CITATION: Pariak-Lukic v. Investment Industry Regulatory Organization of Canada, 2016 ONSC 2564
DIVISIONAL COURT FILE NO.: 361/15
DATE: 2016-10-04
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MARROCCO A.C.J.S.C., L.A. PATTILLO and D.A. BROAD JJ.
BETWEEN:
LUCY MARIE PARIAK-LUKIC
Appellant
– and –
INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA and ONTARIO SECURITIES COMMISSION
Respondents
COUNSEL:
Kevin Richard and David Sischy, for the Appellant
Alexandra Clark and Robert DelFrate, for the Respondent Investment Industry Regulatory Organization of Canada
Keir Wilmut, for the Respondent Ontario Securities Commission
HEARD: April 13, 2016
REASONS FOR JUDGMENT
D. A. BROAD J.
[1] The appellant Ms. Pariak-Lukic has been registered with the Investment Industry Regulatory Organization (“IIROC”) since 1994. She appeals from the order of the Ontario Securities Commission (“OSC” or the “Commission”) dated June 22, 2015 by which it overturned the penalty decision of an IIROC Hearing Panel (the “IIROC Panel”) and imposed a two-year suspension of her registration.
[2] Pursuant to ss. 9(1) of the Securities Act, R.S.O. 1990, c.S.5 (the “Act”) a party may appeal a final decision of the OSC to the Divisional Court. The Court’s powers on appeal are set put in ss. 9(5) which provides that the court may direct the Commission to make such decision or to do such other act as the Commission is authorized and empowered to do under the Act or the regulations, having regard to the material and submissions before it and to the Act and the regulations.
[3] At issue in this case are the appropriate sanctions that should be imposed on the appellant for recommending and facilitating investments by certain of her clients without her employer’s knowledge and approval and without ensuring that a prospectus had been filed for the investments or that the distribution qualified for a prospectus exemption. The sanctions imposed by the IIROC Panel upon the Appellant were a fine, close supervision, and educational requirements. Following a review of the sanctions decision of the IIROC Panel, the Commission determined that a two-year suspension on registration was warranted, in addition to the other sanctions imposed by the IIROC Panel. The suspension has been stayed pending this Court’s decision.
[4] The appellant asks that the Commission’s decision be set aside or, alternatively, the matter be remitted back to the OSC for reconsideration. The respondents ask that the appeal be dismissed.
BACKGROUND
[5] As indicated, the appellant is a registered representative licensed by IIROC. At the relevant time, she was employed by yourCFO Advisory Group Inc., an investment dealer and IIROC registrant, where she acted as a financial planner and advised clients about investments. The appellant has been registered in the securities industry since 1994 without any other disciplinary incidents.
[6] The OSC, as the bodytasked with regulating Ontario capital markets, by means of a Recognition Order recognized IIROC as a self-regulatory organization (“SRO”) for investment dealers and trading activity and oversees its operation. IIROC’s jurisdiction over its members is through contractual agreement, whereas the OSC derives its powers from the Act.
(a) IIROC Proceeding against the Appellant
[7] IIROC Staff commenced a proceeding against the Appellant in February 2013. The allegation was that the Appellant contravened Investment Dealers Association (“IDA”) by-law 29.1 by recommending and/or facilitating off-book investments for clients between 2006 and 2007 without her employer’s knowledge or approval, and without ensuring that a prospectus had been filed for the investment or that the distribution qualified for a prospectus exemption. The IDA was one of IIROC’s predecessor organizations.
[8] The Appellant advised her clients about investment opportunities in second mortgages through Lakepoint Mortgage Investment Fund 1 Inc. (“Lakepoint”). Lakepoint is a private company set up to lend money to Trinity Diversified North America Ltd. (“Trinity”), an unrelated private company that invested in second mortgages in Toronto-area residential properties. Investors purchased shares of Lakepoint, which in turn lent the proceeds to Trinity in exchange for an unsecured promissory note.
[9] The sole director and officer of Lakepoint is the Appellant’s husband who received an annual percentage fee in return for managing Lakepoint. These facts were disclosed by the Appellant to her clients. The Appellant, her husband, and her clients are the only investors in Lakepoint. Together they purchased approximately $3 million worth of Lakepoint shares. Due to the insolvency of Trinity, the investment appears to have been lost.
