null
110 O.R. (3d) 492
2012 ONCA 208
Court of Appeal for Ontario,
Sharpe, Blair and Juriansz JJ.A.
March 29, 2012
Securities regulation -- Penalties -- Administrative penalties -- Ontario Securities Commission correctly dismissing appellants' application to strike down s. 127(1)(9) of Securities Act (which authorizes administrative penalties of up to $1 million for each failure to comply with Ontario securities law) on basis that it violates s. 11(d) of Charter -- Administrative tribunal's power to impose substantial monetary penalties must be assessed on basis of penalty imposed rather than on basis of penalties that are theoretically possible -- Administrative [page493] penalty of $1 million per infraction not prima facie penal -- Administrative penalties of up to $520,000 imposed on appellants not sufficiently high to amount to true penal consequence -- Commission not erring by taking conduct contrary to public interest into account as contextual factor when imposing administrative penalties -- Canadian Charter of Rights and Freedoms, s. 11(d) -- Securities Act, R.S.O. 1990, c. S.5, s. 127(1)(9).
The appellant R was president and chief operating officer of the appellant WCI, a broker and registered investment dealer. The appellant C was the chairman, chief executive officer and ultimate designated person of WCI, and the appellant M was the chief financial officer and chief compliance officer. The Ontario Securities Commission found that R breached Ontario securities law by failing to report insider trades, and that C, M and WCI had failed to adequately supervise R's trading in shares of a company of which he was a director. Section 127(1) (9) of the Securities Act allows the Commission to impose administrative monetary penalties ("AMPs") of up to $1 million for each failure to comply with Ontario securities law. The appellants argued that the potential size of an AMP is so large that it amounts to a penal sanction, and that a party who is subject to such a penalty is a person "charged with an offence" within the meaning of s. 11(d) of the Canadian Charter of Rights and Freedoms. As the Commission does not accord the rights guaranteed by s. 11(d) when conducting administrative hearings, the appellants argued that s. 127(1)(9) of the Act should be struck down. The Commission rejected that argument. Among other sanctions imposed, R was ordered to pay an AMP of $520,000, C was ordered to pay an AMP of $250,000 and WCI was ordered to pay an AMP of $450,000. The Divisional Court upheld the Commission's decision. The appellants appealed.
Held, the appeal should be dismissed.
The power of an administrative tribunal to impose substantial monetary penalties is to be assessed on the basis of the penalty imposed rather than on penalties that are theoretically possible. The Constitution does not impose a defined limit on what is permissible by way of administrative monetary sanctions. Penalties at the level of $1 million per infraction are not inherently penal in nature and are entirely in keeping with the Commission's mandate to regulate the capital markets where enormous sums of money are involved and where substantial penalties are necessary to remove economic incentives for non- compliance with market rules. The AMPs imposed by the Commission on the appellants were not at a level to bring them within the "true penal consequences" category. Given the very large number of infractions involving over a billion dollars' worth of securities and over $2 million in commissions, fines totalling $1,220,000 were within the constitutionally permissible range.
The Commission did not err in taking conduct contrary to the public interest into account as a contextual factor when imposing an AMP on R. It is clear from the opening words of s. 127(1)(9) that before ordering any sanction, including an AMP, the Commission must be of the opinion that it is in the public interest to make the order. That provision requires the Commission to consider the public interest before imposing an AMP. R's conduct found to be contrary to the public interest was inextricably linked to his breach of Ontario securities law.
C and WCI should not be permitted to argue for the first time on appeal that the Commission erred and exceeded its jurisdiction by imposing AMPs against them without making a specific finding that they had breached Ontario securities law. That argument should have been addressed to the sanctions hearing, as it was for the Commission to interpret its own finding on the issue of whether or not those appellants had breached Ontario securities law. In any event, the argument was [page494] without merit. At the sanctions hearing, especially in the absence of any argument to the contrary, it was open to the Commission to interpret its own reasons for its merits findings as amounting to a finding that C had failed to comply with Ontario securities law.
C should also not be permitted to argue for the first time on appeal that the Commission erred and exceeded its jurisdiction by finding that he was under a duty imposed by Ontario securities law to supervise R. It would be inappropriate to describe the alleged error as jurisdictional. The finding that as the CEO and UDP of WCI, C was under a duty to supervise R fell within the expertise of the Commission, was entitled to deference and was not unreasonable. The Commission's decision that C, M and WCI failed to adequately supervise R was also not unreasonable.
APPEAL from the order of the Divisional Court (Ferrier, Molloy and Herman JJ.) (2010), 103 O.R. (3d) 484, [2010] O.J. No. 5681, 2010 ONSC 7029 (Div. Ct.) upholding orders of the Ontario Securities Commission.
Cases referred toCanada (Attorney General) v. United States Steel Corp., [2011] F.C.J. No. 726, 2011 FCA 176, 419 N.R. 203, 333 D.L.R. (4th) 1, 86 B.L.R. (4th) 24, 236 C.R.R. (2d) 1; Lavallee v. Alberta (Securities Commission), [2010] A.J. No. 144, 2010 ABCA 48, 474 A.R. 295, 100 Admin. L.R. (4th) 9, 317 D.L.R. (4th) 373, 255 C.R.R. (2d) 1, 185 A.C.W.S. (3d) 546, 22 Alta. L.R. (5th) 201, [2010] 8 W.W.R. 38; R. v. Wigglesworth, 1987 41 (SCC), [1987] 2 S.C.R. 541, [1987] S.C.J. No. 71, 45 D.L.R. (4th) 235, 81 N.R. 161, [1988] 1 W.W.R. 193, 24 O.A.C. 321, 61 Sask. R. 105, 28 Admin. L.R. 294, 37 C.C.C. (3d) 385, 60 C.R. (3d) 193, 32 C.R.R. 219, 3 W.C.B. (2d) 130, consd Other cases referred to Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Assn., [2011] 3 S.C.R. 654, [2011] S.C.J. No. 61, 2011 SCC 61, 2011EXP-3798, J.E. 2011-2083, 424 N.R. 70, 339 D.L.R. (4th) 428, 208 A.C.W.S. (3d) 434, 28 Admin. L.R. (5th) 177, 52 Alta. L.R. (5th) 1, [2012] 2 W.W.R. 434, 519 A.R. 1; Cartaway Resources Corp. (Re), [2004] 1 S.C.R. 672, [2004] S.C.J. No. 22, 2004 SCC 26, 238 D.L.R. (4th) 193, 319 N.R. 1, [2004] 8 W.W.R. 62, J.E. 2004-954, 195 B.C.A.C. 161, 28 B.C.L.R. (4th) 1, 14 Admin. L.R. (4th) 190, 130 A.C.W.S. (3d) 192; C.U.P.E. Local 