Investment Industry Regulatory Organization of Canada (IIROC)

Appeal from Ontario Securities Commission decision upholding finding of conduct unbecoming a registrant by the Investment Industry Regulatory Organization of Canada.

Administrative law – Admissibility – Conduct of Hearings – Conduct unbecoming – Decisions of administrative tribunals – Evidence – Hearings – Investment Regulatory Organization of Canada – Judicial Review – Procedural requirements and fairness – Professional governance and discipline – Professional misconduct – Reasonableness simpliciter – Securities Commission – Standard of Review – Stock Brokers

Northern Securities Inc. v. Ontario (Securities Commission), [2015] O.J. No. 2924, 2015 ONSC 3641, Ontario Superior Court of Justice, June 5, 2015, R.D. Gordon R.S.J., A.M. Molloy and D.L. Corbett JJ.

The Investment Industry Regulatory Organization of Canada (IIROC) found the appellant engaged in conduct unbecoming a registrant.

On appeal to the Ontario Securities Commission (OSC), the OSC determined the IIROC penalty decision could not stand because of procedural unfairness. The IIROC did not deliver its merits decision prior to conducting the penalty hearing. The OSC concluded the appellants were entitled to have reasons on the merits in order to prepare for and conduct the penalty hearing. The OSC concluded it would conduct the penalty hearing, rather than sending the matter back for a fresh penalty hearing before the IIROC. This was within the OSC’s jurisdiction. Following the penalty hearing, the OSC imposed sanctions against the appellants.

On appeal to the Divisional Court, the appellants advanced various arguments regarding fresh evidence the OSC refused to admit, the reasonableness of the OSC’s decisions, and procedural fairness of the OSC penalty hearing. The Court rejected all the appellants’ arguments and dismissed the appeal.

With respect to fresh evidence, the appellants argued they could not access the fresh evidence at the time of the IIROC merits hearing because they had limited resources and insufficient time to prepare. The Court concluded if the appellants were not ready for the merits hearing, it was up to them to raise this issue and seek an adjournment at that time. Failing to do so was not a basis for permitting fresh evidence after the merits hearing.

With respect to reasonableness of the OSC’s decisions, the Court held the appellants’ arguments were all raised before the OSC and rejected with detailed and persuasive reasons. Those reasons set out a reasonable explanation for the OSC’s decision. There was no basis on which to interfere with the OSC’s decision. With respect to arguments regarding the IIROC’s evidentiary decisions, the Court noted that the IIROC, as a specialized tribunal, is best fixed to decide what it needs in terms of evidence in order to decide a question within the ambit of its technical expertise. The IIROC, OSC, and a generalist court could each come to different decisions on the need for particular evidence, because of their varying levels of specialized expertise. On this basis, the OSC’s conclusion that the IIROC’s discretionary decision regarding the admission of certain expert evidence was reasonable.

With respect to procedural fairness, the appellants argued that because the penalty decision was set aside, both the merits and penalty hearings had to be run again. The Court held this is “simply wrong.” The OSC could have remitted the penalty hearing back to the IIROC, either to a new panel or to the original panel, but the appellants did not want the matter returned to the original panel. Having the OSC hold its own penalty hearing was the most practical approach if the case was not to be sent back to the original panel, as the OSC was already deeply immersed in the record. Because the OSC concluded there had not been a fair penalty hearing, it conducted a fresh penalty hearing at which the appellants were permitted to present evidence and make argument. The appellants had a full chance to be heard. There was no procedural unfairness.

This case was digested by Joel Morris of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact him directly at jmorris@harpergrey.com or review his biography at http://www.harpergrey.com.

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