[10] An IIROC Panel, in its merits decision, determined that the appellant made recommendations to certain of her clients concerning their investments in Lakepoint; that she did not make reasonable inquiries to satisfy herself that the issue of the securities of Lakepoint to her clients was exempt from prospectus requirements under securities laws; and that this constituted conduct unbecoming and not in the public interest contrary to IDA by-law 29.1.
[11] The Panel ordered the appellant to pay a fine of $50,000, be subject to close supervision by her employer for a period of six months, and to rewrite and pass the Canadian Securities Course and the Conduct and Practices Handbook examinations within one year (“IIROC Penalty”). In determining that a suspension was not warranted, the Panel noted:
a) A fine of $50,000 is in the public interest and is an appropriate specific and general deterrent for conduct unbecoming, regardless of the absence of dishonesty or bad faith;
b) The appellant’s misconduct was not a result of her dishonesty, acting in bad faith, or moral turpitude, and was not without regard for, or with reckless disregard of, her understanding of the best interests of her clients, but rather was the result of an inexcusable lack of understanding as to the nature of the Lakepoint investments as securities, which could be remedied by retaking the Canadian Securities Course and close supervision; and
c) A suspension is neither necessary nor desirable, as the role of a regulator is to protect the public interest by removing from capital markets those whose conduct is likely to be detrimental to their integrity, not to punish past conduct, and it is not necessary for the protection of the public interest to remove the appellant from capital markets as there is no basis to conclude her future conduct may be detrimental to their integrity – it is unlikely she will repeat her misconduct in view of the trauma of the IIROC proceeding and the sanctions imposed, and it is neither necessary nor desirable to disrupt her career and interfere with her clients’ reliance on her.
(b) OSC Review of IIROC Penalty
[12] IIROC Staff made an application to the OSC pursuant to s. 21.7(1) of the Act to review the penalty imposed by the IIROC Panel, seeking a two-year suspension of the Appellant’s IIROC registration in addition to the imposed sanctions.
[13] S. 21.7(1) of the Act confers upon the Commission the power, following a hearing, to review a direction, decision, order or ruling of a SRO such as IIROC. By the combined application of subsections 8(3) and 21.7(2) of the Act, upon a review, the Commission may confirm the decision under review or make such other decision as it considers proper.
[14] In spite of the broad power conferred by the Act on the Commission to intervene in a decision of an SRO such as IIROC, as a matter of practice and within its own developed jurisprudence, the Commission generally accords deference to factual determinations that are “central to the SRO’s specialized competence” (see Taub v. Investment Dealers Association of Canada 2009 ONCA 628 (C.A.) at para. 33).
[15] In the case of Re Canada Malting Co. (1986), 9 OSCB 3566, at para. 21, the Commission laid out five grounds, of which at least one must be satisfied, before it will intervene in an SRO panel decision:
a) the SRO proceeded on an incorrect principle;
b) the SRO erred in law;
c) the SRO overlooked some material evidence;
d) new and compelling evidence is presented;
e) the SRO’s perception of the public interest conflicts with the Commission’s.
[16] The Commission determined that it should intervene in the present case and that a suspension is appropriate. It held that it had a basis to intervene in the IIROC Panel’s penalty decision under the Canada Malting test, as the Panel erred in law, proceeded on an incorrect principle, and had a perception of the public interest that conflicted with that of the Commission in three respects namely, in considering the purportedly traumatic effect of the IIROC proceedings against the Appellant, in failing to address the Appellant’s participation in an illegal distribution of securities, and in failing to adequately consider the principles of general deterrence and the protection of the public in crafting the appropriate sanctions.