963 v. New Brunswick Liquor Corp., 1979 23 (SCC), [1979] 2 S.C.R. 227, [1979] S.C.J. No. 45, 97 D.L.R. (3d) 417, 26 N.R. 341, 25 N.B.R. (2d) 237, 79 CLLC Â14,209 at 111, [1979] 2 A.C.W.S. 108; Martineau v. M.N.R., [2004] 3 S.C.R. 737, [2004] S.C.J. No. 58, 2004 SCC 81, 247 D.L.R. (4th) 577, 328 N.R. 48, J.E. 2005-89, 192 C.C.C. (3d) 129, 24 C.R. (6th) 207, 125 C.R.R. (2d) 301, 9 T.T.R. (2d) 487, 135 A.C.W.S. (3d) 1019; Slaight Communications Inc. v. Davidson, 1989 92 (SCC), [1989] 1 S.C.R. 1038, [1989] S.C.J. No. 45, 59 D.L.R. (4th) 416, 93 N.R. 183, J.E. 89-775, 26 C.C.E.L. 85, 89 CLLC Â14,031 at 12247, 40 C.R.R. 100, 15 A.C.W.S. (3d) 132 Statutes referred to Canadian Charter of Rights and Freedoms, s. 11, (d) Customs Act, R.S.C. 1985, c. 1 (2nd Supp.), s. 124 [as am.] Financial Services and Markets Act 2000 (U.K.), 2000 c. 8, s. 206 Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.), s. 40 [as am.] Securities Act, R.S.A. 2000, c. S-4, s. 199 [as am.] Securities Act, R.S.B.C. 1996, c. 418, s. 162 [as am.] Securities Act, R.S.N.S. 1989, c. 418, s. 135 [as am.] Securities Act, R.S.O. 1990, c. S.5, ss. 1 [as am.], 3.4(2)(b) [as am.], 76 [as am.], 107 [as am.], Part XXII [as am.], 122 [as am.], (1) [as am.], 127(1) [as am.], (9), 127.1 Securities Act, R.S.Q., c. V-1.1, s. 273.1 [as am.] Securities Exchange Act of 1934 (U.S.), 15 U.S.C. 78u-2(b)(3) Authorities referred to Ontario Ministry of Finance, Five Year Review Committee Final Report: Reviewing the Securities Act (Ontario) (Toronto: Queen's Printer for Ontario, 2003) [page495] Ontario Securities Commission, OSC Rule 31-505 (Toronto: Ontario Securities Commission)
Nigel Campbell, Peter Hogg, Q.C., and Ryder Gilliland, for appellant Roger D. Rowan. John A. Campion, David A. Hausman and Laura R. Baron, for appellants Watt Carmichael Inc., Harry J. Carmichael and G. Michael McKenney. Alexandra Clark, Johanna Superina and Usman M. Sheikh, for respondent. S. Zachary Green, for intervenor Ministry of the Attorney General.
The judgment of the court was delivered by
[1] SHARPE J.A.: -- At an administrative hearing, the Ontario Securities Commission ("Commission") found that the appellants had breached Ontario securities law, that they had engaged in conduct contrary to the public interest and that it was in the public interest to make certain orders against them pursuant to the Ontario Securities Act, R.S.O. 1990, c. S.5 (the "Act"), s. 127(1). The orders included substantial administrative monetary penalties. The Commission rejected the submission that those penalties ran afoul s. 11(d) of the Canadian Charter of Rights and Freedoms. The Divisional Court dismissed an appeal against the Commission's orders. The appellants obtained leave to appeal to this court.
[2] The proceedings arose from allegations that Roger Rowan, president and chief operating officer of Watt Carmichael Inc. ("WCI"), breached Ontario securities law by trading in, and failing to report his trades in, a large volume of shares of Biovail Corporation. WCI is a broker and registered investment dealer. Rowan was also a director of Biovail. Eugene N. Melnyk, Biovail's chairman and chief executive officer, set up various offshore trusts which held Biovail securities and maintained discretionary trading accounts at WCI. Rowan, as registered representative on the trust accounts, was permitted to trade in securities without client authorization. Before the Commission, the parties agreed that Rowan traded millions of Biovail shares, generating approximately $2,350,000 in commissions for WCI between 2002 and 2004. The Commission dismissed allegations of insider trading [page496] but found that Rowan breached Ontario securities law by failing to file insider reports as required by s. 107 of the Act.
[3] Harry Carmichael was the chairman, chief executive officer and ultimate designated person ("UDP") of WCI and Michael McKenney was the chief financial officer and chief compliance officer ("CCO"). The Commission found that WCI, Carmichael and McKenney had failed adequately to supervise Rowan's trading in Biovail shares.
[4] The appellants challenge the constitutionality of s. 127(1)(9) of the Act, the provision that allows the Commission to impose administrative monetary penalties ("AMPs"). The appellants argue that because the maximum penalty of $1 million can be imposed for each transaction in a single course of infractions, the potential size of an AMP is so large that it amounts to a penal sanction, and a party who is subject to such a penalty is a person "charged with an offence" within the meaning of the Charter, s. 11(d). As the Commission does not accord the rights guaranteed by s. 11(d) when conducting administrative hearings, the appellants say that s. 127(1)(9) should be struck down. Rowan also argues that the Commission erred by taking into account breaches of the public interest in awarding an AMP against him. WCI and Carmichael contend that the Commission made no finding that they breached Ontario securities law and that, as a result, the Commission had no jurisdiction to impose an AMP against them. Carmichael also argues that there was no basis to find that he was under any duty under Ontario securities law to supervise Rowan and that the Commission's sanctions imposed against him on that account should be set aside. WCI, Carmichael and McKenney also argue that the finding that they failed to adequately supervise Rowan was unreasonable. Finally, the appellants appeal the Commission's award of costs.
[5] In my view, the Commission and the Divisional Court correctly concluded that the only remedy available to the appellants under s. 11(d) of the Charter is to limit the authority of the Commission to impose AMPs to levels that qualify as administrative, rather than penal, sanctions. The AMPs at issue here do not transgress that limit. Accordingly, I would dismiss the constitutional challenge to s. 127(1)(9). I would also dismiss the other grounds of appeal on the basis that [the] Divisional Court properly concluded that the Commission's reasons are to be reviewed on a standard of reasonableness, and that they met that standard. The Commission provided careful and detailed reasons for its decision, making all the necessary findings to support the sanctions it imposed. I agree with the Divisional Court that the appellants have failed to show any basis for appellate intervention. [page497]
Facts
[6] WCI was an investment dealer registered under the Ontario Securities Act and a member of the Investment Dealers Association (the "IDA") (now the Investment Industry Regulatory Organization of Canada). Rowan, Carmichael and McKenney were senior officers of WCI. Rowan was the president and chief operating officer. Carmichael was the chairman, chief executive officer and ultimate designated person ("UDP"). McKenney served as WCI's chief financial officer and chief compliance officer ("CCO").
