An adjudicator that declined to review a proposed settlement between the Autorité des marchés financiers (AMF) and one of the respondents in an enforcement proceeding was wrong to make that call, the Quebec Superior Court ruled — and it ordered the adjudicator to review the proposed deal.
According to the court’s decision, back in 2020, the AMF filed an enforcement action against four respondents. The case has yet to be heard, and a hearing date hasn’t been set — although when it does finally happen, the hearing is expected to run for 86 days. In the meantime however, the regulator reached a proposed settlement with one of the respondents, which it submitted to an adjudicator at the Tribunal administratif des marchés financiers for approval in late August.
However, the adjudicator, Judge Jean-Pierre Cristel, refused to review the settlement, saying, among other things, that it would be “in the public interest” to consider all of the evidence that will be presented at trial before deciding whether to approve a settlement.
“This would also avoid the possibility of contradictory judgments,” the judge reasoned, according to a translation of a court document.
The AMF then applied to the court, asking it to set aside the adjudicator’s decision, and to approve the settlement.
According to the court, the regulator argued that the court’s intervention is justified because the adjudicator refused to exercise his jurisdiction.
The court agreed, in part, ruling that the judge’s refusal to review the proposed settlement was “legally flawed and must be overturned.” Rather than take the case itself, the court ordered the tribunal to reconsider.
“The administrative judge had a duty to hear the parties on the ratification of their agreement, and to do so promptly. He could not postpone the matter until after the trial, or link the ratification of the agreement to extrinsic considerations, such as [an] application to stay proceedings or the possible conclusion of agreements between the AMF and other parties,” the court said.
Among other things, the court noted that the AMF’s decision to settle with one of the respondents avoids a lengthy, costly trial, with an uncertain outcome, which is “a valid objective,” it said — that won’t be achieved if the tribunal waits until after the trial against the remaining respondents is completed.
“Justice Cristel’s decision to postpone his ruling contravenes the parties’ right to settle their dispute before trial and the policy that favours settlements,” it said.
“The judge’s refusal to hear the parties constituted a breach of procedural fairness,” it found.
The court also said that, in the proposed settlement, the respondent admits to breaching securities law — and it’s up to the adjudicator to determine whether the proposed sanctions are appropriate based on those admissions. There’s no need for a full trial to reach that decision, it said, and there’s no risk of contradictory findings.
“The two processes are independent, and the admissions contained in the agreement are binding only on the AMF and [the settling respondent], not on the other respondents,” the court said.
While the AMF asked the court to approve the proposed settlement, the court ruled that, “it is the administrative judge who is best placed to do so.” It ordered the tribunal to “take up, without delay, the AMF’s request to ratify” the proposed settlement.