Settlements with regulatory bodies regarding infractions are
generally final and binding on all of the parties. This allows the
parties to put the regulatory infraction to rest and move forward
with their lives. But what happens when a decision of today calls
into question the fairness of a settlement from yesteryear? That is
the question at the heart of the Ontario Securities Commission
(OSC) decision issued in the matter of Marc McQuillen on September
Mr. McQuillen worked as an Assistant to Mr. David Berry when Mr.
Berry was head of preferred share trading at Scotia Capital. Both
were charged by Investment Industry Regulatory Organization of
Canada (IIROC), a self-regulatory organization (SRO) under purview
of the OSC, with manipulating the sale of new share issues being
underwritten by Scotia. Mr. McQuillen settled with IIROC and paid a
$25,000 fine in lieu of undergoing costly proceedings. Mr. Berry
did not settle, but years later won his case against IIROC after a
highly contested hearing on the matter. Soon thereafter, Mr.
McQuillen petitioned the OSC to have his settlement reversed.
Mr. McQuillen argued that, while as a "pure matter of
law" his opportunity to challenge the charges ended with his
settlement, that opportunity was severely curtailed by the cost of
the legal process. Now that the charges were proven to be
unsubstantiated by virtue of Mr. Berry's success in defeating
them, Mr. McQuillen stated that the OSC, as a matter of fairness,
ought to overturn his settlement. He argued that he should be
treated similarly to Mr. Bernie Ashe, the former AIT Chief
Executive, whose settlement in an analogous case was overturned in
IIROC, for its part and supported by OSC staff, argued that the
settlement was final and non-reviewable, and that overturning the
settlement would open the floodgates to future challenges.
Moreover, IIROC argued that neither it nor the OSC had the
jurisdiction to overturn the settlement.
Was Mr. McQuillen's settlement truly final? The OSC says no.
IIROC has been ordered to expunge Mr. McQuillen's disciplinary
record (and if that is not practicable, IIROC must include a
prominent statement to that effect in conjunction with any future
reference by IIROC to the settlement agreement or to Mr.
McQuillen), and to repay his fine. The OSC Vice-Chair James Turner
underpinned his decision on the "manifest unfairness"
that would result if Mr. McQuillen's settlement were not
overturned, stating that "McQuillen continues to suffer damage
to his reputation and career as a result of the settlement
agreement that he should not suffer."
In addressing the arguments advanced by IIROC, Mr. Turner set
aside the notion of a jurisdictional vacuum, issuing his decision
pursuant to the OSC's supervisory jurisdiction over IIROC under
subsection 21.1(4) of the Ontario Securities Act. He
stated that "if neither IIROC nor the Commission has
jurisdiction to reconsider the Settlement Approval in any
circumstances, that would be a material and unfortunate defect in
our securities regulatory regime."
Mr. Turner furthermore rejected the floodgates argument, noting
that Mr. McQuillen's case was "unique and the rarest of
circumstances." The OSC can only intervene in the decision of
an SRO where (i) the IIROC Hearing Panel made a fundamental error
of law or principle or overlooked material evidence; (ii) the
IIROC's Hearing Panel's perception of the public interest
conflicts with that of the OSC; or (iii) new and compelling
evidence is presented to the OSC that was not before the IIROC
For those seeking to challenge SRO decisions in the future, Mr.
McQuillen's case is only slightly encouraging. The fundamental
nature of settlement arrangements – that they are binding on
the parties and non-reviewable – remains intact. In unique
and the rarest of circumstances, however, "final" might
not always mean final.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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