orders the defendant to compensate the plaintiff for financial losses resulting from the securities law violation. This compensation can include both direct losses and, in some cases, punitive damages designed to punish particularly egregious conduct and deter future violations.
Injunctive relief involves court orders that compel the defendant to take specific actions or refrain from certain activities. This can include orders to correct misleading disclosures, cease illegal trading practices, or implement improved corporate governance measures.
Settlements are also a frequent outcome, where the parties agree to resolve the dispute without a trial. Settlements can involve significant financial compensation, changes in corporate practices, or other terms negotiated between the parties. These agreements are often reached through mediation or direct negotiations and must be approved by the court in class action cases to ensure fairness to all class members.
Regulatory penalties can accompany or follow litigation, particularly in cases where the violation involves significant misconduct. Regulatory bodies like the Ontario Securities Commission (OSC) and the Investment Industry Regulatory Organization of Canada (IIROC) may impose fines, sanctions, or other corrective measures on violators. These penalties aim to enforce compliance with securities laws and protect the integrity of the financial markets. In some instances, violators may also face disqualification from serving as directors or officers of public companies.
The specific outcome of a securities litigation case will depend on the nature of the violation, the strength of the evidence, and the legal arguments presented.
Even if no private civil claims are filed, the Ontario Securities Commission can independently investigate and prosecute an issuer suspected of providing false or misleading disclosure. The OSC’s mandate includes safeguarding the public interest—fining violators, issuing cease-trade orders, or imposing bans on directors/officers. Such administrative sanctions aim to protect Ontario’s capital markets from recurrent or egregious misconduct.
In certain scenarios, the OSC might resolve the matter through a settlement: the issuer admits to certain breaches, pays an administrative penalty, and commits to corrective measures like revising disclosures or re-auditing financials. That administrative outcome doesn’t automatically yield compensation for investors who lost money, nor does it bar them from bringing a lawsuit. If no investors step forward, it may mean the losses were minor or the wrongdoing remained undiscovered by those affected. Alternatively, investors might prefer a “wait and see” approach, hoping the OSC’s findings unearth evidence that could bolster civil suits if new losses come to light.
Thus, while the OSC’s enforcement can rectify systemic harm—restoring more accurate disclosures, punishing bad actors— it does not always address direct restitution. If shareholders eventually discover their losses stemmed from the misconduct identified by the OSC, they could initiate civil litigation later, though they must heed limitation periods. The key point is that private suits are investor-driven, focusing on personal or class compensation, whereas the OSC addresses overall market integrity and deters wrongdoing.
Insider trading typically triggers regulatory penalties first, with the Ontario Securities Commission investigating suspicious trades or abrupt price movements. If the OSC concludes an insider profited from undisclosed material info or tipped off others, it can impose fines, trading bans, or settlement orders. However, private litigants—particularly shareholders who claim losses—may also seek redress through civil lawsuits. They might argue that the insider’s illicit trade distorted market pricing or deprived them of the chance to act on equal footing. If, for instance, the insider sold large blocks of shares just before negative news was revealed, shareholders who purchased at artificially high prices could contend they were effectively defrauded.
Civil suits over insider trading often hinge on proving the insider had specific, non-public knowledge that was unquestionably material and that the trading occurred before that knowledge reached general investors. Plaintiffs may attempt to show direct cause-and-effect: but for the insider’s unethical advantage, the share price would have remained stable, or other parties would have sold earlier or at a better rate. While demonstrating exact monetary damage can be more challenging than in straightforward misrepresentation suits, courts can order the insider to disgorge illicit profits or pay damages if a strong causal link emerges. The difference from regulatory penalties lies in the objective: the OSC punishes and deters violations in the public interest, while civil litigants focus on achieving compensation for the specific injuries they incurred.
In certain scenarios, the OSC might resolve the matter through a settlement: the issuer admits to certain breaches, pays an administrative penalty, and commits to corrective measures like revising disclosures or re-auditing financials. That administrative outcome doesn’t automatically yield compensation for investors who lost money, nor does it bar them from bringing a lawsuit. If no investors step forward, it may mean the losses were minor or the wrongdoing remained undiscovered by those affected. Alternatively, investors might prefer a “wait and see” approach, hoping the OSC’s findings unearth evidence that could bolster civil suits if new losses come to light.
Thus, while the OSC’s enforcement can rectify systemic harm—restoring more accurate disclosures, punishing bad actors— it does not always address direct restitution. If shareholders eventually discover their losses stemmed from the misconduct identified by the OSC, they could initiate civil litigation later, though they must heed limitation periods. The key point is that private suits are investor-driven, focusing on personal or class compensation, whereas the OSC addresses overall market integrity and deters wrongdoing.
Not every small error or oversight in a prospectus leads to liability. Canadian securities legislation—and the courts—require that the misrepresentation be material, meaning it would reasonably affect an investor’s decision to buy or sell the security. If the falsehood is trivial (e.g., a minor figure in a non-essential statistic) and would not change a prudent investor’s perception of risk or value, the law usually will not attach liability. Conversely, if the inaccuracy concerns something potentially significant—like the company’s major contracts, regulatory approvals, key debt obligations, or major pending litigation—courts consider it material.
From an investor’s perspective, “material facts” often revolve around potential earnings, major product lines, reputational hazards, or financing arrangements. A prospectus is intended to be a one-stop resource for assessing the offering’s feasibility. If crucial negative info is purposely omitted or overshadowed, or if positive data is grossly exaggerated, the investor’s ability to judge the risk is compromised. Plaintiffs in litigation usually demonstrate materiality by referencing how share prices or investment decisions pivoted upon the revelation or concealment of such facts. Defendants typically argue the omitted or misstated data would not sway a typical investor’s mind, or that disclaimers clarified uncertainties, negating any real misrepresentation. Ultimately, the “materiality” test is pragmatic, focusing on whether a rational investor would find the discrepancy substantial in deciding to invest.
If disclosure has gone wrong or trading has been distorted, Grigoras Law can help. We act in statutory and common law securities claims to address misrepresentation, insider misconduct, and continuous disclosure failures with focused, evidence-driven strategy.
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