On July 31, 2024, the Supreme Court of Canada provided clarity regarding the treatment of administrative monetary penalties and disgorgement orders resulting from securities violations in Poonian v. British Columbia (Securities Commission).
Thalbinder Singh Poonian, Shallu Poonian and others contravened the market manipulation provision of British Columbia’s Securities Act and faced administrative penalties and disgorgement orders imposed by the British Columbia Securities Commission. The Poonians declared bankruptcy and sought an absolute discharge. The Supreme Court ruled that the administrative monetary penalties were discharged by bankruptcy, but that the disgorgement orders survived bankruptcy under the fraud exception.
The decision clarifies that debts must be imposed by a court order to survive bankruptcy under subsection 178(1)(a) of the BIA, and that only disgorgement orders that are directly linked to fraudulent conduct findings may be exempt from discharge under subsection 178(1)(e).
Takeaway
This ruling reinforces the fresh start principle in bankruptcy while at the same time making it clear that findings of fraud and related disgorgement orders will typically survive bankruptcy.