[7] A firm's UDP is responsible for overall compliance with regulatory requirements as well as overseeing the development and implementation of its compliance practices and procedures. The CCO is responsible for day-to-day compliance activities, for supervising the firm's accounts as well as developing and implementing its compliance policies and procedures.
[8] Biovail Corporation ("Biovail") is a reporting issuer in Ontario whose shares traded on both the Toronto Stock Exchange and the New York Stock Exchange. Eugene N. Melnyk was Biovail's chairman and chief executive officer. In 1996, Melnyk established four trusts in the Cayman Islands. The trusts' assets consisted largely of Biovail securities. The trusts had discretionary trading accounts with WCI, enabling Rowan, the registered representative for the accounts, to make trades without prior client authorization.
[9] During the relevant period, Rowan was an insider of Biovail, serving as a director and as a member of Biovail's Audit Committee. From 2002 to 2004, Rowan engaged in a substantial volume of discretionary trading of Biovail securities held in the trust accounts. These transactions were summarized by the Commission as follows:
[QL:GRAPHIC NAME="110OR3d492-1.jpg"/]
[page498]
The Commission's Findings
"Merits" decision
Rowan
[10] By a majority, the Commission dismissed the most serious allegation against Rowan, namely, that he was guilty of insider trading while in possession of material undisclosed information contrary to s. 76 of the Act. However, as an insider, Rowan was required by s. 107 of the Act to report his trades and the Commission found that he had repeatedly breached that section by failing to do so.
[11] The Commission also found that Rowan had acted in a manner contrary to the public interest on several counts. He failed to provide complete and accurate information to Biovail concerning the number of Biovail shares over which he exercised control or direction, and his failure caused Biovail's management information circulars to contain incomplete and misleading information. The Commission further held that, throughout 2002 and 2003, Rowan had engaged in a [2009 LNONOSC 941, at para. 63] "high volume of discretionary trading in Biovail securities in the Trust Accounts during Biovail's 'blackout periods'" -- periods declared by public companies during which insiders may not trade company shares because of the increased risk of insiders having access to material undisclosed information. Rowan's trades were summarized by the Commission in its Sanctions decision as follows:
[QL:GRAPHIC NAME="110OR3d492-2.jpg"/]
[12] The Commission described [at para. 151] Rowan's trading during the blackout periods to be contrary to the public interest and "abusive of the integrity of the capital markets of Ontario".
McKenney
[13] The Commission held that, as WCI's chief compliance officer, McKenney was responsible for supervising Rowan's [page499] trading to ensure compliance with regulatory requirements. Despite this, he had
-- failed to properly monitor Rowan's trading in the trust accounts "in spite of the clear risks" of non-compliance posed by the trading;
-- made "only sporadic and inadequate attempts" to determine when Rowan had knowledge of undisclosed information;
-- accepted information provided by Rowan at "face value" rather than performing independent checks;
-- relied on "happenstance" to determine when Rowan was attending Biovail Board or Audit Committee meetings; and
-- failed to adhere to WCI's own policies by only monitoring trading in Biovail securities in accounts controlled by Rowan.
Carmichael
[14] The Commission held that as chairman, CEO and UDP of WCI, Carmichael was responsible for the firm's overall compliance with regulatory requirements and for overseeing the development and implementation of its compliance practices and procedures. Despite this, Carmichael
-- had failed to ensure that WCI had adequate policies and procedures in place to discharge its responsibility to ensure Rowan's compliance; and
-- had failed to ensure that McKenney was providing proper oversight to the trading in the trust accounts.
WCI
[15] Finally, the Commission found that WCI had breached its supervisory obligations by
-- failing to implement compliance policies, procedures and practices to address the inherent risk in Rowan's dual role as a registered representative for the trust accounts and an insider of Biovail; and
-- failing to adequately supervise Rowan's trading in Biovail shares in the trust accounts, in that WCI failed to ensure the containment of inside information, failed to ensure Rowan's compliance with insider trading and disclosure [page500] rules and the Biovail Blackout Policy, and failed to properly document its compliance activities.
[16] The Commission noted that Rowan's trading in Biovail trust shares during the relevant period had generated approximately $2,350,000 in commissions for WCI.
"Sanctions" decision
[17] In its subsequent Sanctions decision, the Commission imposed significant sanctions against each of the appellants to reflect the "seriousness of the securities law violations that occurred in this matter" and to "not only deter the [Appellants] but also like-minded people from engaging in future conduct that violates securities law".
[18] The Commission gave comprehensive reasons dismissing the challenge to the constitutionality of the AMP provision and, as described below, imposed significant AMPs on all appellants except for McKenney. In assessing the size of the AMPs, the Commission took into account that approximately one-half of Rowan's 7,410 trades in Biovail shares took place prior the date when the power to impose AMPs came into force.
[19] Rowan's registration was suspended for 12 months and made subject to conditions upon his return. He was prohibited from being a director or officer of a reporting issuer for seven years, prohibited from being a director [or] officer of a registrant for three years, reprimanded and ordered to pay an AMP of $520,000.
[20] Carmichael was required to resign any current position as an officer or director of a registrant and prohibited from acting as such for 45 days, prohibited from acting in a supervisory role for 45 days, reprimanded and required to pay an AMP of $250,000.
[21] McKenney was required to resign any current position as an officer or director of a registrant and prohibited from acting as such for 12 months. He was also prohibited from acting in a supervisory role for 12 months and reprimanded.
[22] WCI was required to undergo an independent review of its compliance structure, reprimanded and required to pay an AMP of $450,000.
[23] The Commission ordered that all of the AMPs were to be allocated for the benefit of third parties pursuant to s. 3.4(2)(b). The Commission also ordered the appellants to pay costs of $140,000.
The Divisional Court
[24] The Divisional Court dismissed the appeal without calling on the respondents. The Divisional Court observed that most of [page501] the grounds of appeal raised issues that fell squarely within the expertise of the Commission and were therefore to be reviewed on a standard of reasonableness. The Divisional Court described [at para. 6] the Commission's decisions as "careful and thorough", "correct in law" and "reasonable in light of the evidence and the public interest".
[25] Applying a standard of correctness to the constitutional challenge to the AMP provision, the Divisional Court adopted the detailed reasons of the Commission's Sanctions decision rejecting the constitutional challenge.
[26] Without squarely deciding which standard of review should apply, the Divisional Court found no error of law in the Commission's consideration of conduct contrary to the public interest in awarding an AMP against Rowan.
