A British Columbia Supreme Court judge has ruled that Thomas Arthur Williams cannot include a $6.8-million disgorgement order in the debts being erased when he is discharged from bankruptcy. The British Columbia Securities Commission (BCSC) ordered the sanction, along with a $15-million administrative penalty in 2016, neither of which have been paid in any part.
“The judge granted the BCSC’s application based on last year’s ruling by the Supreme Court of Canada in another BCSC case. The Supreme Court of Canada said that a type of sanction known as disgorgement – an order to pay money representing the amount obtained or loss avoided by the wrongdoing – should survive bankruptcy if it was imposed for misconduct involving false pretenses or fraudulent misrepresentation,” the BCSC announced.
“This month’s B.C. Supreme Court ruling was the first to use the Supreme Court of Canada’s legal test for determining whether a financial sanction should survive discharge from bankruptcy,” they add.
Administrative penalties, meanwhile (generally the financial deterrent levied in most insurance cases), are separate from disgorgement orders and are not enforceable after a discharge from bankruptcy.
“The court noted that Parliament could have drafted the Bankruptcy and Insolvency Act (BIA) to expressly say that financial sanctions of regulatory bodies or administrative tribunals are exempt from bankruptcy discharge, but the BIA does not say that. In response to that ruling, the BCSC has been engaging with elected and appointed federal officials about adding securities regulators’ financial sanctions to the BIA’s list of debts that survive bankruptcy,” the BCSC states.
In the Williams case, the former registered mutual fund representative sought to be discharged from bankruptcy in 2023, which was opposed by the BCSC and the court-appointed trustee both.
In the 2016 case, the BCSC found that Williams was the mastermind of a Ponzi scheme that raised approximately $11.7-million from 123 investors between February 2007 and April 2010. In addition to the financial penalties, Williams was thrown out of the securities industry, and permanently banned from trading in any securities or working in any capacity in connection with securities market activities.
Related: Sanctioned Canadians now allowed to discharge some penalties through bankruptcy
