Decision in brief: Gong, Enforcement Proceeding, Motion to dismiss stay motion, July 20, 2023
In this enforcement proceeding, OSC staff say that Xiao Hua (Edward) Gong committed securities fraud and sold securities without being registered. Gong has asked the Tribunal to stay (permanently end) this proceeding because of things OSC staff did during its investigation and in this proceeding and a related court proceeding. Gong says that OSC staff’s conduct is an “abuse of process”.
A corporation that Gong controlled previously pled guilty to criminal charges in court relating to the same activities. Gong says that the abuse of process comes from, among other things, OSC staff’s mishandling of documents that were meant to be kept confidential in the criminal case against Gong’s corporation. OSC staff wants Gong’s request for a stay to be dismissed on a summary basis (without a full review of all the evidence) because it says his request has no realistic chance of success.
The Tribunal decided not to dismiss Gong’s request for a stay on a summary basis. For OSC staff’s request for a summary dismissal to be successful, it must show that Gong has not raised a “tenable case” for a stay, meaning his request has no realistic chance of success. OSC staff says that because what Gong calls mishandling of documents happened in the criminal case against Gong’s corporation before that corporation pled guilty, any abuse of process that may have happened in the criminal court case does not affect the fairness of this separate enforcement proceeding before the Tribunal.
The Tribunal decided that Gong raises a “tenable case”. Even if Gong cannot show that what he calls an abuse of process affects the fairness of the current enforcement proceeding, a stay can still be granted if the conduct offends society’s sense of fairness and decency.