[27] Noting that the appellants had not raised the issue below, the Divisional Court rejected the argument that the Commission erred in awarding AMPs against Carmichael and WCI without finding that their failure to supervise was itself a breach of Ontario securities law. The Divisional Court held that the Commission's findings supported the conclusion that Carmichael and WCI breached Ontario securities law.
Issues
(1) Should s. 127(1)(9), authorizing the Commission to impose an AMP of up to $1 million per infraction, be struck down as contrary to s. 11(d) of the Charter of Rights and Freedoms? (2) Did the Commission err and exceed its jurisdiction by taking conduct contrary to the public interest into account when imposing an AMP against Rowan? (3) Did the Commission err and exceed its jurisdiction by imposing AMPs against Carmichael and WCI without making a finding that they had breached Ontario securities law? (4) Did the Commission err and exceed its jurisdiction by finding that Carmichael was under a duty imposed by Ontario securities law to supervise Rowan? (5) Was the Commission's finding that Carmichael, McKenney and WCI had failed to adequately supervise Rowan unreasonable? (6) Should the Commission's costs award be set aside? [page502]
Analysis
1. Should s. 127(1)(9), authorizing the Commission to impose an AMP of up to $1 million per infraction, be struck down as contrary to s. 11(d) of the Charter of Rights and Freedoms?
[28] Section 127(1) provides as follows:
127(1) The Commission may make one or more of the following orders if in its opinion it is in the public interest to make the order or orders: . . . . .
- If a person or company has not complied with Ontario securities law, an order requiring the person or company to pay an administrative penalty of not more than $1 million for each failure to comply.
[29] Section 127(1) is contained in Part XXII of the Act, which deals with enforcement. Also of relevance to the case at bar is s. 122, which provides that a person who "contravenes Ontario securities law" may be charged with an offence and is liable on conviction to a fine of up to $5 million and imprisonment of up to five years less a day.
[30] Most s. 127(1) orders may be made on the basis of the Commission's opinion that "it is in the public interest to make the order or orders", but some, including the power to impose an AMP, can only be made where the Commission has found that the "person or company has not complied with Ontario securities law".
[31] "Ontario securities law" is defined in s. 1 as follows:
"Ontario securities law" means, (a) this Act, (b) the regulations, and (c) in respect of a person or company, a decision of the Commission or a Director to which the person or company is subject; . . . . .
"regulations" means the regulations made under this Act and, unless the context otherwise indicates, includes the rules . . . . .
"rules" means, (a) the rules made under section 143, and (b) orders, rulings and policies listed in the Schedule[.][page503]
[32] The Charter of Rights and Freedoms, s. 11(d) provides:
- Any person charged with an offence has the right . . . . . (d) to be presumed innocent until proven guilty according to law in a fair and public hearing by an independent and impartial tribunal[.]
[33] The respondent concedes that the appellants were not accorded the rights guaranteed by s. 11(d) and, accordingly, the issue is whether the appellants were entitled to s. 11(d) protections: that is, were they persons "charged with an offence" because they were in jeopardy of having the Commission impose the AMPs authorized by s. 127(1)(9).
[34] The appellants argue that s. 127(1)(9) allows the Commission to impose an AMP of virtually unlimited magnitude. In the present case, if the maximum fine of $1 million per infraction were multiplied by the thousands of infractions Rowan was found to have committed, a penalty in the billions of dollars would be theoretically possible. The appellants say that a fine of that magnitude cannot possibly qualify as an administrative sanction and that it is necessarily penal in nature. They submit that a person put in jeopardy of having such a penalty imposed must be someone "charged with an offence" and therefore entitled to the rights conferred by s. 11(d) of the Charter. They insist that whether a proceeding is covered by s. 11 must be assessed ex ante, on the basis of the amount of the potential fine, and not ex post, on the basis of the actual monetary penalty imposed.
[35] The starting point for analysis of the Charter challenge is the decision of the Supreme Court of Canada in R. v. Wigglesworth, 1987 41 (SCC), [1987] 2 S.C.R. 541, [1987] S.C.J. No. 71, the seminal case on the meaning of the phrase "charged with an offence" in s. 11. Wigglesworth rejected the proposition that all persons subject to proceedings leading to the imposition of a penalty should be regarded as charged with an offence for the purposes of s. 11. Wilson J., who wrote the majority opinion, took a narrower view and held, at p. 558 S.C.R., that s. 11 should be restricted "to the most serious offences known to our law, i.e., criminal and penal matters".
[36] There are two categories of "criminal or penal matters". A matter may be a criminal or penal matter either because "by its very nature it is a criminal proceeding" or "because a conviction in respect of the offence may lead to a true penal consequence": p. 559 S.C.R. Matters "of a public nature, intended to promote public order and welfare within a public sphere of activity" are by their very nature criminal or penal while "private, domestic [page504] or disciplinary matters which are regulatory, protective or corrective and which are primarily intended to maintain discipline, professional integrity and professional standards or to regulate conduct within a limited private sphere of activity" are not: p. 560 S.C.R. "Proceedings of an administrative nature instituted for the protection of the public in accordance with the policy of a statute are also not the sort of 'offence' proceedings to which s. 11 is applicable": p. 560 S.C.R.
[37] The appellants do not suggest that the proceedings they faced before the Commission met the "by nature" test as being criminal or penal. The proceedings were clearly regulatory in nature and designed to enhance public confidence in the integrity and reliability of the capital markets. The appellants base their challenge to s. 127(1)(9) on the "true penal consequence" test. They contend that because of the potential magnitude of the AMP the Commission could impose, they were faced with "a true penal consequence", thereby triggering the protection of s. 11 of the Charter.
[38] Wigglesworth holds that a private, domestic or disciplinary matter that escapes the reach of the first "by nature" test may still be caught by s. 11 because the matter could lead to "a true penal consequence". This was explained by Wilson J., at p. 561 S.C.R.:
[A] true penal consequence which would attract the application of s. 11 is imprisonment or a fine which by its magnitude would appear to be imposed for the purpose of redressing the wrong done to society at large rather than to the maintenance of internal discipline within the limited sphere of activity.
[39] However, at pp. 561-62 S.C.R., Wilson J. added what she described as "two caveats". Both caveats bear directly on the issue posed in this case. Wilson J.'s first caveat was that [at p. 561 S.C.R.]:
[T]he possibility of a fine may be fully consonant with the maintenance of discipline and order within a limited private sphere of activity and thus may not attract the application of s. 11. It is my view that if a body or an official has an unlimited power to fine, and if it does not afford the rights enumerated under s. 11, it cannot impose fines designed to redress the harm done to society at large. Instead, it is restricted to the power to impose fines in order to achieve the particular private purpose. (Emphasis added)
[40] Wilson J.'s second caveat was that only rarely would a proceeding fail to qualify for s. 11 protection under the "by nature" test but fall under s. 11 by virtue of the "true penal consequence test". As Wilson J. put it [at p. 561 S.C.R.], it is highly doubtful that "any body or official which exists in order to [page505] achieve some administrative or private disciplinary purpose can ever imprison an individual". However, where [at p. 562 S.C.R.] "an individual is to be subject to penal consequences such as imprisonment -- the most severe deprivation of liberty known to our law -- then he or she, in my opinion, should be entitled to the highest procedural protection known to our law".