[17] The Commission then reviewed the Panel’s findings and did not find errors in some of its determinations but took issue with others. It concluded that it is appropriate and in the public interest that the appellant be suspended, noting that:
a) The Panel erred in its apparent consideration of the effect of the IIROC regulatory proceeding on the appellant, particularly in the absence of evidence to that effect;
b) The Panel appeared to have been influenced by the testimony of Mr. Frankovitch, the CEO of the appellant’s current employer, who expressed the view that the industry sees suspension as a tool to deal with dishonesty, finding that his belief was not persuasive, representative, or determinative;
c) It was not clear what weight, if any, the Panel ascribed to the principle of general deterrence, that it failed to adequately address it and that it appeared to be more concerned about the consequences of a suspension on the appellant and her clients’ continuing ability to rely on her than it was on investor protection and market integrity. Moreover, the Commission found that the Panel’s perception of the public interest conflicts with that of the Commission;
d) The Panel’s failure to consider the seriousness of the appellant’s conduct in engaging in illegal trading is inconsistent with the Commission’s approach to impose significant sanctions for unregistered trading and participating in illegal distributions, including the imposition of market bans;
e) The appellant’s failure to recognize that the Lakepoint investments constituted securities, with mandated prospectus requirements, demonstrated reckless disregard for the interests of her clients. This differs from the case law which the Panel relied upon, where there was no dishonest, deliberately deceptive, or reckless harmful behaviour on the part of the respondent;
f) The Panel should have given careful consideration to the IIROC Sanctions Guidelines, which recommend suspension and/or a ban in egregious cases of breaches of the Act.
STANDARD OF REVIEW
[18] The appellant submits that appeals to the Divisional Court from Commission decisions are generally reviewed on a standard of reasonableness except for questions of law where which the standard is correctness. She submits that most, if not all, of the issues in this case involve errors of law, such that the applicable standard is correctness.
[19] The OSC and IIROC submit that the appropriate standard is reasonableness, as the Commission’s decision involved matters at the heart of its expertise within its statutory and regulatory framework. They argue that the Commission applied provisions of the Act relating to IIROC oversight and the IIROC Rules, which are closely connected to the Commission’s oversight function.They say that the Commission’s determinations that the Appellant characterizes as errors of law are in fact examples of the Commission’s exercise of discretion which are thereby reviewable on a standard of reasonableness.
[20] It is well settled, as confirmed in the recent case of Northern Securities Inc. v. Ontario (Securities Commission) 2015 ONSC 3641, [2015] O.J. No. 2924 (Div. Ct.), that the standard of review of decisions of the OSC is that of reasonableness on all issues other than procedural fairness. Moreover, the Northern Securities case, at para. 5, confirmed that the reasonableness standard of review applies specifically when the OSC reviews the decision of a SRO such as IIROC.
[21] The Court of Appeal in Taub, in confirming at para. 2 that the standard of review of a decision of the Commission, when reviewing a decision of an SRO, is one of reasonableness, adopted the language of the majority of the Divisional Court in that case as follows:
“The question before the Securities Commission was a question it was entitled to decide in fulfilling the mandate given to it by the Legislature. The answer to the question invokes the Commission's expertise as a regulator. We therefore conclude that the standard of review on this appeal is one of reasonableness.”
[22] It is acknowledged that there exists a rare exception to the reasonableness standard of review, calling for a standard of correctness, where the administrative body under consideration decided a general question of law that is both of central importance to the legal system as a whole and outside its specialized area of expertise (see McLean v. British Columbia (Securities Commission) 2013 SCC 67, [2013] 3 S.C.R. 895 at paras. 25-26). It was not argued by the appellant, nor we do we find, that this exception has any application in the present case.
[23] Given that the standard of review is that of reasonableness, on the authority of Dunsmuir v. New Brunswick, 2008 SCC 9 at para. 47, the questions for determination are therefore twofold: 1) whether the reasons of the Commission show that there was justification, transparency and intelligibility in its decision-making process and 2) whether the decision falls within a range of possible acceptable outcomes which are defensible in respect of the facts and law.
ANALYSIS
Issues raised by the Appellant
[24] The appellant submits that the commission erred in five respects, namely:
a) by incorrectly applying the test for intervention;
b) by failing to afford proper deference to the IIROC Panel’s analysis and findings, particularly as they relate to industry expectations;
c) by failing to afford proper deference to the IIROC Panel’s consideration of general deterrence;
d) in interfering with the IIROC Panel’s finding of fact on the merits which characterized the appellant’s conduct as less than reckless disregard; and
e) by placing undue emphasis on the IIROC Sanctions Guidelines.
[25] It is noted that there is a measure of overlap between these grounds.
