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

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...