[41] In my view, Wilson J.'s first caveat is fatal to the appellant's argument that we should strike down s. 127(1)(9) on the ground that it allows for the imposition of a monetary penalty of potential virtually unlimited magnitude. The italicized portion of the passage I have quoted above stands for the proposition that the appropriate remedy to protect the rights guaranteed by s. 11 in the case of an unlimited power to impose a fine is not to nullify the power altogether, but rather to limit the tribunal's discretion so that it may only impose penalties that are consistent with the purpose of maintaining discipline and order within a particular sphere of activity.
[42] The appellants contend that the italicized passage cannot mean what it appears to say given the actual decision in Wigglesworth. In his careful argument, Prof. Hogg pointed out that in Wigglesworth, the accused RCMP officer was charged with a disciplinary offence for which he could be fined and sentenced to imprisonment by the tribunal. The officer was given a modest fine and not sent to jail, yet the Supreme Court of Canada held that the possibility of imprisonment brought the proceedings within s. 11 because the officer faced the possibility of "true penal consequences". Professor Hogg submits that the actual holding in Wigglesworth was to assess whether s. 11 applied ex ante, on the basis of the potential penalty, not ex post, on the basis of the actual penalty. He submits that we should take the same approach and effectively disregard the italicized passage as non-binding obiter dictum.
[43] I am unable to accept that argument for the following reasons.
[44] It is clear from Wilson J.'s "second caveat" that she regarded Wigglesworth as an exceptional case. What made Wigglesworth exceptional was that a domestic tribunal was given the power to imprison, a possibility that Wilson J. regarded as difficult to imagine. When explaining her conclusion that the RCMP officer did face "true penal consequences", she wrote, at pp. 563-64 S.C.R.: "This would seem, therefore, to be that unusual case where proceedings have failed the 'by nature' test but have passed the 'true penal consequence' test." The power to order imprisonment is so obviously penal in nature and so exceptional in the setting of administrative tribunals that the [page506] mere possibility of a sentence of imprisonment was sufficient, in Wilson J.'s view, to colour the proceedings as having "true penal consequences" and thereby to trigger the protection of s. 11.
[45] In my view, we should decline the invitation to follow and to extend reasoning intended to meet the exceptional and rarely encountered power to imprison to the circumstances of this case. Instead, I would apply the plain language of the passage in Wigglesworth dealing with the power to fine that is commonly encountered in administrative proceedings.
[46] There is now an established line of authority holding that the power of an administrative tribunal to impose substantial monetary penalties is to be assessed on the basis of the penalty imposed rather than on penalties that are theoretically possible. This is consistent not only with the language of Wigglesworth, but also with the general principles that "legislation conferring an imprecise discretion does not confer the power to infringe the Charter unless that power is conferred expressly or by necessary implication" and that "[l] egislation conferring an imprecise discretion must therefore be interpreted as not allowing the Charter rights to be infringed": Slaight Communications Inc. v. Davidson, 1989 92 (SCC), [1989] 1 S.C.R. 1038, [1989] S.C.J. No. 45, at pp. 1078-79 S.C.R.
[47] In Lavallee v. Alberta (Securities Commission), [2010] A.J. No. 144, 2010 ABCA 48, 317 D.L.R. (4th) 373, the Alberta Court of Appeal upheld the power of the Alberta Securities Commission to impose administrative penalties of $1 million per infraction. Similarly, in Canada (Attorney General) v. United States Steel Corp., [2011] F.C.J. No. 726, 2011 FCA 176, 333 D.L.R. (4th) 1, the Federal Court of Appeal upheld a provision of the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.), s. 40, authorizing a penalty of up to $10,000 per day for failure to comply with a ministerial directive. The court held, at para. 80:
A statutory power to impose fines that comes along with little statutory guidance will not be subject to s. 11 as long as it is exercised in a way so as to achieve proper administrative aims. If, as U.S. Steel contends, the procedure provided for in section 40 does not meet the standard of subsection 11(d) of the Charter, this simply means that the Court is limited in the goals it can consider in imposing monetary fines . . . [This] accords with the principle that we should not assume before the fact that judges will exercise their discretion in an unconstitutional way[.]
[48] The appellants contend that both cases were wrongly decided and that we should set Ontario law on a different course. I disagree. These decisions are consistent with Wigglesworth and I am not persuaded that we should depart from the established pattern in the jurisprudence. [page507]
[49] Penalties of up to $1 million per infraction are, in my view, entirely in keeping with the Commission's mandate to regulate the capital markets where enormous sums of money are involved and where substantial penalties are necessary to remove economic incentives for non-compliance with market rules. The recommendation of the Securities Act Five Year Review Committee that the Commission be given the power to impose administrative penalties of up to $1 million per contravention was based on the need to ensure that the administrative penalty would not simply be viewed as a "cost of doing business" or a "licensing fee" for unscrupulous market participants: Ontario, Five Year Review Committee Final Report: Reviewing the Securities Act (Ontario) (Toronto: Queen's Printer for Ontario, 2003), at p. 214. The Committee noted the importance of allowing "the Commission to send an appropriate deterrent message, having regard to, among other things, the gravity and impact of the conduct under consideration and the nature of the respondents that are the subject of the proceedings".
[50] As the Commission indicated in its Sanctions decision, the level of penalty permitted by s. 127(1)(9) is in keeping with legislation in other provinces. One million dollar penalties are authorized in Nova Scotia, Alberta and British Columbia, while Quebec allows for penalties of up to $2 million: Securities Act, R.S.N.S. 1989, c. 418, s. 135; Securities Act, R.S.A. 2000, c. S-4, s. 199; Securities Act, R.S.B.C. 1996, c. 418, s. 162; Securities Act, R.S.Q., c. V- 1.1, s. 273.1. The United States Securities and Exchange Commission can impose administrative fines of varying levels up to a maximum of $100,000 for natural persons and $500,000 for companies: Securities Exchange Act of 1934 (U.S.), 15 U.S.C. 78u-2(b)(3). There is no specified maximum on administrative monetary penalties that can be imposed by the United Kingdom Financial Services Authority: Financial Services and Markets Act 2000 (U.K.), 2000 c. 8, s. 206. Penalties at the $1 million level are also in keeping with those levied by self-regulatory agencies operating in the securities field: see paras. 53-55 of the Commission's Sanctions reasons.
