As originally reported in our November and December 2008 Broker’s Report, IIROC was granted leave to appeal the Ontario Superior Court (Divisional Court) ruling in Taub v. Investment Dealers Association of Canada, et al. The appeal was argued on February 11, 2009 and the Court of Appeal released its decision on August 28, 2009, overturning the Divisional Court’s holding that the Investment Dealers Association (now the Investment Industry Regulatory Organization of Canada, referred to herein as “IIROC”) did not maintain jurisdiction over its former members.
In addition to finding that the Divisional Court erred in its application of the appropriate standard of review, the Court of Appeal considered and concluded that the decision of the Ontario Securities Commission (the “OSC”) (which had held that IIROC maintained jurisdiction over former members) was a reasonable one and as such should not have been overturned. Firstly, the court held that section 21.1(3) of the Ontario Securities Act (the “Act”), which requires IIROC to “regulate the operations and standards of practice and business conduct of its members and their representatives in accordance with its by-laws, rules, regulations, policies, procedures, interpretations and practices”, does not limit IIROC’s jurisdiction such that the by-law extending its disciplinary jurisdiction to former members for five years after they cease to be members was not in contravention of the Act. Secondly, the court held that section 21.6 of the Act, which provides that no by-law of a self-regulatory organization may contravene Ontario securities law but that self-regulatory organizations may impose additional requirements within their jurisdiction, specifically permitted IIROC to impose additional requirements in its by-laws. As such, the court concluded that “[b]ecause s. 21.1(3) does not limit the jurisdiction of the SRO to regulate only current members, s. 21.6 effectively enlarges the power of the SRO to enact rules to fulfill its regulatory mandate.”
It should be noted that the Court of Appeal’s decision in Taub is consistent with the British Columbia Court of Appeal’s decision in Investment Dealers Association of Canada v. Dass (also reviewed in November 2008’s Broker’s Report), which similarly held that IIROC’s by-law extending its disciplinary jurisdiction to former members did not contravene the British Columbia Securities Act.