Procedural route to challenge capital markets regulatory investigative tool confirmed Procedural route to challenge capital markets regulatory investigative tool confirmed

A recent Ontario Court of Appeal decision has helped to clarify the scope and limitations of a capital markets regulator’s investigatory authority and a party’s ability to challenge investigative summonses issued under the Ontario Securities Act (the Act).

In Binance Holdings Limited v. Ontario Securities Commission, 2025 ONCA 751, the Court held that a summons issued by the Ontario Securities Commission (the Commission) was an unreasonable seizure contrary to section 8 of the Charter and that there are constitutional limitations on the broad investigatory authority of the Commission in investigations conducted under the Act. The decision also clarified that a summons issued under the Act is reviewable by the courts, confirming judicial review as an appropriate procedural route and shedding light on an otherwise murky procedural pathway.

Background

The case has a storied past dating back several years. Nonetheless, it is worth briefly reviewing the facts for context. In March 2021, the Commission notified crypto asset trading platforms generally, including Binance, that if they intended to do business in Ontario, they were required to comply with Ontario securities law or risk regulatory enforcement. In response, Binance chose to cease its operations in Ontario, but Ontario users nonetheless continued to access the Binance platform. As a result, the Commission issued an investigation order pursuant to section 11(1)(a) of the Act to investigate alleged unregistered trading, unregistered distributions, circumvention of Ontario securities law and misleading statements. In May 2023, one of the Commission’s Staff-appointed investigators issued a summons pursuant to section 13 of the Act, which included the following demand:  

For the period of January 1, 2021 to present, provide all communications regarding Ontario (or Canada generally) among directors, officers, employees, contractors, agents and consultants of Binance Holdings Limited and related entities.

Binance initially sought relief from the Capital Markets Tribunal (the Tribunal), the adjudicative body responsible for conducting hearings under the Act, established in 2022 through the bifurcation of the Commission and its adjudicative arm. Binance applied to the Tribunal to revoke the Commission’s investigation order and the summons, partly because they were overly broad and unreasonably intrusive. The Tribunal, however, did not consider the merits of these arguments, concluding that since the bifurcation, it lacked jurisdiction under section 144(1) of the Act. Under the Tribunal’s interpretation of section 144(1) of the Act, the Tribunal is not authorized to revoke or vary decisions made by the Commission; it grants that power exclusively to the “Commission”.

As such, the Tribunal determined that it would not reconsider or review decisions made by the Commission rather than those made by the Tribunal, leaving Binance effectively without relief available from the Tribunal. In response, Binance sought redress in the courts, seeking judicial review of the Commission’s decision to issue the investigation order and the summons made under it, at the Divisional Court. There, it argued that the summons was overbroad, contrary to section 8 of the Charter which protects against “unreasonable search or seizure”. The Divisional Court considered the merits of Binance’s challenge of the investigation order and determined that it should not be quashed. However, the Divisional Court declined to determine the merits of Binance’s Charter challenge of the summons because Binance had not raised its Charter argument to the Commission at first instance. The Divisional Court also refused to schedule an urgent motion seeking to stay the summons pending resolution of Binance’s judicial review application. Consequently, Binance was required to disclosed “tens of thousands of pages of material” to the Commission, notwithstanding the pending challenge.

In response to the Divisional Court’s procedural ruling on the summons, Binance subsequently brought a section 144(1) application to the Commission, which was heard by a director appointed by section 5(3) of the Securities Commission Act to act as a Commissioner (the Commissioner).  The Commissioner determined that it lacked authority to vary the summons. Binance appealed both the Divisional Court’s decision on the summons as well as the Commissioner’s determination to the Court of Appeal.

The Court of Appeal’s decision

The Ontario Court of Appeal determined that

• the Commission lacked jurisdiction to revoke or vary the summons
• the Divisional Court erred in declining judicial review of Binance’s Charter arguments
• the Divisional Court did not err in declining the stay of the summons pending judicial review
• the summons was an unreasonable seizure, contrary to section 8 of the Charter

Additionally, the Court discouraged demands for written interrogatories by the Commission within a summons going forward. 

Authority to vary or revoke the summons

As noted above, the Court of Appeal rejected Binance’s arguments regarding the Commission’s jurisdiction, finding that the Commission was not authorized to revoke or vary summonses. However, the Court found that the Divisional Court erred in declining to consider Binance’s Charter arguments on the merits.