[51] Penalties at the level of $1 million almost certainly have a deterrent purpose, but that does not make them penal in nature. As the Supreme Court of Canada held in Cartaway Resources Corp. (Re), [2004] 1 S.C.R. 672, [2004] S.C.J. No. 22, 2004 SCC 26, in carrying out their regulatory and preventative mandate provincial securities commissions may legitimately consider deterrence when imposing a monetary penalty. Writing for the court, Le Bel J. stated, at para. 60, that "it is reasonable to view general deterrence as an appropriate, and perhaps necessary, [page508] consideration in making orders that are both protective and preventative". See, also, Martineau v. M.N.R., [2004] 3 S.C.R. 737, [2004] S.C.J. No. 58, 2004 SCC 81, at para. 38.
[52] I agree with the the Commission's conclusion, at para. 56, that an administrative penalty of $1 million is not prima facie penal [2009 LNONOSC 941]:
In pursuit of the legitimate regulatory goal of deterring others from engaging in illegal conduct, the Commission must, therefore, have proportionate sanctions at its disposal. The administrative penalty represents an appropriate legislative recognition of the need to impose sanctions that are more than "the cost of doing business". In the current securities regulation and today's capital markets context, a $1,000,000 administrative penalty is not prima facie penal.
[53] Nor am I persuaded that the AMPs imposed by the Commission on the appellants were at a level to bring them within the "true penal consequence" category. The constitution does not impose a defined limit on what is permissible by way of administrative monetary sanctions. The limit can only be determined by reference to the purpose of the penalty in relation to the regulatory mandate of the tribunal. In Martineau, the Supreme Court of Canada considered a penalty under s. 124 of the Customs Act, R.S.C. 1985, c. 1 (2nd Supp.), which conferred a power to require a cash payment with no statutory maximum. The key question, as stated at para. 60, is whether the penalty "constitutes a fine that, by its magnitude, is imposed for the purpose of redressing a wrong done to society at large, as opposed to the purpose of maintaining the effectiveness of customs requirements" (emphasis in original).
[54] In my view, the Commission did not err in concluding that magnitude of the AMP was geared to its regulatory mandate. The maximum AMP for one contravention is one fifth of the maximum penalty that can be imposed in a prosecution under the Act: see s. 122(1). The amount of an AMP is determined by regulatory considerations distinct from the principles of criminal liability and sentencing. No criminal record results. A further indication of the internal rather than criminal purpose of the AMPs is that the proceeds of the AMPs imposed were allocated by the Commission for the benefit of third parties pursuant to s. 3.4(2)(b) and not paid to the consolidated revenue fund: see Wigglesworth, at p. 561 S.C.R.
[55] Given the very large number of infractions involving over a billion dollars' worth of securities and over $2 million dollars in commissions, fines totalling $1,220,000 were within the constitutionally permissible range. [page509]
2. Did the Commission err and exceed its jurisdiction by taking conduct contrary to the public interest into account when imposing an AMP against Rowan?
[56] As I have already noted, under s. 127(1)(9) of the Act, the Commission can only impose an AMP where there has been a breach of Ontario securities law. Rowan argues that the Commission wrongly took into account conduct that was found to be contrary to the public interest when assessing the amount to impose against him by way of an AMP. Particular importance was attached to para. 161 of the Commission's Sanctions reasons [2009 LNONOSC 941]:
Rowan failed to comply with Ontario securities law by: breaching s. 107 of the Act by failing to file insider reports in respect of trades in Biovail securities that he executed in the Trust Accounts; engaging in conduct contrary to the public interest by failing to provide complete and accurate information to Biovail concerning the number of Biovail common shares held in the Trust Accounts over which he exercised or shared control or direction; and engaging in conduct contrary to the public interest by trading in Biovail securities in the Trust Accounts during Biovail's Blackout Periods. Further, the Hearing Panel found that Rowan's conduct was contrary to the public interest.
[57] As it was common ground before us, I accept without deciding that Rowan's only transgression that amounted to a breach of Ontario securities law was his failure to file insider reports. He submits that by listing the matters on which he was found to have acted contrary to the public interest as if those were also breaches of Ontario securities law, the Commission conflated the former with the latter. It follows, in his submission, that this passage demonstrates that the Commission improperly considered acts contrary to the public interest when fixing the amount of the AMP.
[58] I am not persuaded by counsel's characterization of the Commission's alleged error as amounting to a "jurisdictional error". I agree with the Divisional Court that on this issue the Commission's reasons are to be reviewed on a reasonableness standard. However, I will proceed on the assumption that if the Commission did impose the AMP on the basis of some irrelevant or legally improper basis, the decision could not escape being characterized as unreasonable.
[59] I am unable to accept the submission that the Commision's AMP order was imposed on an improper basis, for the following reasons.
[60] It is clear from the opening words of s. 127(1)(9) that before ordering any sanction, including an AMP, the Commission must be of the opinion that it is in the public interest to make [page510] the order. I read this provision as requiring the Commission to consider the public interest before imposing an AMP.
[61] In Cartaway Resources Corp. (Re), at para. 63, the Supreme Court of Canada, interpreting a provision of the B.C. Securities Act, s. 162, conferring the power to order AMPs, held that "the penalty that the Commission ultimately imposes should take into account the entire context, as well as the preservation of the public interest".
[62] Rowan's conduct found to be contrary to the public interest was inextricably linked to his breach of Ontario securities law. When imposing an AMP for Rowan's failure to report, the Commission was surely entitled to consider what it was he failed to report. Viewed in that light, the conduct found contrary to the public interest had a direct bearing on a proper assessment of the gravity of his specific breach of Ontario securities law.
[63] The question, then, is whether the Commission went beyond using findings of conduct contrary to the public interest as contextual factors and instead used the AMP as a sanction against the conduct contrary to the public interest. Rowan submits that para. 161 demonstrates that the Commission did just that, treating Rowan's trades as if they were violations of Ontario securities law. I cannot accept this submission.
[64] I agree with the Divisional Court that para. 161 cannot be read in isolation. I agree with the Divisional Court's conclusion, at para. 20, that para. 161 of the Sanction reasons "is merely a summary of findings previously made". The balance of the reasons and findings clearly demonstrate that the Commission fully understood and carefully applied the important distinction between a breach of Ontario securities law and conduct contrary to the public interest.
[65] I also agree with and adopt paras. 21 and 22 of the Divisional Court's reasons:
Other references by the Commission in its reasons to multiple violations of securities law are, in my view, more reasonably interpreted as a reference to the fact that the Commission found that Mr. Rowan repeatedly violated s. 107 over an extended period of time. Indeed, the Commission found that there were 7,410 such breaches.
