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BY MARK BROWN
The Investment Dealers Association has launched an appeal of a
Saskatchewan hearing panel decision that threatens to unravel the
regulator's power to discipline its former members. Although the case
has attracted little public attention, it could force Canada's
securities commissions to act if the IDA loses.
In February, a Saskatchewan Financial Services Commission hearing panel
determined that the IDA's contract with its members does not give it the
right to bring disciplinary action against brokers after they have left
the industry.
The case, which dates back more than 10, involves two former IDA
registrants and a third who is still in the industry, who appealed an
IDA hearing panel decision to the SFSC.The IDA accuses Wade MacBain,
Karl Neufeld and Frederick Smith of Matrix Financial in Saskatoon of
violating several IDA by-laws between 1996 and 2000. The hearing panel
allowed the appeal of MacBain and Neufeld, but permitted the IDA to go
ahead with its disciplinary proceedings against Smith.
Jeff Kehoe, the IDA's director of enforcement litigation, says this is
the first case of its kind (although there are others that have
questioned the scope of the IDA's powers in passing). "Our ability to
effectively regulate depends on our ability to discipline people
allegedly involved in misconduct, even if they are terminated from their
member firm," Kehoe says.
In its appeal motion, the self regulatory organization says the
commission erred in law in finding that the association "has no
statutory authority to regulate its former members." Whether the IDA has
the statutory authority is irrelevant, says Kehoe. "Our position is we
don't need it," he argues. "One of the terms of that contract is to be
bound by that contract even after you leave."
This case is being closely watched by other regulators. Bill Rice, chair
of the Alberta Securities Commission, says the provinces may need to
consider legislative changes if the SFSC ruling holds up.
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