The recent decision by the United States Court of Appeals for the Second Circuit, SEC v. Citigroup, has implications for Ontario's new "no-contest" settlement policy. The Second Circuit overturned Judge Rakoff's decision in the Citigroup case and confirmed that "no-contest" settlements are permissible – even where they appeared to allow a defendant to simply pay a fine and escape a finding of liability.
In March, the Ontario Securities Commission (OSC) released Staff Notice 15-702 Revised Credit for Cooperation Program. The new policy includes provisions permitting Staff of the OSC to enter into settlements with respondents who agree not to contest staff's allegations. Judge Rakoff's decision was a touchstone for those who were critical of "no-contest" settlements.
Possibly prompted by the criticism of these settlements from Rakoff and others, the OSC released a policy with strict limitations on when "no-contest" settlements are available. This will likely limit the number of settlements that actually occur. For more on that topic see our bulletin available here.
By reiterating that "no-contest" settlements are permissible and even desirable in the US system, the Second Circuit has created more space for the OSC to expand its own "no-contest" policy, should it choose to do so.
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