It is also apparent from the Commission's reasons that its primary focus in determining the appropriate administrative penalty under s. 127(1)(9) was the repeated breach by Mr. Rowan of s. 107 of the Act. At para. 96 of the Penalty Reasons, the Commission referred to there being 7,410 breaches, but also said that only 3,690 (being 52% of the total breaches), occurred after the administrative penalty provisions came into force. The Commission held that this provision should not be applied retrospectively and therefore ruled that any administrative penalty it imposed against Mr. Rowan would only be 52% of the penalty it would have imposed if all of the conduct under s. 107 were taken into account. In para. 166 of its Reasons, the [page511] Commission did just that. It imposed an administrative penalty of $520,000 and then stated that but for its decision on retrospectivity, the penalty would be $900,000 to $1 million. It is therefore clear that the Commission tied the administrative penalty directly to the s. 107 breaches.
[66] Moreover, in my view it is clear that para. 161 of the Commission's reasons do not only relate to the imposition of the AMP. The impugned paragraph summarizes all of Rowan's transgressions as a basis for the imposition of a long list of sanctions, most of which were properly made on the basis that he had acted contrary to the public interest. There was nothing wrong with the Commission providing a complete list of the conduct it found to justify the various sanctions it imposed.
[67] Accordingly, I would reject this ground of appeal.
3. Did the Commission err and exceed its jurisdiction by imposing AMPs against Carmichael and WCI without making a finding that they had breached Ontario securities law?
[68] The lynchpin to this argument is that while the Commission found "that McKenney, Carmichael and Watt Carmichael failed to adequately supervise Rowan's trading in Biovail securities in the Trust Accounts" (see, especially, Merits decision, at para. 353 [2008 LNONOSC 473]), at no point in the Merits decision did the Commission make a specific finding that Carmichael and WCI had breached a specific provision of Ontario securities law.
[69] In finding that Carmichael and WCI "failed to adequately supervise Rowan's trading in Biovail securities in the Trust Accounts", the Commission did not attach the words "contrary to" a specific section of the Act, regulations, rules or policies falling within the definition of Ontario securities law. Carmichael and WCI contend that this means that the Commission failed to make a finding of a breach of Ontario securities law, and therefore the Commission lacked jurisdiction to impose an AMP against them under s. 127(1)(9).
[70] In my view, this was an argument that should have been addressed to the Sanctions hearing as it was for the Commission to interpret its own finding on the issue of whether or not these appellants had breached Ontario securities law. Carmichael and WCI knew that Commission staff was asking the Commission to impose an AMP yet they failed to raise this argument at the Sanctions hearing. It was advanced in written argument before the Divisional Court but abandoned in oral argument.
[71] The fact that experienced counsel did not raise an argument at first instance is often telling. As I will discuss in relation [page512] to the fourth issue, a court reviewing the decisions of an administrative tribunal has the discretion to refuse to entertain an argument not advanced before the tribunal and modern jurisprudence cautions against labelling alleged errors as jurisdictional to justify review on a standard of correctness. In the circumstances, I would refuse to exercise my discretion to entertain this new argument.
[72] Moreover, even if Carmichael and WCI were entitled to raise this argument on appeal, in my view, it is without merit. I cannot accept their characterization of the Merits reasons of the Commission. We must read the passage relied on in support of this argument in its proper context. At several points in its Merits reasons, the Commission recognized that the issue was whether Carmichael and WCI had failed to comply with their supervisory obligations under OSC Rule 31-505.
[73] Rule 31-505 is part of Ontario securities law as defined in s. 1 of the Act. Section 3.1 of that rule, entitled "Supervisory Terms", provided as follows:
3.1 A registered dealer shall supervise each of its registered salespersons, officers and partners and a registered adviser shall supervise each of its registered officers and partners in accordance with Ontario securities law and terms or conditions imposed by the Director or the Commission on the registration of the salesperson, officer or partner of the dealer or the officer or partner of the adviser requiring that the actions of the registered salesperson, officer or partner of the registered dealer or the registered officer or partner of the registered adviser be supervised in a particular manner. Section 1.3 of the Rule required the registered dealer to designate a compliance officer to be "responsible for discharging the obligations of the registered dealer or adviser under Ontario securities law", including the supervisory function provided for by s. 3.1. Section 1.1(2) provided that an IDA member dealer was permitted to discharge its supervisory obligations by performing any equivalent requirement set out by the IDA and approved by the Commission. As an IDA member, WCI adopted the IDA procedure and designated Carmichael as UDP and McKenney as CCO, thereby making Carmicheal and McKenney responsible for the supervision required by OSC Rule 31-505.
[74] When setting out the issues to be decided, at para. 35(h) [2008 LNONOSC 473], the Commission described this issue as "[w]hether Watt Carmichael, McKenney and Carmichael failed to adequately supervise Rowan's trading in Biovail securities in the Trust Accounts, contrary to OSC Rule 31-505, IDA Regulation 1300.2 and IDA Policy No. 2". The Merits reasons contain a considered analysis of what OSC Rule 31-505 requires. At the Sanctions hearing, especially in the absence of any argument [page513] from Carmichael to the contrary, it was open to the Commission to interpret its own reasons for its merits findings as amounting to a finding that Carmichael "failed to comply with Ontario securities law": Sanctions decision, at para. 193.
[75] Accordingly, I would dismiss this ground of appeal.
4. Did the Commission err and exceed its jurisdiction by finding that Carmichael was under a duty imposed by Ontario securities law to supervise Rowan?
[76] Again, Carmichael advances an argument on appeal that he failed to advance before the Commission. The Merits reasons of the Commission make it clear, at para. 309 [2008 LNONOSC 473], that the defence Carmichael raised at the hearing was not that he was under no duty imposed by Ontario securities law but that he had done all he was required to do by way of supervision:
The Respondents submit that the allegation against Carmichael is even less well-founded than the allegation against McKenney. As the UDP, Carmichael was responsible for ensuring that Watt Carmichael had appropriate policies and procedures in place and qualified personnel to supervise compliance. The Respondents submit that Carmichael fulfilled these obligations, and that Watt Carmichael's policies were crafted in consultation with, and expressly approved by, the IDA. In the Respondents' submission, there is no basis for this allegation against Carmichael, who has had 45 years of experience in the industry. (Emphasis added)
[77] In these circumstances, I would exercise my discretion against permitting Carmichael to advance this argument before this court. As the Supreme Court of Canada held in Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Assn., [2011] 3 S.C.R. 654, [2011] S.C.J. No. 61, 2011 SCC 61, 339 D.L.R. (4th) 428, at paras. 22-26, courts have the discretion to refuse to entertain issues on judicial review where the issue could have been but was not raised before the specialized tribunal.
