representations made in the disclosure are not certified. The Note
to Reader expressly states that the certifying officers are responsible for ensuring processes are in place to enable them to make
the representations they provide to the reader.
[ 97] Further, it is consistent with the above interpretation of
the Note to Reader that a failure to disclose that the Turcolt
Investment was unauthorized is not a misrepresentation about
whether there is a process or control in place. Rather, it is a misrepresentation of a material fact relevant to the reader, for which
the certifying officers take responsibility (including for processes
related to those representations).
[ 98] Therefore, I find that the “carve-out” for internal processes
and controls in the Note to Reader relied upon by Jaffrey does not
vitiate an alleged misrepresentation by omission that the Turcolt
Investment was unauthorized. Otherwise, Jaffrey’s certification
that there are “no misrepresentations” and that “the interim
filings do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made” would be meaningless.
iii. Policy considerations
[ 99] Jaffrey submits that if the court found at trial that he had
knowledge that the Turcolt Investment was unauthorized, or
deliberately avoided acquiring such knowledge, this would result
in “every CFO” being responsible for “every fact” about “every
transaction” entered into by the company. I do not agree.
[ 100] Jaffrey knew the facts of the Turcolt Investment summarized at para. 90 above. It is on this evidence that a court could
infer Jaffrey had knowledge (or deliberately avoided acquiring
knowledge) that the Turcolt Investment was unauthorized.
[ 101] Consequently, a finding of liability in this case would not
mean that “every CFO” would be responsible for “every fact”
about “every transaction” entered into by the company.
[ 102] For the above reasons, I find that Kauf has established
a reasonable possibility that as of December 21, 2016, Jaffrey
knew or deliberately avoided acquiring knowledge that the Turcolt
Investment was unauthorized.
Issue 2: The public correction issue
[ 103] The determination of whether the court should grant
leave to Kauf to plead that the December 2016 Press Release is
a public correction could have a significant impact on the claim.