An Ontario court has denied a bid from two former fund salesmen seeking to overturn a decision of the Ontario Securities Commission (OSC) denying them registration.

The Divisional Court dismissed an appeal by former fund salesmen, Sanji Sawh and Vlad Trkulja, who sought to appeal a decision of the OSC denying them registration in the wake of a regulatory settlement with the Mutual Fund Dealers Association of Canada (MFDA), that they believed would allow them to regain their individual registrations.

According to the decision, the pair lost their registration as fund dealer reps after the firm they founded, Investment House of Canada (IHOC), settled an enforcement action brought against it by the MFDA, which saw the firm resign from the MFDA and wind down. As a result of that deal, and the firm’s suspension from the MFDA, their registration was effectively suspended too.

However, they later applied to the OSC to have their registrations as dealing reps reinstated. The deputy director of the commission denied that request, and they appealed that decision to the commission, which also denied them, ruling that they “lacked the requisite proficiency and integrity to be registered”.

They then appealed this decision to the court, arguing that the OSC’s decision “undermined the coherence of the securities regulatory regime by not according sufficient deference to the settlement agreement that was approved by the MFDA”, which, they say, contemplated that they would be able to reinstate their registrations as fund dealer reps.

The court dismissed the appeal, noting that the OSC “has not delegated decisions about registration to the MFDA and that the MFDA made no findings on the issues that the commission had to decide when it declined to reinstate [their] registrations.”

It notes that the former reps are right that OSC reviews of decisions by self-regulatory organizations (SROs) typically demonstrate deference to the findings of the SROs. “However, it is important to recognize that in this case the commission was not conducting a hearing and review of the MFDA settlement or the hearing panel decision approving that settlement,” it says. Instead, it was assessing their fitness for registration, which is not something it has delegated to the MFDA.

Also, the hearing panel that approved the settlement agreement made no findings on the issues that the commission considered, it says. “The hearing panel did not hear evidence about and make findings as to whether the appellants were suitable for registration or whether the reinstatement of their registrations would be otherwise objectionable,” it says.

“The appellants may have had the expectation that once the MFDA settlement was approved, there would be no problem with the reinstatement of their registrations. However, the fact that this was their expectation does not make the expectation a reasonable one,” it says. “First, the MFDA has no jurisdiction over the issue and second, the MFDA made no finding on the issue except to impose conditions if their registrations were reinstated.”

Ultimately, the court concluded that the commission’s decision was reasonable. “The reasoning is justifiable, transparent and intelligible and the conclusion reached ‘falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law’,” it said, in dismissing the appeal.