Cease trade and freeze orders
The Ontario Securities Commission (OSC) has the authority to issue cease trade orders (CTOs) and obtain freeze directions against individuals or companies.
Cease trade orders
Once issued, a CTO prohibits or limits trading in securities. CTOs may be issued for a variety of durations. Temporary CTOs are those with an expiry date, whereas permanent CTOs remain in effect indefinitely until revoked by the OSC.
The Canadian Securities Administrators (CSA) maintains an online CTO database of individuals and companies that are, or previously were, the subject of a CTO.
Changes to the Act in 2014 simplified the process for the OSC to secure court orders to prevent a person or company from liquidating or transferring funds held in bank or brokerage accounts. Section 126(1) of the Act allows for the interim preservation of property, also known as a freeze direction or freeze order.
As part of issuing a freeze-order , the OSC may:
- direct a person or company to retain any funds, securities or property in its possession, control or safekeeping until the Commission revokes the order, consents to the release or the Superior Court of Justice orders otherwise
- order that the freeze direction be certified to a land registrar or mining recorder which will have the same effect as a certificate of pending litigation
A freeze direction that names a bank or financial institution will apply only to the branch(es) identified in the direction.
The freeze direction can be issued without notice but copies of the direction must be provided to the persons and companies named in the direction. Any person or company directly affected by a freeze direction may apply to the Commission for clarification or to have the direction varied or revoked.
Freeze orders are an important tool to secure restitution for victims because they can be used in the early stages of an investigation and recovered money can be returned to victims under a court-ordered receivership process.
Please note: unless specifically included in the freeze direction, funds, securities or property in a recognized clearing agency or securities in the process of transfer by a transfer agent are excluded. Also, funds that have already been spent or hidden before the OSC begins its investigation cannot be recouped later. Funds that have already been spent or hidden before the OSC begins its investigation may not be recoverable.