The Court of Appeal for British Columbia has ruled that the Canadian Venture Exchange Inc. had no jurisdiction over a British Columbia broker arising as a matter of contract as the new exchange came into being.

The broker, Harjit Gill, won his appeal challenging the disciplinary authority of the CDNX, which was formed in 1999, replacing the Vancouver Stock Exchange and the Alberta Stock Exchange.

At the time of the exchanges’ merger there was an investigation by the VSE into alleged misconduct by Gill, then a broker with Merrill Lynch Canada Inc., but who had worked for several brokerages in B.C.

The question on appeal was whether CDNX inherited the authority to discipline Gill as a matter of contract rather than legislation and to impose penalties if the allegations are proven. The B.C. Securities Commission ruled last year that CDNX did have that authority, having ‘acquired’ it by virtue of the merger.

Gill appealed the commission’s ruling on several grounds. In her ruling, Madam Justice Newbury said, “At the end of the day, it is my conclusion that what may be called ‘contractual jurisdiction’ over Mr. Gill did not pass to CDNX Inc. for many reasons, most notably that he did not agree to become subject to the authority of CDNX Inc. in the place of the VSE or consent to the ‘assignment’ of such jurisdiction to CDNX Inc.

“Thus in my view, the appeal must be allowed and the decision of the Commission set aside.”

It also made an order declaring that CDNX Inc. has no jurisdiction arising as a matter of contract to proceed with a hearing of allegations that Gill infringed the by-laws or rules of the VSE.