Canada: The Right To Formulate An Objection In An Investigation Conducted By The Autorité des Marchés Financiers

When a witness is compelled to testify in an investigation conducted by the Autorité des marchés financiers (AMF), does his lawyer have the right to object to a question that is unrelated to the subject-matter of the investigation? The Québec Court of Appeal will soon have the opportunity to decide this issue, which is often a litigious one between the AMF and lawyers assisting witnesses in such investigations.

The Securities Act confers upon the AMF and its investigators the power to summon witnesses to appear and be examined. It states that any person called on to testify during such an investigation may be "assisted by the advocate of his choice" (S. 246 of the Securities Act).

AMF investigators frequently try to curtail the role of the advocate on the grounds that the he may "assist" but may not "represent" the witness. While in practice the AMF investigator and the attorney assisting the witness usually agree on a modus vivendi during the examination, the AMF recently opted for a more aggressive approach in a particular investigation.

In that matter, a witness was summoned to testify in connection with an investigation conducted by the AMF. The investigator refused to disclose to the witness and his attorney the order authorizing the investigation. The attorney objected to certain questions asked by the investigator on the grounds that they did not appear to be related to the investigation, of which he knew very little given that he had never been provided with the investigation order. The attorney suggested that his objections be immediately ruled upon by a Superior Court judge. The AMF refused that suggestion and instead decided to bring penal charges against the witness for refusing to answer the questions asked, asserting that the witness had committed an infraction pursuant to subsection 195(4) of the Securities Act.

In an unreported judgment, the Court of Québec acquitted the witness, essentially for the following reasons:

  • the investigator may examine a person summoned only respecting matters relevant to the investigation;
  • the rules of natural justice give the witness the right to know the purpose of the investigation in order to ensure that he is treated in accordance with the investigation mandate given by the commissioner conducting the inquiry;
  • the investigator had failed to inform the witness of the nature of the investigation, and hence of the scope and limits of his mandate;
  • it was normal for the witness to ensure that the questions asked actually fell within the investigation mandate and were relevant thereto;
  • the witness, through his attorney, had exercised a fundamental right, namely to object to a question that exceeded the investigator's jurisdiction; and
  • as the witness's attorney had suggested to the investigator that the objection be ruled upon by the Superior Court, a suggestion which was rejected by the investigator, the Court could not find that there had been a refusal to answer by the witness within the meaning of Section 195 of the Securities Act.

In Autorité des marchés financiers v. Fournier, 2010 QCCS 4830 (CanLII) (C.S.), the Superior Court dismissed the AMF's appeal and ruled as follows:

  • the investigator's powers to compel a person to give evidence were limited by the subject of the investigation, and the person examined could refuse to answer on the grounds that the question asked did not pertain to a matter that was the subject of the investigation;
  • the subject of the investigation had to be disclosed to the person being examined;
  • the attorney had not only the right but also the duty to intervene in order to obtain particulars and to object if he realized that the investigation was going off-track and had become a mere fishing expedition;
  • the advocate's role could not be reduced to a silent walk-on part; and
  • it was "surprising" that the AMF had decided to lay criminal charges against the witness in the circumstances of that matter.

The AMF has sought and obtained leave to appeal these judgements to the Court of Appeal. The AMF's position before the Court of Appeal is very aggressive, the basic argument being that an advocate may not object to any question asked by an AMF investigator except to ensure the preservation of solicitor-client privilege.

The Barreau du Québec has intervened with leave of a judge of the Court of Appeal. The Barreau will argue that an advocate has to be able to properly protect the rights of a witness during the examination, which includes being able to object if the investigator asks questions which exceed his powers and are beyond the scope of the investigation.

The Court of Appeal will in all likelihood hear the matter in 2011.

The powers of an investigator acting in connection with an investigation conducted by the AMF, further to an order issued under the Securities Act, are limited by the subject of his investigation. The right to privacy guaranteed by the Québec Charter includes the right of any person subject to being tried to ensure the legality of questions asked by the AMF in order, inter alia, to prevent fishing expeditions. It will thus be interesting to see if the Court of Appeal accepts the AMF's premise to the effect that where the investigator exceeds his authority by asking illegal questions, the subject of the examination is not entitled to object to the illegal questions, either directly or through his or her lawyer.

It will also be interesting to see if the Court of Appeal accepts the argument, implied in the AMF's position, that the Securities Act creates an exceptional regime pursuant to which, unlike other investigative bodies, its investigators cannot be subject to judicial review. There is no question that the powers of investigation exercised under the Securities Act are aimed at protecting the public against unscrupulous trading practices that may result in investors being defrauded. As important as the AMF's mission may be, numerous regulatory authorities successfully perform equally essential roles while being governed by the abovementioned principles.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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