Reasonable Investigation Defence Shields Directors and Officers from Securities Class Action

A recent decision in a proposed securities class action reinforces the potential benefits to directors and officers in maintaining strong internal controls and conducting reasonable investigations, including, where appropriate, engaging and following the advice of external experts. In Rahimi v. SouthGobi Resources, Justice Belobaba refused to grant leave the plaintiff to proceed against several directors and officers, finding that they had satisfied the reasonable investigation defence in Part XXIII.1 of the Ontario Securities Act. This decision is noteworthy because it confirms that, in appropriate cases, directors and officers can rely upon the statutory protections in Part XXIII.1 to defeat personal claims against them at an early stage of the proceedings. For more information, click here.