Decision in brief: TeknoScan Systems Inc., Enforcement Proceeding, Sanctions and Costs, October 14, 2025

In an earlier decision, the Tribunal decided that TeknoScan Systems Inc., and three of its officers and directors, Phillip Kai-Hing Kung, Soon Foo (Martin) Tam and H. Samuel Hyams, committed fraud. They sent a notice to TeknoScan shareholders about a potential profitable transaction involving the company that they knew was dishonest and misleading. It led to ninety-two percent of TeknoScan’s preferred shareholders converting their shares to common shares and permanently losing the rights that went along with being preferred shareholders.

This decision focuses on what sanctions and costs should be ordered against the respondents.

Each respondent must pay an administrative penalty and be banned from taking part in Ontario’s capital markets. The Tribunal decided the administrative penalties should be significantly lower than what the OSC asked for, because while the fraud was serious, it wasn’t among the worst the Tribunal has seen. The Tribunal decided that:

• Kung must pay an administrative penalty of $450,000 and be permanently banned. Kung was previously registered with the OSC, meaning he was officially approved by the OSC to handle people’s investments or give financial advice. The Tribunal decided that, because of this, he had more responsibility than non-registered individuals to provide shareholders with proper information. Kung did not accept responsibility for his actions and told the Tribunal its fraud findings were wrong. He also knew about an additional piece of information about the transaction that should have been told to shareholders, that the other respondents were not aware of.
• Tam must pay an administrative penalty of $350,000 and be permanently banned. Tam was also previously registered with the OSC and should have known better. Like Kung, Tam did not accept responsibility for his actions and did not accept the Tribunal’s earlier decision.
• Hyams must pay an administrative penalty of $250,000 and cannot participate in Ontario’s capital markets for 20 years, though he must permanently stop being a director or officer of any issuer, registrant or investment fund manager. The sanctions against Hyams are lower than Kung’s and Tam’s because Hyams accepted responsibility for his actions and he has less experience in the capital markets than they do.
• TeknoScan must pay an administrative penalty of $150,000 and is permanently banned. TeknoScan’s administrative penalty is lower because any financial penalties against TeknoScan may have unintentional consequences for TeknoScan’s innocent shareholders. This is because the payment of the penalty would reduce the available cash the company has to meet its obligations to shareholders.

The administrative penalties and market participation bans will work together to discourage the respondents and others who might think about doing something similar in the future.

Finally, the Tribunal decided that Kung, Tam and Hyams must together pay $300,000 in costs to the OSC and TeknoScan must pay $100,000. These amounts are in the public interest and account for the fact that the OSC was not entirely successful at the merits hearing. As with the administrative penalty amount, TeknoScan’s costs are lower to protect its shareholders.