BMO’s $564M Ponzi Verdict Tossed by Appeals Court

Background

The ruling, issued by a three-judge panel, overturned a $564 million jury verdict awarded to investors who lost money in a Ponzi scheme orchestrated by Earl Jones and his company, EFE USA. BMO was found liable under Ontario’s Securities Act for failing to supervise Jones, who was an investment advisor at BMO Nesbitt Burns.

Synopsis

1. In a significant development for Canadian securities law, the Ontario Court of Appeal recently overturned a $564 million Ponzi scheme verdict against Bank of Montreal (BMO).
2. The court found that the trial judge erred in instructing the jury on the issue of BMO's liability under Ontario's Securities Act.
3. The court also found that the trial judge erred in admitting certain evidence at trial.

The decision is a major victory for BMO and other financial institutions that have been sued in connection with Ponzi schemes.

Arguments and Decision

The plaintiffs argued that BMO was liable for Jones's actions because it failed to properly supervise him.

BMO argued that it was not liable because it had taken reasonable steps to supervise Jones and that it was not aware of his Ponzi scheme.

The trial judge instructed the jury that BMO could be liable even if it was not aware of Jones's Ponzi scheme.

The Court of Appeal found that the trial judge erred in instructing the jury on this issue.

The Court of Appeal also found that the trial judge erred in admitting certain evidence at trial.

The evidence in question was a report prepared by BMO's internal auditors after Jones's Ponzi scheme was discovered.

The Court of Appeal held that the report was inadmissible because it was prepared for the purpose of litigation.

Impact of the Decision

The decision is a major victory for BMO and other financial institutions that have been sued in connection with Ponzi schemes.

The decision makes it more difficult for plaintiffs to hold financial institutions liable for the actions of their employees.

The decision is also a reminder to financial institutions of the importance of properly supervising their employees.

Conclusion

The Ontario Court of Appeal's decision in BMO Nesbitt Burns Inc. v. Jones is a significant development in Canadian securities law.

The decision makes it more difficult for plaintiffs to hold financial institutions liable for the actions of their employees.

The decision is also a reminder to financial institutions of the importance of properly supervising their employees.