The Obligation To Disclose Documents In The Possession Of Third Parties: IIROC V. Crandall

• Published date: 21 January 2021
• Law Firm: Norton Rose Fulbright Canada LLP
• Author: Mr Ted Brook

In IIROC v. Crandall, 2020 NBCA 76 (Crandall), the New Brunswick Court of Appeal overturned a 2019 decision of the Financial and Consumer Services Tribunal (the Tribunal) in which the Tribunal found that the Investment Industry Regulatory Organization of Canada (IIROC) had breached its duty of fairness owed to one of its members by failing to disclose documents in the possession of the member's former employer during enforcement proceedings.

The Court of Appeal's decision is significant for two reasons. First, the decision establishes that the obligation of regulators to produce documents in the possession of third parties in enforcement proceedings is different from the obligation to produce documents in their own possession and control. Second, it reiterates that it is not the role of an administrative tribunal to bring and adjudicate motions on its own initiative. To do so, and to decide issues without giving the parties an opportunity to be heard, constitutes a breach of the duty of procedural fairness.

The IIROC Enforcement Proceedings

Robert Crandall was an investment advisor. In 2013, IIROC received a complaint about Crandall regarding excessive trading without approval, prompting an investigation. During the investigation, and subsequent enforcement proceedings, Crandall maintained that his former employer possessed records, including notebooks, notepads and other records, that he needed for his defence. IIROC made repeated requests for documents from the former employer and disclosed the relevant documents provided by it. However, no notebooks or notepads were found. Crandall ultimately chose not to testify in his own defence, insisting that he was unable to do so without his notes.

In a decision dated May 26, 2016, an IIROC panel concluded that Crandall had (1) engaged in excessive trading; (2) engaged in unauthorized discretionary...