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CCCA_V2No4_Col-Litigat-FIN.qxd:CCCA_V1No2_Col-Litigat-V1.qxd 11/24/08 3:32 PM Page 46 Legal Update – McCarthy Tétrault LLP The right to remain silent Cross-border securities regulation and self-incrimination. ross-border securities regulation can principles of fundamental justice. This willing to require a witness to testify only Clead to conflicting legal and policy constitutional regime reflects ss. 9 and 5 of if the OSC’s investigation were conducted principles because securities regulators in the Ontario Evidence Act and Canada without SEC employees. two or more countries may bring regula- Evidence Act, respectively. The OSC and the SEC have a history tory proceedings against the same indi- The Supreme Court of Canada has held of co-operation.The MOUs between for- vidual based on fundamentally different that the combined effect of ss. 7, 9 and 13 eign and Canadian regulators include co- principles. The principle of protection of the Charter is to enshrine a person’s operation, and this co-operation should against self-incrimination, which is treat- right to remain silent and to not incrimi- be an abuse-avoiding process as well as an ed differently by the Canadian and U.S. nate himself as overarching principles, ele- evidence-generating process. Constitutions, is an example of this. mental canons and basic tenets of the To achieve fairness in regulatory pro- In Ontario,the obligation to testify dur- Canadian justice system and the Charter. ceedings, the constitutional protection ing an investigation by the Ontario By contrast, in the U.S., the privilege afforded to witnesses in each country must Securities Commission (OSC) arises from against self-incrimination entitles the wit- be respected,particularly when a citizen of the regime in sections 11 to 17 of the ness to refuse to testify entirely; if the wit- one country may be the target of a regu- Ontario Securities Act. Section 11 permits ness chooses to testify, his or her evidence latory authority in another. Therefore, a the OSC to investigate with respect to the can be used against him or her at a subse- Canadian securities regulator must guar- due administration of securities law and quent trial. antee that a person who testifies in Canada regulation of the capital markets in In these circumstances, a person sum- cannot have his or her testimony used Ontario and other jurisdictions. Further, moned to testify by a Canadian securities against him or her in the United States. the OSC has entered into two memoran- regulator and who is aware that he or she Respecting constitutional principles da of understanding (MOUs) with the is also being investigated by a foreign secu- may also require that the Canadian securi- U.S.Securities and Exchange Commission rities regulator,such as the SEC,may apply ties regulator surrender any statutory right (OSC) that provide for sharing of infor- to a court to determine whether he or she to disclose testimony to a foreign regulator mation between the two regulators. is obliged to testify and to assert that there and ensure that no employee of a foreign Such sharing is problematic for a num- is a risk that his or her testimony may find regulator is involved with any investiga- ber of reasons.When someone in Canada its way to a foreign regulator and be used tion in Canada. is investigated by the OSC, he or she may against him or her. A Canadian judge, or not be aware that the OSC may be acting even counsel for a Canadian securities Thomas G. Heintzman O.C., Q.C., and on behalf of or sharing information with a regulator, is likely to agree that there is a Sarah Shody are lawyers in McCarthyTétrault’s foreign regulator. Also, in Canada, section sufficient risk of this happening, contrary Litigation Group in Toronto. Mr. Heintzman is 13 of the Charter provides that a witness to the Charter. Counsel and specializes in civil litigation; he has has the constitutional right not to have Risks of Charter violations are highest acted in some of Canada’s most high-profile com- incriminating evidence used against him where the Canadian regulator has one mercial disputes relating to securities law and or her in any other proceeding except a team conducting both domestic and for- shareholders’ rights, government contracts, broad- prosecution for perjury or for giving con- eign investigations, and this team includes casting and telecommunications, and environmen- tradicting evidence. It does not entitle a a foreign regulator: there is a presumed tal law. Ms. Shody maintains a general litigation witness to refuse to testify.Section 7 of the sharing of information that the court is practice.This article is a condensed version of their Charter provides that a person has the unable to scrutinize, and derivative use of paper “Cross-Border Securities Regulation: Self- right to life, liberty and security of the a witness’s testimony outside Canada.In A Incrimination and the Convenient Forum” person, and the right not to be deprived v. Ontario Securities Commission, Justice (2007), which was presented at the 7th Annual thereof except in accordance with the Campbell assessed these risks and was Advance Forum on Securities Regulation. 46 CCCA Canadian Corporate Counsel Association WINTER 2008