IDA has jurisdiction over resigned dealer

Taub was a registered representative with the Investment Dealers Association of Canada (the “IDA”) from June 1988 until he resigned in September, 2004. In October 2005, the IDA instituted disciplinary proceedings against him alleging conduct unbecoming in relation to his trading activity for clients and in his dealing with his own member firm before his resignation.

When he originally applied for registration with the IDA, he signed an application and agreed to be bound by the by-laws, rulings, rules and regulations of the IDA and remain subject to its jurisdiction for five years after he ceased to be a member.  Nevertheless, he moved before the IDA discipline tribunal for an order declaring that the IDA had no jurisdiction over him because his status as a registered representative had expired in September, 2004. The IDA refused his motion and accepted jurisdiction.

The Ontario Securities Commission (the “OSC”) would not interfere with the IDA decision as it was reasonable.  Section 21.1 of the the Ontario Securities Act allows for the recognition of self-regulatory organizations (“SROs”), which may impose additional requirements within their jurisdiction, provided that these additional requirements do not contravene the Ontario Securities Act.  The recognition of the IDA is part of a statutory securities scheme designed to protect investors and to foster fair and efficient capital markets.  As a matter of policy, the by-laws and other rules of the IDA constitute “part of the fabric of securities regulation” in Ontario, and “it would be contrary to the public interest to allow the applicant to avoid such regulation by simply resigning his membership in the IDA.” The OSC agreed with the submission of IDA staff that the respondent’s interpretation would undermine the IDA’s ability to discipline its members and in that way would be inconsistent with its duty to protect the public interest.

The Ontario Court of Appeal upheld the OSC decision on review (thus overturning the Divisional Court), as the OSC had applied its expertise and the decision was reasonable.

Taub v. Investment Dealers Association of Canada, 2009 ONCA 628