Binance Wins Partial Ruling on Securities Investigations

The Ontario Court of Appeal recently addressed the scope of regulatory authority and privacy protections in Binance Holdings Limited v. Ontario Securities Commission.

Bennett Jones reports that the case involved Binance’s challenge to a summons issued by an investigator appointed by the Ontario Securities Commission (OSC). The summons demanded extensive document production, including internal communications across multiple platforms. 

Binance, a Cayman Islands-based crypto platform, was subject to OSC scrutiny after failing to register as a dealer under Canadian securities regulations and continuing to serve Ontario residents despite assurances that access would be blocked.

The court considered both the procedural limits of the OSC’s powers under the Securities Act and the application of s. 8 of the Charter, which protects against unreasonable search and seizure, in the context of regulatory inquiries.

In 2023, the OSC issued an investigative order, followed by a summons seeking documents, including communications involving directors, officers, employees, contractors, and related entities. Binance contested the summons in multiple forums, including the Capital Markets Tribunal, the Divisional Court, and directly with the OSC, arguing that the summons was overbroad and lacked constitutional validity.

Most challenges were dismissed on jurisdictional grounds. The matter was left to the Court of Appeal.

The Court of Appeal found that Binance did not have a constitutional right to pre-compliance review of the summons, but determined that the specific summons at issue was overbroad and violated the Charter.

The court held that the OSC itself cannot revoke or vary a summons issued by an appointed investigator, and that compelled document production must be reasonable, limited to inquiry-specific matters, and confined to the regulator’s jurisdiction.

Demands extending broadly across entities and communication platforms, without limitation to relevant activities, were deemed excessive.

According to Bennet Jones, the Ontario decision provides important guidance on the procedural safeguards available to crypto market participants and the limits of regulatory authority. However, given the serious consequences that can arise, companies under investigation should maintain precise compliance records and plan legal strategies to challenge overbroad summonses.