Court Affirms Standard Of Review For Decisions Of Securities Commissions Is Reasonableness

by Dentons
Contact

Background

The Appellants, Sanji Sawh and Vlad Trkulja, who were both mutual fund dealers and exempt market dealers, founded Investment House of Canada (“IHOC”) in 2003. IHOC was a member of the Mutual Fund Dealers Association (“MFDA”), a self-regulatory organization (“SRO”) recognized by the Ontario Securities Commission (the “Commission”).

In 2009, following an investigation into IHOC, the MFDA commenced a disciplinary proceeding in relation to several alleged violations of the MFDA Rules, By-laws or Policies by IHOC and the Appellants. The Appellants and the MFDA subsequently reached a settlement agreement pursuant to which IHOC resigned from the MFDA and wound down, and the Appellants admitted to several contraventions of the MFDA Rules. The settlement agreement was approved by an MFDA hearing panel.

As a consequence of the settlement agreement, the Appellants’ registration as dealing representatives of a mutual fund dealer was suspended. Six weeks after the settlement agreement, the Appellants applied to the Commission to have their registrations reinstated, which was denied. The Appellants requested a review of the decision and, after a six-day hearing before two commissioners, the OSC determined that the Appellants lacked the proficiency and integrity required by sections 27(1) and (2) of the Securities Act, R.S.O. 1990, c. S.5 (the “Act”), to be registered as dealing representatives of a mutual fund dealer, and that reinstatement of their registrations would be otherwise objectionable.

The Appellants appealed to the Divisional Court, arguing that the conduct reviewed by the OSC was almost exclusively conduct that had already been fully investigated by the MFDA – which had not imposed a sanction barring the Appellants from applying for reinstatement of their registrations – and that by refusing their application, the Commission had departed from its established practice of deferring to the determinations made by expert SROs such as the MFDA.

Discussion

In delivering the Panel’s decision, Justice Sachs agreed with the Appellants that the case law surrounding Commission reviews of SRO decisions highlights the importance of deference to an SRO’s findings. In the Appellants’ case, however, the Commission was not conducting a hearing and review of the MFDA’s settlement agreement or the hearing panel’s decision approving that agreement (which, in any event, did not provide that the Appellants’ registration would be reinstated).

Rather, the Commission’s decision was an exercise of its discretion under section 27 of the Act to consider whether the Appellants were suitable candidates for re-registration, over which the Commission has sole jurisdiction (as the MFDA has not been delegated this authority). Justice Sachs held that the Commission’s decision was justifiable and transparent, and met the applicable standard of review of reasonableness.

The Divisional Court’s decision serves as a reminder that SROs derive their jurisdiction by virtue of being recognized by provincial securities commissions and that the power of SROs and their members is always subject to the oversight of those commissions. It also reaffirms the principle, recently expressed in other contexts,[1] that the courts will generally afford considerable deference to the decisions of securities commissions by applying a standard of review of reasonableness.

[1] See, e.g., Cornish v. Ontario Securities Commission, 2013 ONSC 1310 (CanLII) which dealt with continuous disclosure obligations, and Rankin v. Ontario Securities Commission, 2013 ONSC 112 (CanLII) which addressed a settlement entered into between the Appellant and the Commission.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dentons | Attorney Advertising

Written by:

Dentons
Contact
more
less

Dentons on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.