A recent court decision provides guidance on a seldom litigated issue — when can an individual or company seek immunity from being sued for complying with Ontario securities law?
In Sells v. Manulife, Manulife sought the dismissal of a lawsuit commenced by two former investment advisors (the “IAs”) based on s. 141(2) of the Securities Act, which states:
Immunity of Commission and officers
141. (1) No action or other proceeding for damages shall be instituted against the Commission or any member thereof, or any employee or agent of the Commission for any act done in good faith in the performance or intended performance of any duty or in the exercise or the intended exercise of any power under Ontario securities law, or for any neglect or default in the performance or exercise in good faith of such duty or power.
Immunity re intended compliance
(2) No person or company has any rights or remedies and no proceedings lie or shall be brought against any person or company for any act or omission of the last-mentioned person or company done or omitted in compliance with Ontario securities law.
On its face, s. 141(2) immunizes any person or company for complying with Ontario securities law, but doesnot explicitly include the pre-requisite requirement of good faith as required in s. 141(1), which immunizes the Ontario Securities Commission and its actors.
The IAs in Sells, whose registration had been sponsored by Manulife, alleged that Manulife had filed misleading uniform termination notices (the “UTNs”) about the IAs with Investment Industry Regulatory Organization of Canada (“IIROC”), thereby sabotaging their employment with other investment dealers and causing the loss of their book of business. It is an offense under securities law to give false or misleading information on a UTN.
Manulife was required under Ontario securities law to submit the UTNs to notify IIROC that its agency agreements with the IAs had been terminated. Among other things, the UTNs required Manulife to specify the reasons for the IAs’ termination and to provide related details.
Manulife argued that the lawsuit should be dismissed as a matter of law because in filing the UTNs it complied with Ontario securities law and its conduct was accordingly protected by s. 141(2) regardless of whether it acted in good faith. The court rejected Manulife’s argument, holding that a trial was necessary to determine whether Manulife had filed a compliant UTN and could be shielded by s. 141(2).
The key takeaway from Sells is that s. 141(2) does not operate automatically where there is an unresolved dispute as to whether the party seeking to rely on it did or did not comply with securities law. The underlying facts are important — a party cannot comply with securities law by filing a misleading document.