Canada: Securities Regulation: The Supreme Court Of Canada Speaks Again

Last Updated: December 16 2013
Article by William S. Osler, Usman M. Sheikh and James T. McClary

The Supreme Court of Canada recently issued its decision in McLean v British Columbia (Securities Commission).1  

The case is the first by the Court to address inter-provincial cooperation in relation to securities regulation since its 2011 decision in the Securities Reference.2 It is also the first to be rendered by the Court since the announcement in September 2013 by the finance ministers of Canada, Ontario and British Columbia to create a new national cooperative securities regulator. [see the Bennett Jones Corporate Finance Update, " Federal, Ontario and BC Governments Announce New Securities Regulator," September 2013]

The Court's decision underscores the importance of inter-provincial cooperation in the effective and efficient enforcement of securities laws and also has significant implications for administrative law generally.

Summary of Proceedings

On September 8, 2008, the Appellant, Patricia McLean, entered into a settlement agreement with the Ontario Securities Commission in respect of misconduct that occurred in Ontario, in 2001 or earlier. As part of the settlement, the OSC issued an order barring McLean from trading in securities for five years and banning her from acting as an officer or director of any reporting issuer or registrant in Ontario for ten years. In 2010, the British Columbia Securities Commission issued a reciprocal order against McLean which was substantially identical to the OSC's order.

Reciprocal orders, also known as secondary proceedings, allow a securities regulator, such as the BCSC, to issue protective orders against a respondent based on findings of securities-related misconduct by a securities regulator in another province or territory. Reciprocal order provisions have been enacted by all 13 provincial and territorial legislatures in Canada.

McLean challenged the BCSC's reciprocal order, arguing that the limitation period in the BC Securities Act prohibited any order issued more than six years after the underlying misconduct. As McLean's misconduct occurred between 2000 and 2001, she argued that the BCSC proceeding commenced against her in 2010 was time-barred and that the BCSC should have initiated proceedings in 2007, before the 2008 settlement agreement with the OSC was concluded. The BCSC dismissed the argument without reasons and issued the reciprocal order.

The British Columbia Court of Appeal reviewed McLean's legal argument on a standard of review of correctness and dismissed the challenge (remitting the matter to the BCSC solely to provide brief reasons on why the order was in the public interest). McLean appealed the Court of Appeal decision and, in June 2012, the Supreme Court of Canada granted leave.

Decision of the Supreme Court of Canada

A seven-member panel of the Supreme Court of Canada dismissed McLean's appeal. In its decision, the Court held that:

  • The standard of review of the BCSC's interpretation of limitation periods in the BC Securities Act is reasonableness, not correctness; and
  • The BCSC's interpretation of the limitation period in the BC Securities Act was reasonable.

Implications of the Decision

The reasoning of the Court has significant implications for inter-provincial securities regulatory cooperation and administrative law.

For securities regulators:

  • The Court Affirmed the Importance of Inter-Provincial Cooperation. The Court's decision follows its ruling in the Securities Reference which struck down draft federal legislation intended to create Canada's first national securities regulator. In McLean, the Court has affirmed the importance of interprovincial cooperation in the enforcement of securities laws in Canada, noting that such cooperation is "indispensable" and that the BCSC interpretation was reasonable as it furthered the legislature's manifest goal of improving such cooperation.
  • The Court Confirmed the Desirability of Issuing Reciprocal Orders, Without Inefficient Parallel and Duplicative Proceedings. The Court noted that McLean's arguments could require each province or territory to commence its own proceeding in respect of misconduct that is being investigated by another province or territory, resulting in overlapping cases that "clog up the legal system and overburden the securities commissions" and "place a high burden on the target of the proceedings, who could well face multiple proceedings all across the country".
  • The Court Acknowledged BC's Efforts to Improve Inter-Provincial Cooperation By Enacting Secondary Proceedings Legislation. The Court examined the history of BC's secondary proceedings legislation, noting that it arose out of the Provincial/Territorial Memorandum of Understanding Regarding Securities Regulation signed by all provinces and territories (other than Ontario) in 2004 and that it was specifically designed as a "solution to the challenges inherent in the decentralized structure of securities regulation in Canada." In doing so, the Court appears to have given support to the continued development of similar ad hoc solutions to such challenges.
  • The Court Provided Guidance on What is "Reasonable" When Issuing Reciprocal Orders. The Court addressed a number of hypothetical concerns with the BCSC's interpretation of the limitations period, including that a cascading series of secondary proceedings, piggy-backing on each other, could effectively extend the limitations period to 74 years. The Court recognized that a regulator acting in such a manner would likely be distorting the purpose of secondary proceedings provisions. The Court noted, however, that any such order would be the subject of appellate review on a reasonableness standard and, without deciding the issue, endorsed as "good sense" the following propositions put forward by the BCSC in relation to issuing reciprocal orders:

    1. The date that "starts the clock" for the purposes of BC's limitation period on secondary proceedings is the date that the relevant action first occurred (i.e., the date a settlement agreement is entered into or the date of a conviction, judicial finding or enforcement order);
    2. A secondary proceeding may not be commenced if the period of the original order (i.e., the order issued by the primary jurisdiction) has already lapsed; and
    3. A reciprocal order must be based on an original proceeding in the primary jurisdiction (rather than on another reciprocal order).

For administrative law, and particularly on the issue of the standard of review, the Court:

  • Provided Guidance on the "Exceptions" to the Presumption of Deference that is to Apply to a Tribunal's Decision. McLean argued that the BCSC's decision should be reviewed on a correctness standard, relying upon the few exceptions to the presumption of deference that otherwise applies to a tribunal's decision (see the Court's decision in Alberta Teachers' Association3). One such exception is where the issue raises a question of law that is of central importance to the legal system as a whole and outside the adjudicator's specialized expertise. Continuing its trend towards deference, the Court refused to apply the exception, noting that securities regulators may arrive at differing, but reasonable, interpretations of similar statutory provisions and that the exercise of that interpretive discretion is part of an administrative decision maker's expertise.
  • The Court Further Extended Deference to Decisions Issued by a Tribunal Without Reasons. The Court noted that, while the BCSC failed to give reasons for its interpretation, it "impliedly decided that the proceeding was not time-barred". While the Court would have preferred the BCSC to have provided written reasons, it noted that a reasonable basis for the decision was "apparent from the arguments advanced by the [BCSC]" in court and that nothing would be gained by requiring the BCSC to reconsider its decision on remand. A similar approach was taken recently by the Court in Agraira.4

Usman M. Sheikh, a litigator at Bennett Jones LLP, served as co-counsel to the Ontario Securities Commission in the appeal.

Footnotes

1. 2013 SCC 67.

2. Reference re: Securities Act (Can.), 2011 SCC 66.

3. Alberta v Alberta Teachers' Association, 2011 SCC 61.

4. Agraira v Canada (Public Safety and Emergency Preparedness), 2013 SCC 36 (see para. 58).

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
William S. Osler
Usman M. Sheikh
James T. McClary
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions