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Case Summary: Sharp v. Autorité des marchés financiers


In 2017, Québec’s Autorité des marchés financiers (“AMF”), the province’s financial sector regulator, brought an action against four British Columbia residents for their alleged involvement in transactional “pump–and-dump” securities manipulation schemes. The AMF alleged that the defendents promoted and gave a legitimate “face” to their shell company through misleading press releases and other marketing when, in reality, the business remained was essentially inoperative. These activities subsequently inflated the price of the company’s shares. The defendants sold their shares and pocketed a profit of over $2.6 million.

Though the defendants resided in British Columbia, their scheme had several ties to Québec: the shell company was a Quebec reporting issuer with a Montréal business address, at one point a director was a Québec resident, the promotional activities of the company were accessible to Québec residents, and fifteen Québec investors lost a combined $5,000. As a result of this geographical nexus, the AMF brought its action before the Financial Markets Administrative Tribunal (“FMAT”), alleging that the defendants violated Québec’s Securities Act by improperly or fraudulently influencing the value of securities and knowingly participating in securities transactions that created an artificial security price.

These jurisdictional implications would be a central point of contention between the AMF and the defendants which led several levels of court to examine the constitutional applicability of the FMAT and Québec securities regime to out-of-province residents.

Legal Framework

FMAT’s jurisdiction to decide on matters of securities law is granted under the Act respecting the Autorité des marchés financiers (the “AMF Act”) which stipulates that the FMAT can decide on matters under that act, the Québec Securities Act and other specified legislation. The AMF Act grants FMAT jurisdiction to take any measure needed to ensure compliance with the two aforementioned laws. Neither of the two statutes expressly discusses the extent of FMAT’s territorial reach.

As will be elaborated below, the Civil Code of Québec (“CCQ”) was also posited by the courts as a potential source of jurisdiction for FMAT, in particular, the provisions of private international laws (the civil law equivalent to conflicts of laws) under the section titled “International Jurisdiction of Québec Authorities”. In particular, emphasis was placed on an article of the CCO, which specifies that Québec authorities have jurisdiction over actions by an individual relating to assets (patrimony) where the fault and injury occurred in Quebec, and another article of the CCQ, which allows a Québec authority to hear a dispute despite having no jurisdiction provided the dispute has a sufficient connection with Québec and taking proceedings abroad is impossible or cannot reasonably be required.

Aside from the statutory provisions, the “real and substantial connection” or “sufficient connection” test from Unifund Assurance Co. v. Insurance Corp. of British Columbia[2], is used to examine the application and reach of provincial legislation. The test does this "by assessing the sufficiency of the connection among the enacting jurisdiction, the subject matter of the legislation, and the individual or entity sought to be regulated”,[3] subject to the principles of order and fairness.

Judicial History

The AMF brought an originating pleading before FMAT alleging that the defendants contravened the Securities Act. The defendants in turn challenged the jurisdiction of the FMAT over their case as they were out-of-province residents. FMAT dismissed the defendant’s motions for a declinatory exception, stating that FMAT had jurisdiction under the provisions of the AMF Act.

It is important to note that the decisions at the declinatory motion and all subsequent court decisions did not decide on the merits of the case, but asks whether the matter fell within the jurisdictional competence of FMAT. This entailed delineating the territorial reach and constitutional applicability of the Québec securities scheme.

The defendants filed an application for judicial review which was dismissed by the Superior Court of Québec. On appeal, the Court of Appeal of Québec (“Court of Appeal”) affirmed the jurisdiction of FMAT but  was divided on the reasons why. The majority found a real and substantial connection between Québec and the appellants under the Unifund test. The defendants appealed the decision to the Supreme Court of Canada (the “Supreme Court”).

The Supreme Court Decision

The majority of the Supreme Court dismissed the appeal in a judgement rendered on November 17, 2023, citing that the FMAT was correct in its jurisdictional reach over the out-of-province appellants. By interpreting the jurisdictional provisions of Québec’s securities laws through the Unifund test, the Supreme Court found that there was sufficient "real and substantial connection" between the defendants and the province for the FMAT to extend its jurisdictional reach. The Court also noted that while the Unifund test forms part of the family of “real and substantial connection” tests that have been used in a variety of cases, its interpretation is heavily dependent on the unique facts of the case and therefore its use will vary depending on the context.

The Unifund test was applied in a two-step process. Firstly, the Supreme Court asked whether there was sufficient connection between Québec and the appellants. This was answered affirmatively; the allegations that the appellants used Québec as the “face” of their securities scheme and injured Québec investors were sufficient to establish that connection.

In the second step, the finding of a “real and substantial connection” was subject to the rules of order and fairness, which also considers interprovincial comity. The Supreme Court stated that a flexible and purposeful approach was needed when applying these principles in the securities context given that modern securities manipulation and fraud is not restricted by borders. The Supreme Court found that applying Québec law to the defendants was indeed fair, and would not offend either of the principles of order or of interprovincial comity. In fact, it would defeat the purpose of the cross-border nature of modern securities regulation to allow the defendants to escape Québec’s regulatory reach, that it is indeed the nature of modern securities regulation is to allow for provinces to be able to go after non-residents.

On assessing the role of the CCQ in this decision, the Supreme Court agreed with Mainville J.A.’s concurring decision at the Court of Appeal that the CCQ was applicable as the law of general application in Québec and acted as suppletive to statute. However, the Supreme Court found that the CCQ provisions on private international law did not grant FMAT jurisdiction over the out-of-province defendants as none of the articles on private international law were applicable to the facts of this case.


[1] Sharp v. Autorité des marchés financiers 2023 SCC 29 [Sharp v. AMF].

[2] 2003 SCC 40, [2003] 2 S.C.R. 63.

[3] Sharp v. AMF at para 102.



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