The Investment Dealers Association of
Canada is appealing a ruling by the Saskatchewan Financial Services
Commission that says the regulator has no authority to discipline former
Earlier this year, Wade MacBain, Karl
Neufeld and Frederick Smith filed a motion to the SFSC to challenge the
authority of the IDA to haul sanctions against them. The IDA accuses the
three investment dealers, who worked for Matrix Financial in Saskatoon,
of violating several IDA bylaws between 1996 and 2000.
The Saskatchewan hearing panel referred to Chalmers v. The Toronto Stock
Exchange, an Ontario Court of Appeal case that debated the reach of
domestic tribunals, to determine that the IDA needs statutory authority
to impose sanctions on past members of the investment dealers
organization. As a result, the commission sided with MacBain and
Neufeld, who were no longer members. The case against Smith was allowed
to proceed, because he was still a member of the industry.
While the IDA concedes in its factum filed with the SFSC in early
October that it doesn't have the requisite statutory authority against
MacBain and Neufeld, it is appealing the decision on the grounds that
its jurisdiction over members, or former members, is contractual in
The IDA asserts the commission erred in staying the proceedings. It
argues that simply because the courts will not enforce the IDA fines,
this does not mean that the contracts between the regulator and its
members, current and past, cannot be enforced. The IDA asserts its
authority to regulate its members.
Given the significance of the SFSC's initial ruling, the IDA expected a
flood of similar motions would be filed. And that's precisely what has
happened. "It had a ripple effect across the country," says Jeff Kehoe,
the IDA's director of enforcement.
Since the SFSC's ruling, three other former IDA members have tried to
challenge the regulator's authority, but Kehoe is quick to point out
that all of these challenges have been dismissed. "We've now received
decisions in B.C., Ontario and Quebec that support our position.
Christian Guilbault in Montreal was the first to try to test the
precedent set by the SFSC, although he later withdrew his proceedings.
In August, Charles Dass, a former IDA member in Vancouver, took his
challenge to the British Columbia Securities Commission. Dass argued
that since the B.C. Securities Act refers to "members" rather than
"non-former members," the IDA no longer had jurisdiction over him. That
application, however, was dismissed, on the grounds "that
self-regulatory bodies like the IDA regulate the members and approved
persons in accordance with the bylaws, rules and other regulatory
instruments of the self-regulatory body."
Stephen Taub tried the same approach in Ontario, similarly with little
success. In response to Taub's application, a hearing panel of the
Ontario Securities Commission said it has imposed "a duty on recognized
SROs, like the IDA, to regulate the operations and the conduct of their
According to Kehoe, the terms of the IDA bylaws — specifically bylaw
20.7 — make it very clear that the IDA has the authority to regulate
former members and institute proceedings for a period of five years
after they leave the industry.
That's not to say the IDA has stopped its push for wider powers. "We
would still like to see expanded powers across the country to improve
our ability to collect fines, to compel witnesses to obtain third-party
The SFSC and the IDA are waiting for a reply from MacBain and Neufeld.
As a result, no date has been set for the appeal.
Filed by Mark Brown, Advisor.ca,