[26] We are of the view that the Commission’s decision was justified, transparent and intelligible in respect of each of the grounds argued by the appellant. We are also satisfied that the decision falls within a range of possible acceptable outcomes which are defensible in respect of the facts and law. The reasons for these findings are set forth below.
Justification, transparency and intelligibility in the decision-making process
(i) Commission’s application of the test for intervention
[27] The Commission, in its Reasons, reviewed its statutory authority of review of an SRO such as IIROC pursuant to sections 21.7 and 8(3) of the Act. It observed that it exercises original jurisdiction similar to conducting a new trial and it specifically reviewed the grounds on which it will intervene in a decision of a SRO under the Canada Malting test. The Commission also observed that in practice it takes a restrained approach to applications under section 21.7 of the Act and will only substitute its decision for that of an IIROC Panel in rare circumstances, recognizing the specialized expertise of an IIROC Panel and the need to afford deference to factual determinations central to the panel’s specialized competence, including matters of sanction.
[28] The Commission reviewed in detail the bases upon which IIROC staff submitted that the IIROC Panel erred, thereby entitling it to intervene based on the test set out in Canada Malting. It rejected three bases for intervention submitted by IIROC staff, finding that the Panel did not overlook material evidence and did not err in law or proceed on an incorrect principle by not considering the issues of risk, suitability and due diligence in determining the appropriate sanctions, and secondly that the Panel did not err in law or proceed on an incorrect principle by failing to impose a suspension on the appellant solely because she may have received a personal benefit from the fee received by her husband for managing Lakepoint. Thirdly, the Commission found that the Panel did not err in law nor proceed on an incorrect principle by failing to attribute the loss of the money invested by the appellant’s clients in Lakepoint to her misconduct.
[29] However, the Commission did find that the Panel’s apparent consideration of the effect of IIROC’s regulatory proceeding on the appellant, particularly in the absence of evidence to that effect, constituted an error of law justifying its intervention. In doing so, it noted that the Panel’s assessment of the effect of the proceeding on the appellant was, at least in part, speculative and determined that it should not have been a factor in the Panel’s determination of the appropriate sanctions.
[30] The appellant argued that the Commission was not entitled to rely upon the IIROC Panel’s consideration of trauma suffered by the appellant as supporting intervention because the Panel did not rely upon trauma in making its sanction determination. The appellant points, in this respect, to the statement at para. 58 of the Panel’s decision that “in view of the trauma we believe this IROC regulatory proceeding has had on Ms. Lukic and the sanctions we are imposing and the fact that if she were to make the same or similar mistake again in the future the consequences next time would likely be a suspension that could effectively end her career in the industry, we believe it is unlikely that her misconduct will be repeated.” (underlining added).
[31] We would not give effect to this submission. As pointed out by the Commission at para. 69 of its decision, the Panel did refer to the effect of the proceeding on the appellant in its consideration of the appropriate sanctions at para. 45 of the Panel’s reasons, and in particular in its analysis of specific and general deterrence. This was not a case of the Panel determining the appropriate sanctions and then referring to trauma as something separate and apart from that determination. At para. 45 of its reasons, the Panel found that the “painful financial consequences” of a fine, when combined with the “time, trouble, costs and heart-ache” to the respondent resulting from the IIROC investigation and hearing, will satisfy the requirements of specific and general deterrence.
[32] In our view, the Commission’s decision to intervene based upon its determination that the IIROC Panel erred in law in giving consideration to the trauma suffered by the appellant satisfies the requirements of justification, transparency and intelligibility in Dunsmuir.
[33] At paragraph 96 of its decision, the Commission noted that the IIROC Panel did not address the seriousness of the appellant’s participation in an illegal distribution of securities contrary to the Act. At paragraph 101 the Commission stated that the Panel’s approach in determining the appropriate sanctions for participation in an illegal distribution of securities contrary to the Act, as illustrated by its finding that the conduct must be deliberate for a suspension to be imposed, is inconsistent with the Commission’s approach, noting that the Commission has held in previous cases that significant sanctions will be imposed for unregistered trading in securities and participation in the illegal distribution of securities, and has consistently imposed market bans for such conduct. The Commission observed that “industry expectations of the consequences of a breach of the Act should not significantly differ because the respondent appears before IIROC and not the Commission.”
