The Ontario Securities Commission (OSC) has upheld the appeal of the former assistant to high-profile trader, David Berry, who sought to have his settlement with the Investment Industry Regulatory Organization of Canada (IIROC) overturned after allegations against his boss were dismissed years later.

Berry and his assistant, Mark McQuillen, were accused of trading rule violations by IIROC. McQuillen settled the allegations against him in 2007, whereas Berry fought the charges and was ultimately vindicated, although not until 2013. McQuillen then sought to have his settlement retracted on the basis that the Berry hearing established that the trading in question did not amount to a violation of the rules. (See Former assistant seeks to clear name, investmentexecutive.com, August 19, 2014.)

The OSC agreed. In the decision released Monday, it concludes that it is “manifestly unfair to McQuillen” to allow the settlement agreement to stand. It orders the approval of that settlement to be set aside, and that the agreement itself should be vacated. It also orders IIROC to repay $25,000 to McQuillen; and says that it should expunge his disciplinary record.

Among other things, IIROC had argued that the trading rules do not expressly give its hearing panels the jurisdiction to reconsider, or reverse, an earlier decision. And, it said that the commission has no jurisdiction to review the refusal decision. OSC staff agreed with IIROC, saying that the commission should dismiss the appeal.

However, the panel disagreed. It ruled that regulators should be able to reconsider their decisions. “It would seem to me that, if neither IIROC nor the commission has jurisdiction to reconsider the settlement approval in any circumstances, that would be a material and unfortunate defect in our securities regulatory regime and one that could undermine confidence in that regime,” it said in its decision. And, it goes on to conclude that the commission does have jurisdiction, given its overriding supervisory jurisdiction over self-regulatory organizations.

It then rules that, given that it was found that Berry hadn’t violated the trading rules, “it logically follows that, had McQuillen continued to be a respondent in the Berry proceeding, the alleged breaches by McQuillen of [the trading rules] would have been dismissed on the same basis as they were dismissed against Berry. That follows as a matter of logic and I do not need any evidence to prove that conclusion.”

The OSC panel also rejected the argument from IIROC “that there would be great harm and an ‘opening of the floodgates’ if we permit McQuillen to re-open the settlement approval and the settlement agreement in these circumstances.”

“It is clear that the commission will interfere in an SRO decision only in the rarest of circumstances,” it says. “I have concluded in the circumstances that there is no basis upon which the Berry panel could have dismissed the allegations against Berry and not against McQuillen. Accordingly, these reasons recognize that the commission will re-open a settlement only in unique and the rarest of circumstances; in circumstances such as those in which McQuillen now finds himself.”

It also ruled that it would be “manifestly unfair” to McQuillen to allow the settlement to stand. “McQuillen continues to suffer damage to his reputation and career as a result of the settlement agreement that he should not suffer,” it said.