[78] I do not accept the submission that Carmichael can escape his failure to raise the argument before the Commission on the basis that the alleged error deprived the Commission of jurisdiction to make the order. Since C.U.P.E. Local 963 v. New Brunswick Liquor Corp., 1979 23 (SCC), [1979] 2 S.C.R. 227, [1979] S.C.J. No. 45, courts have been dissuaded from labelling matters as jurisdictional. As Dickson J. explained, at p. 233 S.C.R., "[t] he question of what is and is not jurisdictional is often very difficult to determine" and courts should hesitate "to brand as jurisdictional, and therefore subject to broader curial review, that which may be doubtfully so". This point was made with even greater [page514] force in Alberta (Information and Privacy Commissioner) v. Alberta Teachers' Assn., at para. 39:
True questions of jurisdiction are narrow and will be exceptional. When considering a decision of an administrative tribunal interpreting or applying its home statute, it should be presumed that the appropriate standard of review is reasonableness.
[79] In my view, it would be singularly inappropriate to describe the alleged error as jurisdictional. To decide whether or not Carmichael was under any duty imposed by Ontario Securities law to supervise Rowan, the Commission would have to interpret and apply its home statute, regulations, rules and policies. That interpretive exercise would involve careful consideration of how those provisions operate in the complex world of the securities industry. It is difficult to imagine an issue that more squarely fell with the province and the expertise of the Commission.
[80] The Commission did find that as the CEO and UDP of WCI, Carmichael was under a duty to supervise Rowan. That finding fell within the expertise of the Commission; it is entitled to deference on appeal and to be reviewed on a standard of reasonableness. Again, the fact that the argument raised on appeal was not advanced at first instance is telling. In my view, there is no basis upon which this court could conclude that the Commission's finding on this point was unreasonable.
[81] Accordingly, I would dismiss this ground of appeal.
5. Was the Commission's finding that Carmichael, McKenney and WCI had failed to adequately supervise Rowan unreasonable?
[82] Carmichael, McKenney and WCI (for the purposes of this issue the "WCI appellants") submit that the Commission's finding that they had failed to adequately supervise Rowan was unreasonable. This argument is essentially based upon the assertion that Rowan's transgressions arose because he was a director and an insider of Biovail and not because he was a registrant under the Act. The WCI appellants say that any duty to supervise him rested with Biovail, not the WCI appellants. The WCI appellants further submit that as a practical matter, it would have been impossible for them to supervise Rowan's trading during the blackout periods.
[83] Counsel properly conceded that the Commission's findings on this issue are to be reviewed on the standard of reasonableness. Once again, we are presented with an issue that falls squarely within the province and the expertise of the Commission. [page515]
[84] In its Merits decision, the Commission provided very extensive reasons rejecting the very submissions made before us. The Commission came to that conclusion on the basis of its own interpretation of the relevant regulatory requirements, including OSC Rule 31-505, multilateral and Commission policies, the relevant jurisprudence and the evidence of Guenther Kleberg, an expert in industry standards for brokerage compliance practices. The WCI appellants led no evidence to contradict that of Kleberg, who testified that the trust accounts were "screaming for attention" because of the factors summarized, at para. 321 of the Commission's Merits reasons [2008 LNONOSC 473]: (a) the accounts held a very large position in Biovail securities; (b) the accounts were highly concentrated in Biovail securities; (c) the accounts conducted very active trading in Biovail securities; (d) the registered representative assigned to the accounts was an insider of Biovail; and (e) the registered representative held discretionary trading authority over the accounts.
[85] The Commission took into account, at para. 322, the point relied on by the WCI appellants "that industry standards would not generally require the CCO to monitor adherence to corporate blackout periods by a brokerage client who is an insider of a reporting issuer". Nonetheless, the Commission accepted Kleberg's opinion "that where a registered representative who is also an insider of a reporting issuer ('RR/insider') has discretionary authority to trade in securities of the reporting issuer, close supervision by the CCO is required to ensure that an RR/insider does not trade in the issuer's securities during the issuer's blackout periods". The Commission also accepted Kleberg's opinion that it would have been possible for the WCI appellants to supervise Rowan's trading during the scheduled blackout periods.
[86] The WCI appellants are asking this court to substitute its findings regarding the interpretation of the applicable supervisory standard under OSC Rule 31-505, an exercise that involves specialized knowledge of securities industry practice, for the express and fully explained findings on the point by the Commission, an expert tribunal. As the Supreme Court of Canada observed in Cartaway, at para. 46, "[t]he courts . . . have less expertise than securities commissions in interpreting their constituent statutes given the broad policy context within which securities commissions operate". [page516]
[87] I agree with and adopt the reasons of the Divisional Court on this issue, at para. 25:
The Commission found that Carmichael, McKenny and Watt Carmichael Inc. failed to adequately supervise Rowan. Its findings in that regard were largely factual and policy based. They were within the special expertise of the Commission and the reasonableness standard therefore applies. The Commission's findings easily meet that standard and we would not interfere.
[88] Accordingly, I would dismiss this ground of appeal.
6. Should the Commission's costs award be set aside?
[89] Commission staff sought a costs order, pursuant to s. 127.1, in the amount of $283,691.40. The Commission found that costs should be ordered against the appellants but, on account of the failure of the Commission staff to make out the allegations of insider trading, ordered $140,000. The appellants say that award should be set aside.
[90] The appellants complain that the Act's one-way costs regime, allowing only for costs to be awarded against a party found to have failed to comply with Ontario securities law or to have acted contrary to the public interest, is fundamentally unfair. I fail to see how that argument can assist the appellants as, in the absence of any challenge to the regime's validity, this court cannot ignore the law that was duly enacted by the legislature.
[91] The appellants further complain that the costs award is unfair because they defeated the most serious allegation, that Rowan engaged in insider trading, which took up a substantial amount of time at the hearing. However, the Commission explicitly took that into account when fashioning its costs award, at para. 239 [2009 LNONOSC 941]:
Further, we have also considered the unique circumstances of this case, and the fact that four of the eight allegations were not made out, in determining the appropriate amount of costs that should be paid by the Respondents. In particular, we considered the fact that the vast majority of the evidence led at the hearing was directed at allegations that were not made out.
[92] Costs orders are entitled to deference on appeal. Where the tribunal making the order has expressly taken into account the very point advanced on appeal, an appellate court will rarely interfere. I agree with and adopt the reasons of the Divisional Court on this point, at para. 33:
The Commission addressed its mind to the fact that the appellants were successful on many of the issues raised against them. The Commission took that into account in assessing costs and reduced the award accordingly. [page517]
[93] Accordingly, I would dismiss the appeal of the Commission's costs order.
Disposition
[94] For these reasons, I would dismiss the appeals. The Commission did not seek costs in this court and, accordingly, I would dismiss the appeals without costs.
Appeal dismissed.