[34] The Commission viewed IIROC’s failure to address the seriousness of the appellant’s conduct in this manner as proceeding on an incorrect principle, justifying its intervention, as demonstrated by its statement at paragraph 105 of its reasons that “for the foregoing reasons, I find that the panel erred in law and proceeded on an incorrect principle and that the sanctions decision is inconsistent with decisions of the commission in which suspensions have been imposed for conduct is similar to that of [the appellant].” The reasons went on to state “I also find that the panel’s perception of the public interest conflicts with that of the Commission.”
[35] It is evident from the reasons of the Commission that it was concerned with the maintenance of consistency in the regulatory response to breaches of the Act through the imposition of sanctions, particularly with reference to industry expectations. The Commission is the body mandated by the Act to safeguard the public interest in reference to capital markets. It is reasonable for the Commission to seek to maintain consistency in the application of appropriate sanctions for similar or comparable breaches of the Act. By reason of its specialized expertise, the Commission is in the opportune position to judge, on an ongoing basis, what is consistent and what is not, and for that purpose to interpret and apply previous decisions of SRO’s as well as its own decisions. It is important that the court take a deferential approach to the review of the Commission’s efforts to maintain a consistent approach to the imposition of sanctions, its concern being restricted to ensuring that, in so doing, the Commission acts reasonably.
[36] We do not accept the appellant’s argument that the Commission’s reliance on its different perception of the public interest from that of the IIROC panel is undermined by the Commission’s failure to state what its perception of the public interest is and to contrast it with that of IIROC. At para. 77 of its reasons the Commission instructed itself, citing the cases of Committee for the Equal Treatment of Asbestos Minority Shareholders v. Ontario (Securities Commission), 2001 SCC 37, [2001] 2 S.C.R. 132, at para. 43, and Re Mithras Management Ltd. (1990), 13 O.S.C.B 1600, on the purpose of its public interest jurisdiction to “restrain future conduct that is likely to be prejudicial to the public interest in fair and efficient capital markets” and that its role in imposing sanctions “is to protect the public interest by removing from the capital markets those whose past conduct is so abusive as to warrant apprehension of future conduct detrimental to the integrity of the capital markets.”
[37] In our view, the Commission’s conclusion that, in the context of this case, the IIROC Panel’s perception of the public interest conflicts with its own was justifiable, transparent and intelligible.
[38] We are not persuaded that in this case the Commission’s decision to intervene was unreasonable.
(ii) Commission’s alleged failure to afford proper deference to the IIROC Panel’s analysis and findings, particularly as they relate to industry expectations
[39] The appellant, in her Factum, pointed to three aspects to this ground of appeal, namely, 1) the Commission’s rejection of evidence given on the penalty hearing, 2) the Commission’s consideration and application of the relevant case law, and 3) the Commission’s consideration of the issue of general deterrence.
[40] With respect to the first aspect, the appellant submitted that the Commission failed to provide a reasonable basis for dismissing the evidence of Mr. Frankovich that the industry views suspensions as a tool to deal with the dishonesty and fines and other sanctions to deal with honest people who make mistakes. The appellate points out that the admission of this evidence was unchallenged and it was uncontroverted at the hearing before the IIROC Panel. She argues that it was an error of law in the circumstances for the Commission to reject Mr. Frankovich’s evidence.
[41] At para. 99 of its decision the Commission stated “Frankovich’s belief with respect to the industry’s views with respect to the circumstances that would lead to the imposition of suspensions is not persuasive, cannot be taken as representative and, in any event, would be subject to IIROC’s primary goals of protecting the investing public and the integrity of the securities markets.” In our view the Commission did not err in law and nor act unreasonably in taking this approach to the evidence of Mr. Frankovich. In purporting to give evidence of the “industry’s views” he was expressing a personal opinion rather than giving evidence of facts. It is well known that a witness’ evidence may be accepted in whole, accepted in part or rejected by a decision-maker. There is no basis to suggest that the IIROC Panel was in any better position than the Commission to judge whether the opinions of Mr. Frankovich were reflective of the ways in which the industry views suspensions and other sanctions. In our view, the Commission did not err in declining to defer to the IIROC Panel’s apparent reliance on the views expressed by Mr. Frankovich in his evidence. Moreover, the Commission did not err in observing that the primary goals of IIROC must take precedence over the evidence of Mr. Frankovich where it found they conflicted.
