The Court of Appeal for Ontario has reversed a lower court decision, and reaffirmed a self-regulatory organization’s jurisdiction over former members.

The case involves former registered rep Stephen Taub. Taub challenged the jurisdiction of the Investment Dealers Association of Canada (predecessor to the Investment Industry Regulatory Organization of Canada) after the IDA brought disciplinary action against him after he’d already left the industry. An IDA tribunal rejected that argument, and that decision was upheld on appeal by the Ontario Securities Commission.

However, Taub appealed the OSC decision to the Divisional Court, which overturned the tribunals’ decisions in a majority decision. “The majority held that the OSC’s interpretation of the governing legislation was unreasonable, and concluded that the IDA did not retain jurisdiction over the respondent after he had resigned,” noted the appeal court in its decision.

The IDA and the OSC in turn appealed the Divisional Court decision (and the Mutual Fund Dealers Association of Canada participated in the case as an intervenor). In its decision dated August 28, the appeal court agreed with the IDA and the OSC, allowing their appeal.

“To me the most significant issue is whether there is any legal impediment on the IDA preventing it from imposing fines on non-members who are found guilty of professional misconduct, as it can on members,” Judge Kathryn N. Feldman said in the decision.

“Clearly the imposition of a fine is a penalty. However, it is a penalty that each member voluntarily agrees to in applying for membership in the association,” Feldman said.

“If the IDA is able to impose the same significant fines when disciplining former members as it can when disciplining members and if those fines are legally collectable, then expulsion or removal of a person from membership in an SRO would not be the ultimate or necessarily the only significant disciplinary penalty that could be imposed on former members. This would make discipline proceedings against a former member as effective and relevant as proceedings against a current member and would address the mootness issue and the concern that [raised in an earlier case] about the efficacy of disciplining former members,” the court found.

“In my view, the conclusion of the OSC is reasonable and should be upheld. I would therefore set aside the decision of the majority of the Divisional Court and affirm the decision of the minority,” Feldman concluded.

“We’re extremely pleased with the decision,” said Wendy Dey, director of public affairs with the OSC.

“We are reviewing the decision in detail before commenting further,” Dey added.

IE