When Is A Foreign Issuer A 'Responsible Issuer' For The Purpose Of Part XXIII.1 Of The Ontario Securities Act?

In Yip v. HSBC Holdings plc et al., 2017 ONSC 5332, Justice Perell was called upon to determine the jurisdictional reach of the Ontario courts to protect Canadian and foreign investors when the defendant is a foreign corporation whose shares do not trade on a Canadian stock exchange.

Yip, an Ontario resident who purchased shares of HSBC Holdings (Holdings) on the Hong Kong Stock Exchange, asserted both a statutory secondary market and a common law misrepresentation claim against Holdings and one of its former employees, alleging that he and other purchasers on foreign exchanges were misled by certain representations made by Holdings. Yip maintained that Holdings, a U.K. public issuer whose shares trade on exchanges including in the U.K., the U.S. and Hong Kong, but not in Canada, was a "responsible issuer".

Based upon a substantial evidentiary record, Holdings moved to dismiss Yip's action on the grounds that the Ontario court lacked jurisdiction simpliciter, or in the alternative, to stay it on the basis that Ontario was forum non conveniens. Yip brought a cross-motion for a declaration that Holdings was a "responsible issuer" under s. 138.8 of the Ontario Securities Act (the Act). Justice Perell determined both motions in favour of Holdings, finding as follows.

Jurisdiction to Decide Jurisdiction

As a preliminary matter, Justice Perell agreed with Yip that "the court has jurisdiction to determine whether it has jurisdiction". The power to make a declaration at the instance of any party with an interest in the subject-matter of the declaration exists whether or not there is a cause of action .

There is No Place of Trading Requirement in s. 138.3 of the Act

Justice Perell noted that unlike the U.S. statutory cause of action for misrepresentation in continuous disclosure, which applies only to the purchase or sale of a security on an American stock exchange or a securities transaction occurring within the U.S. (see Morrison v National Australia Bank, 130 S. Ct. 2869), and also unlike s. 130 of the Act which has a "place of trading" qualification, under s. 138.3 there is no requirement for a trade within the territorial jurisdiction of the court.

His Honour identified three circumstances in which an Ontario court will have jurisdiction simpliciter over a foreign corporate defendant:

where the foreign corporation's securities trade in Ontario's secondary market; where the foreign corporation's securities trade both in Ontario's secondary...