B.C. couple partially victorious in bankruptcy fight with securities regulator

OTTAWA — The Supreme Court of Canada has ruled that people fined by provincial securities regulators can wipe out penalties through bankruptcy, but orders to pay back ill-gotten gains remain in place.

The ruling handed down today says penalties imposed by “administrative tribunals or regulatory agencies” are not covered by a list of exceptions in the Bankruptcy and Insolvency Act, which outlines specific types of debts that “survive bankruptcy.”

The case involved a B.C. couple, Thalbinder Singh Poonian and Shailu Poonian, who were ordered by the British Columbia Securities Commission to pay $13.5 million in administrative penalties and $5.6 million to repay those who lost money in a market manipulation scheme that “caused vulnerable investors to lose millions of dollars.”

A majority of the court ruled the penalties are not exempt because they aren’t imposed by a court, and don’t directly result from fraudulent conduct, but rather are made “indirectly” through the commission’s decision to sanction the Poonians.