Administrative law – Decisions of administrative tribunals – Securities Commission – Stock brokers – Disciplinary proceedings – Settlements – Judicial review – Bias – Procedural requirements and fairness – Disclosure
Rankin v. Ontario (Securities Commission),  O.J. No. 259, 2013 ONSC 112, Ontario Superior Court of Justice, January 11, 2013, M. Brown R.S.J., P.T. Matlow and K.E. Swinton JJ.
The appellant was charged with ten counts of insider trading and ten counts of tipping under the Securities Act, R.S.O. 1990, c. S. 5 (the “Act”), in respect of allegations that he provided confidential information to Mr. Duic, who used that information to purchase securities. Mr. Duic admitted insider trading and reached a settlement agreement with the respondent Ontario Securities Commission. That agreement imposed a cease trade order. In the case against the appellant, Mr. Duic was a key witness for the prosecution.
At trial, the appellant was found guilty of ten counts of tipping, but not guilty of ten counts of insider trading. He was sentenced to six months imprisonment. On appeal, the appellant’s conviction was overturned and a new trial was ordered.
Prior to the appellant’s retrial, the appellant entered into negotiations with the Commission to resolve both the quasi-criminal and administrative proceedings. A settlement agreement was reached wherein the quasi-criminal charges were withdrawn and the appellant made admissions in the administrative proceedings and agreed to sanctions under the Act.
Following approval of the settlement agreement, the appellant learned that prior to his entering into the settlement agreement, the Commission was investigating Mr. Duic for breach of his cease trade order. During settlement negotiations with the appellant, the Commission orally informed the appellant’s counsel that Mr. Duic was under investigation.
The appellant applied to the Commission under the Act to make an order revoking or varying the decision to approve the settlement agreement on the basis that the Commission failed to disclosure relevant information in respect of Mr. Duic’s conduct prior to the settlement agreement. The Commission declined to grant the application, and held that the information would not likely have affected the outcome of the administrative proceeding and an order of revocation would not be in the public interest.
The appellant appealed to the Ontario Superior Court of Justice Divisional Court, alleging that the Commission’s decision not to revoke the settlement agreement was unreasonable and a member of the Commission hearing the revocation application was biased. Brown J. and Swinton J., for the majority, held that the Commission’s decision on the revocation application was reasonable and there was no basis to support a finding of bias.
The court held that the conclusion that there was no unfairness to the appellant was reasonable in the circumstances. The appellant was, regardless of the investigation into Mr. Duic’s possible breach of the cease trade order, well placed to attack Mr. Duic’s credibility; the information regarding Mr. Duic’s possible breach of the cease trade order was not information that would have possibly lead a reasonable person to risk a further criminal or administrative proceeding; the appellant had made admissions that he communicated confidential information about corporate transactions to Mr. Duic and led no evidence on the revocation application that those admissions were not true or that he had been misled or was treated unfairly when he made them; and the appellant received a good settlement, as the criminal charges were withdrawn where the appellant was at risk of a conviction. Therefore, the Commission’s decision to refuse the appellant’s application was reasonable. Revoking the settlement agreement was not in the public interest.
On the issue of bias, the court rejected the appellant’s argument that the Commission’s decision should be set aside because a member of the Tribunal who had presided over the hearing in which the Commission considered Mr. Duic’s breach of the cease trade order also presided over the hearing of the revocation application. The court noted that no concern about bias was raised at the revocation application because of the Tribunal member’s participation and, therefore, the appellant must be taken to have waived that claim. Further, the threshold for a finding of real or perceived bias is high. Mere suspicion is insufficient to support an allegation of bias. The appellant’s assertion that the Tribunal member refused to consider submissions that ran counter to his view of the conclusions in respect of Mr. Duic’s proceeding was without merit. The appellant’s disagreement with the conclusions in the proceedings involving Mr. Duic did not provide a basis to conclude that the Tribunal members approached the revocation application with a closed mind or in an improper manner.
The majority dismissed the appellant’s appeal.
Matlow J., in dissent, held that the appeal should be allowed and a new hearing held before another panel of the Commission, differently constituted. Matlow J. held that, as a matter of law, for the settlement agreement to be binding on the appellant, it had to be an informed agreement, which required the Commission to inform him about all matters known to them that could be relevant to his decision whether or not to agree to the settlement. As a result of the Commission’s failure to provide full disclosure to the appellant, the appellant’s decision to agree to the settlement could not be an informed decision and, accordingly, the Commission’s decision on the revocation application to uphold the settlement agreement could not stand.
This case was digested by Joel A. Morris of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact him directly at firstname.lastname@example.org or review his biography at http://www.harpergrey.com.
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