[42] With respect to the second aspect referred to by the appellant, in our view the Commission carried out a careful of review of the case law considered by the IIROC Panel as well as other relevant case law. It is not this court’s function to determine whether the conclusions which the Commission drew from its review of the relevant case law were correct, but rather our task is to consider whether its review was reasonable by satisfying the test of justification, transparency and intelligibility. We are satisfied that it was.
[43] The third aspect referred to by the appellant of the Commission failing to afford proper deference to the IIROC Panel’s analysis and findings overlaps with the appellant’s third ground of appeal relating to the question of general deterrence, and is discussed below.
(iii) The alleged failure of the Commission to afford proper deference to the IIROC panel’s consideration of general deterrence
[44] The Commission, in its review of the manner in which the IIROC Panel addressed the issue of general deterrence, began by instructing itself with respect to the underlying purposes of the Act set forth in section 1.1, namely to provide protection to investors from unfair, improper or fraudulent practices, and to foster fair and efficient capital markets and confidence in capital markets. It also had regard to IIROC’s primary goals, as stated in the Commission’s Recognition Order relating to IIROC, being the protection of the investing public in the integrity of the securities markets.
[45] The Commission noted that the IIROC Panel’s main concerns in determining appropriate sanctions are protective and preventive. The Commission carefully reviewed the reasons of the Panel relating to the appropriateness of a suspension and also carried out a review of the relevant jurisprudence. Ultimately the Commission concluded that the Panel’s approach, in finding that the impugned conduct must be deliberate for a suspension to be imposed, is inconsistent with the Commission’s approach, as exemplified by previous decisions of the Commission. As indicated above, the Commission observed that “industry expectations of the consequences of a breach of the Act should not significantly differ because a respondent appears before IIROC and not the Commission.”
[46] We are unable to conclude that the Commission, in deciding that the IIROC Panel had failed to adequately address the importance of general deterrence, failed to act with justification, transparency and intelligibility.
(iv) Alleged interference by the Commission with the IIROC Panel’s finding of fact characterizing the appellant’s conduct as less than reckless disregard
[47] In its penalty decision, the IIROC Panel, after reviewing its merits decision, observed at para. 56 that “the misconduct of Ms. Lukic was not as a result of her dishonesty, or acting in bad faith, or any other kind of moral turpitude. It was not without regard for, or with reckless disregard of, her understanding of the best interests of her clients.” The Commission, at para. 104 of its decision, stated that by 1) failing to recognize that her clients receive securities in connection with their investments in Lakepoint, 2) failing to ensure that a prospectus had been filed or that the distribution properly qualified for a prospectus exemption and 3) both recommending and facilitating off-book investments which eliminated any oversight by her employer the appellant demonstrated reckless disregard for the interests of her clients.
[48] In our view, the Commission’s finding in this respect represented a characterization of the appellant’s conduct based upon facts found by the Panel. The Commission found that the IIROC Panel, in holding that the appellant’s conduct was not without regard for, or with reckless disregard of, the best interest of her clients had failed to appreciate material evidence. Since there was evidence to support the Commission’s conclusion that the appellant had demonstrated reckless disregard for the interests of her clients, it cannot be said that its decision was unreasonable (see Boulieris v. Investment Dealers Assn. of Canada 2005 16629 (ON SCDC), [2005] O.J. No. 1984 (Div. Ct.) at paras. 34-36).
(v) Commission’s alleged placement of undue emphasis on the IIROC Sanctions Guidelines
[49] At para. 104 of its decision the Commission stated that the “Panel should have given careful consideration to Guideline 1.5 of the Sanctions Guidelines, which recommends a period of suspension for breaches of the Act and a ban in egregious cases, and Guideline 3.10 of the Sanctions Guidelines, which recommends a period of suspension in egregious cases involving large value high risk off-book and distributions.”
[50] In our view the Commission, in making the observation that the Panel “should” have given careful consideration to the Sanctions Guidelines did not place undue emphasis on them. The Commission did not state or imply that the Guidelines were in any way binding on the panel or were intended to fetter its discretion. The Guidelines themselves state in the preamble “nothing in these guidelines shall fetter the discretion of a Hearing Panel to impose a lesser or greater penalty in specific circumstances.”
