Court deals blow to IDA
July 16, 2008
An Ontario court has ruled the watchdog overseeing the brokerage
industry has no authority over former members, delivering a blow to the
regulator's ability to discipline brokers who have left their jobs.
In a ruling released yesterday, the Ontario Divisional Court has ruled
the Investment Dealers Association of Canada - now called the Investment
Industry Regulatory Organization of Canada (IIROC) - cannot discipline
former Research Capital Corp. investment adviser Stephen Taub. The
regulator had begun disciplinary hearings against Mr. Taub in 2005,
alleging he had conducted improper trades for clients. He challenged the
hearing panel's jurisdiction on the basis that he was no longer an IDA
The court said the Ontario Securities Act only gives IIROC jurisdiction
over members. "There is no provision in the section for regulation of
former members," it ruled.
However, in a dissenting opinion, Mr. Justice James Carnwath disagreed
with the other two members of the court panel, saying the decision will
frustrate the primary purpose of the Securities Act.
"The irony of the majority's conclusion is that it frustrates the
purpose of the legislation," he said. "Allowing a member to resign and
therefore escape sanction for improper acts committed ... can hardly be
said to protect investors and foster confidence in capital markets."
Judge Carnwath said he supports an earlier ruling from the Ontario
Securities Commission, which found IIROC did have authority over former
IIROC spokeswoman Connie Craddock said yesterday the regulator had just
received the ruling and had not studied it.