Decision in brief: Cormark Securities Inc., Enforcement Proceeding, Merits, November 6, 2024

In this enforcement proceeding, the OSC says that Cormark Securities Inc., William Jeffrey Kennedy, Marc Judah Bistricer and Saline Investments Ltd. participated in transactions that resulted in shares of Canopy Growth Corporation being distributed to the public without a prospectus (a document required by Ontario securities law that provides information about the investment). The OSC says that Cormark and Kennedy misled Canopy about an important part of the transactions’ structure.

Prior to Canopy being added to The Toronto Stock Exchange’s composite index, Cormark told Canopy that it could take advantage of the anticipated increased demand for Canopy shares and raise money. Canopy agreed, and Kennedy, Cormark’s Head of Equity Capital Markets, arranged the transactions, which involved Cormark’s clients, Bistricer and his company, Saline.

The Tribunal dismissed the OSC’s allegations against the respondents.

The Tribunal decided that the transactions did not result in an illegal distribution of Canopy shares. The term “distribution” is meant to capture the moment when shares are first sold to the public. These transactions involved two separate sets of securities: restricted shares and freely-trading shares. The restricted shares sold by Canopy to Saline were restricted from trading. When Saline provided those shares as collateral for a loan as part of the transactions, that was not a trade. The shares that Saline did trade were freely-trading shares that had already been sold to the public.

The Tribunal also decided that Cormark and Kennedy did not mislead Canopy about the transactions.