[51] The Commission was of the view that paragraphs 1.5 and 3.10 were pertinent in light of the factual findings of the IIROC Panel that the appellant had committed a legislative breach (para. 1.5) and engaged in “outside business activities” (i.e. dealing in securities outside of the normal business activities of the firm). Para. 1.5 included, as recommended sanctions, consideration of a “suspension for 3 months to 10 years, or a possible ban if conduct is egregious” and para. 3.10 included “period of suspension (in most egregious cases involving large value high risk off-book distributions)”. The Commission did not act unreasonably in observing that the Panel should have given careful consideration to these Sanctions Guidelines.
Whether the decision falls within a range of possible acceptable outcomes
[52] In our view the addition of a two-year suspension on to the package of sanctions imposed by the IIROC Panel does fall within the range of possible acceptable outcomes. The cases cited by IIROC staff to the Commission and referred to by the Commission (Re Thomson, [2004] IDACD No. 49, Re Pandelidis, [2005] IDACD No. 16 and Re Morrison, [2004] IDACD No. 63) in which suspensions were imposed in comparable (characterized by the Commission as “similar”) circumstances is indicative of this. The fact that suspensions may not have been imposed in cases cited by the appellant to the Commission (Re Hazen,[2006] IDACD No. 20 and Re Steinhoff, 2014 BCSECCOM 23 (Steinhoff No. 2)) does not detract from the fact that the addition of a two-year suspension comes within the range of possible acceptable outcomes.
Procedural Fairness
[53] The appellant presented an alternative argument in submissions that she was denied procedural fairness by the Commission’s failure to afford her the opportunity to make submissions respecting the interplay between a suspension and the sanctions imposed by the IIROC Panel, particularly the requirement for close supervision, after it made its determination to intervene. The appellant says that this led to a failure on the part of the Commission to consider the effect of the sanctions as a whole. She submits that it was unfair not to afford her an opportunity to respond to this issue following the determination of the Commission to intervene. She says that the matter should be referred back to the Commission for a further hearing on this issue.
[54] We would not give effect to this submission for two reasons. First, as indicated above, subsection 8(3) of the Act empowers the Commission, on a review of a decision of an IIROC Panel, to confirm the decision under review or make such other decision as it considers proper. The Commission may therefore, based upon the circumstances of the particular case, send the question of sanctions back to the IIROC Panel for final determination or it may substitute its determination on appropriate sanctions for that of the IIROC Panel. It would be quite improper for this court to interfere with the process adopted by the Commission by mandating that it must, in circumstances such as these, conduct a two-stage hearing, involving an initial hearing on the question of whether it should intervene, and if it decides to intervene, a second hearing to consider the question of sanctions.
[55] Second, we are not satisfied that the appellant was denied any procedural fairness in this case. It was clearly set forth in the IIROC staff’s Application for a Hearing and Review that it was seeking a two-year suspension in addition to the sanctions imposed by the IIROC Panel. It was fully open to the appellant to make submissions on the interplay between the suspension proposed by staff and the close supervision term imposed by the IIROC Panel in light of the relief being sought by IIROC staff. The fact that she chose not to do so, when she had the opportunity, does not create any procedural unfairness.
Disposition
[56] For the foregoing reasons the appeal is dismissed.
[57] The parties have agreed on the costs of the appeal, should the appeal be dismissed, namely that the appellant shall pay costs to IIROC in the sum of $7,500.00 and to OSC in the sum of $2,500.00 for an aggregate costs amount of $10,000.00, all inclusive. These costs shall be paid within 30 days hereof.
D. A. BROAD J.
A.C.J.S.C. MARROCCO
L. A. PATTILLO J.
Released: October 4, 2016
CITATION: Pariak-Lukic v. Investment Industry Regulatory Organization of Canada, 2016 ONSC 2564
DIVISIONAL COURT FILE NO.: 361/15
DATE: 201601004
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MARROCCO A.C.J.S.C., L.A. PATTILLO and D.A. BROAD JJ.
BETWEEN:
LUCY MARIE PARIAK-LUKIC
Appellant
- And –
INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA and ONTARIO SECURITES COMMISSION
REASONS FOR JUDGMENT
Released: October 4, 2016