Although courts may decline judicial review where adequate alternatives are available, the Divisional Court declined judicial review without first determining that the Commission was authorized to grant an adequate alternative remedy. In effect, the Divisional Court had relied on the mere possibility of an alternative remedy without satisfying itself that the remedy was effective. The Court of Appeal therefore allowed Binance’s appeal of the Divisional Court’s decision to decline judicial review and concluded that it was appropriate for it to determine the constitutional issues that could have been made by the court below.

Binance was not entitled to a stay of the summons

Binance argued that the Divisional Court erred in declining to stay the summons as it was entitled to a reasonable opportunity to challenge a production demand before having to comply. As noted, the Court of Appeal rejected this argument. It held that, unlike criminal cases, there are no constitutional guarantees to pre-compliance judicial supervision of a regulatory production order. The absence of judicial supervision over a production demand is a relevant factor in assessing the reasonableness of the demand, but it is not a freestanding right.

The constitutional validity of the summons

In considering whether the summons engaged Binance’s section 8 Charter rights, the Court noted that holders of business records have a reasonable expectation of privacy over business records targeted by a seizure, but that reasonable expectation is low. The Court found, however, that this low expectation does not amount to “no expectation of privacy”. The scope of a valid production order must therefore be limited to terms that are fair and reasonable. Accordingly, the compelled production of Binance’s business records engaged its section 8 Charter rights.

The Court of Appeal rejected the Commission’s argument that section 13 of the Act authorizes unconstrained production demands, determining that the Commission’s authority to compel production of documents under section 13 of the Act is subject to a relevance requirement. Production demands that exceed the purpose of the inquiry, or that compel documents absent a reasonable foundation to believe they are relevant, are therefore overbroad and unreasonable, contrary to section 8 of the Charter.

The summons demanded production, without limitation, of all communications between any employees or contractors of Binance or its related entities relating not only to Ontario but to all of Canada, regardless of the subject matter of those communications. The Court of Appeal described this demand as “staggering in its breadth” and “made without apparent concern about the relevance of what was being demanded, beyond mere speculation that there could be something relevant that would otherwise be missed.”  The summons was therefore overbroad. Rather than permitting the Commission to retain seized documents until a Charter-compliant summons was issued, the Commission was ordered to return all documents collected pursuant to the invalid summons.

The summons also requested answers to written questions, including requiring Binance to “confirm” details about Ontario accounts and provide descriptions of the methodologies used to identify Ontario accounts. Binance argued that these demands exceeded the Commission’s investigatory authority under the Act. As the Commission conceded that it did not seek answers to these questions, the Court of Appeal did not decide the issue. The Court did, however, express concern regarding these demands, noting that section 13 of the Act authorizes investigators to “summon and enforce the attendance” of a person and to “summon and compel any person or company to produce documents and other things”. Nowhere does it empower an investigator to use a summons to compel written answers to demands for information. The Court discouraged the inclusion of such language going forward.

Implications

The Court of Appeal clarified that the Commission’s broad investigatory powers are not unlimited but are restricted by a relevance evaluation. Further, the decision affirms that courts are willing to review the Commission’s exercise of investigatory authority where existing administrative mechanisms are unavailable or ineffective. The Court of Appeal’s analysis suggests that production orders by other regulators are subject to similar scrutiny.

Further, Binance questions whether the Commission is authorized to seek answers to written questions by way of a section 13 summons under the Act. These limitations do not, however, relieve subjects of a summons from compliance prior to a determination of judicial review, as there is no absolute right to pre-compliance judicial supervision of regulatory production orders.

Courts have consistently recognized the unique specialized expertise of capital markets regulators and tribunals, including the Supreme Court of Canada’s decision in Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission),^[1] which encouraged a “high degree of curial deference” of Commission and Tribunal decisions given their “expertise in the regulation of the capital markets.”^[2]

In light of this, the Commission can itself devise a mechanism that will provide an adequate opportunity to scrutinize the investigative reach of Commission staff within an investigation. Such a formal “off ramp” could perhaps better safeguard the rights of investigation targets and witnesses from costly and time-consuming inquiries that are ultimately found to be unreasonable and unnecessary and provide a more effective buffer between the administrative process and court intervention. Until such reform is initiated and implemented, the Court of Appeal’s decision sheds light on the current path to challenge the Commission’s investigatory authority.

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[1] 2001 SCC 37.

[2] 2001 SCC 37 at para. 49.