The Supreme Court of Canada today issued a ruling that makes it easier for regulators in secondary jurisdictions to impose sanctions for misconduct occurring years—or even decades—earlier.
But when the B.C. Securities Commission, in 2010, attempted to adopt the same prohibitions as in the OSC settlement, McLean appealed on grounds that the limitation period had already expired. Indeed, under s. 159 of the province’s Securities Act, proceedings “must not be commenced more than six years after the date of the events that give rise to the proceedings.”
The securities commission, however, successfully argued before the appeal court that the “event” giving rise to the proceedings was not the misconduct — but rather the OSC settlement. Justice Michael Moldaver, writing for the SCC majority, was inclined to agree:
“A review of the ordinary meaning, the context, and the purpose of both ss. 159 and 161(6) of the Securities Act reasonably supports the Commission’s conclusion that the event giving rise to a proceeding under s. 161(6)(d) is the fact of having agreed with a securities regulatory authority to be subject to regulatory action.”
Interestingly, the court noted the appellant’s counter-interpretation defining the event as the misconduct itself was also reasonable. The judgment, however, states that, in matters concerning regulators dealing with their own regulation, broad discretion, subject to a standard of reasonableness, must be granted.
“. . . the resolution of unclear language in a home statute is usually best left to the administrative tribunal because the tribunal is presumed to be in the best position to weigh the policy considerations often involved in choosing between multiple reasonable interpretations of such language,” says the decision.
Christopher Wirth, a commercial litigator at Stockwoods LLP, represented McLean before the Supreme Court. Wirth says he’s disappointed by the ruling, but acknowledges the court has provided some clarity on the matter, while leaving a few issues outstanding.
With more freedom to interpret their statutes, says Wirth, securities commissions may be emboldened to test the standard of reasonableness. If an “event” can be interpreted as the primary settlement with a securities commission, then what’s to prevent another commission from interpreting the event as a secondary, or even tertiary, settlement?
“The impact of their decision ultimately to not get involved,” says Wirth, “is that it leaves open the door for other regulators to bring proceedings decades down the road based on other regulators’ decisions, as long as they’re still within the limitation period from a previous regulator’s decision.”
Wirth also notes the ruling may leave Canada’s fragmented system of provincial securities regulators even more fragmented, as various commissions may interpret the same wording in different ways.
“From a consistency point of view, it would be nice to have one set of outcomes to a particular set of facts or circumstances . . . but I guess Moldaver, on behalf of the majority, is saying here is that, if that turns out not to be the case, so be it. For better or worse, it’s a federal system. . . .”
The SCC ruling addresses this issue in part, stating — while duplicative proceedings should be avoided whenever possible — various interpretations for similar laws may be a reality of living in Canada: “The possibility that other provincial securities commissions may arrive at different interpretations of similar statutory limitation periods is a function of the Constitution’s federalist structure . . .”