Canada: The OSC's Jurisdiction On An Appeal From A Decision Of A Director: Re Dhillon (2018) ONSEC 14

In Re Dhillon, the Director of Compliance and Registrant Regulation ("Director") of the Ontario Securities Commission ("OSC" or "Commission") refused Dhillon's application for registration under s. 27 of the Ontario Securities Act (the "Act") on the ground that Dhillon lacked both the proficiency and integrity for registration, and that his registration would otherwise be objectionable (the "Director's Decision"). Thereafter, Dhillon applied to the OSC for a hearing and review of the Director's Decision under s. 8 of the Act. Between the time of the Director's Decision and the time of the hearing and review by the OSC, Dhillon's sponsor withdrew its sponsorship of his registration.

The OSC's decision to deny Dhillon's application considers the impact of the sponsor's withdrawal of its sponsorship, and sheds light on the test that an applicant must satisfy on an appeal and review of a decision of the Director to deny registration as well as the scope of the Commission's jurisdiction under s. 8.

Preliminary Issue: Commission's Jurisdiction under s. 8 of the Act Where the Applicant's Sponsor Has Withdrawn

Section 25 of the Act requires that an individual seeking to engage in the business of trading in securities be registered as a dealing representative of a registered dealer. As the registered dealer that had originally sponsored Dhillon's application for registration had withdrawn its sponsorship following the Director's Decision, the OSC was required to determine, as a preliminary matter, its jurisdiction to grant the relief requested.

The OSC concluded that Dhillon remained a person "directly affected" by the Director's Decision within the meaning of s. 8, and as such had standing to seek a hearing and review of the denial of his application for registration. Further, the Commission's authority to make "such decision as it considers proper" under s. 8 of the Act must surely include the authority to set aside the Director's Decision without approving the registration. Accordingly, while the Commission did not have jurisdiction to approve Dhillon's application for registration given his unsponsored status, the Commission retained jurisdiction under s. 8(3) to set aside the Director's Decision to refuse it. The hearing proceeded on that basis.

Presumably the practical effect of this approach is that if Dhillon had succeeded in persuading the OSC to set aside the Director's Decision, and had he been able to find a dealer to sponsor him, the Director would have been required to grant a further request by him for registration as a dealing representative of that registered dealer, absent additional grounds for denying him status as a registrant.

Burden of Proof on Staff Under s. 27 of the Act

The Commission confirmed that a hearing and review to the OSC of a decision of the Director is a hearing de novo, involving a fresh consideration of the issue. No deference is owed to the Director's Decision, and Staff bear the burden of proof or persuasion of establishing that the applicant lacks the proficiency or integrity to be registered, or that his registration would otherwise be objectionable.

Staff argued that the burden of proof on Staff was lower than the balance of probabilities standard, based upon the wording of s. 27(1) of the Act that provides that the Director may refuse registration where it appears to the Director that the applicant is not suitable or the registration would otherwise be objectionable. The OSC noted that in F.H. v. McDougall, 2008 SCC 53, the Supreme Court of Canada recognized that it is open to the legislature to change the civil standard of proof on a balance of probabilities through statutory enactment using clear and unambiguous language. However, the language of s. 27 fell short of the type of clear and unambiguous language required to displace the conventional standard of proof. Further, given the impact of a denial or loss of registration on an individual, requiring Staff to establish the preconditions to a denial of registration on a balance of probabilities was not onerous. Ultimately, however, the OSC declined to decide the issue as it did not have a detailed analysis of the phrase, which also appears in other sections of the Act including s. 61 concerning the issuance of a receipt for a prospectus and s. 70 concerning the issuance of an order to cease trade a prospectus distribution. Further, even using the conventional standard of proof on a balance of probabilities, Dhillon was unsuitable for registration.

Decision on the Merits of the Hearing and Review

The Commission confirmed its obligation to act in the public interest when reviewing the Director's Decision, and to bear in mind certain fundamental principles such as the requirement for the maintenance of high standards of fitness and business conduct to ensure honest and responsible conduct by market participants enshrined in s. 2.1(2)(iii) of the Act.

In determining whether Dhillon was suitable for registration, the Director and the Commission were required to consider whether he satisfied the requirements prescribed in the regulations relating to proficiency, solvency and integrity. The solvency requirement was not an issue in this case.

In this case, the OSC was satisfied on a balance of probabilities that Dhillon was not suitable for registration, based upon a lack of proficiency and prior conduct demonstrating a lack of integrity. On that basis it confirmed the Director's Decision.

The issue with respect to Dhillon's proficiency was whether, notwithstanding that Dhillon's application for registration was dated more than three years after he was last registered in 2012, he could still meet the proficiency requirements in National Instrument 31-103 – Registration Requirements. NI 31-103 requires that a mutual fund dealing representative have passed at least one of the Canadian Investment Funds Course Examination, the Canadian Securities Course Examination or the Investment Funds in Canada Course Examination. Although Dhillon had passed one of those courses in 1990, he was deemed by NI 31-103 not to have passed such an examination as he had not passed it within a three year period prior to his application for registration. Dhillon's argument to the Director that he satisfied an exemption for individuals who had gained twelve months of relevant securities industry experience during the three year period prior to his application failed. His submission that, notwithstanding that he had not been employed in the industry during that three year period, he had taken several industry related seminars and training courses which should qualify as securities industry experience was rejected by the Director. The OSC agreed with the Director that Dhillon's attendance at seminars did not amount to 12 months of relevant securities industry experience.

Dhillon also failed to establish that he satisfied the integrity requirements. Dhillon's prior registration history revealed that he had been the subject of client complaints and compliance deficiencies while working at other dealers, and was found by the MFDA to have breached MFDA rules and to have deliberately misconducted himself. The Commission determined that he had repeatedly used pre-signed forms, recommended unsuitable leverage strategies to clients and engaged in off-book trading activities. He had mistreated compliance staff at multiple firms, and his explanations for his conduct displayed a lack of integrity. The manner in which he responded to regulators when his non-compliance was raised with him also demonstrated his lack of integrity. In sum, the evidence was "truly overwhelming that Mr. Dhillon is effectively ungovernable and completely lacking in personal integrity".

Takeaways

Whether the use of the words "appears to the Director" in sections 27, 61 and 70 of the Act should be interpreted as importing a standard of proof lower than on a balance of probabilities is unclear and remains to be definitively determined.


About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

For more information about Norton Rose Fulbright, see nortonrosefulbright.com/legal-notices.

Law around the world
nortonrosefulbright.com

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
 
In association with
Related Topics
 
Related Articles
 
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