An Ontario court has dismissed former investment banker Andrew Rankin’s appeal to set aside a settlement agreement he made with the Ontario Securities Commission (OSC) because the commission was reasonable in denying his bid to set aside the deal, the court ruled. However, a dissenting opinion said that he’s entitled to a new hearing.
According to the reasons of the Ontario Superior Court of Justice (Divisional Court), which were released last week, Rankin asked the court to overturn an OSC decision that denied his application to set aside his settlement with the commission that concerned allegations of tipping inside information he acquired when working as a banker.
Rankin sought to have that settlement set aside on the basis that he wasn’t aware that the man accused of trading on the inside information he allegedly provided, Daniel Duic, was under investigation for possibly breaching a cease trade order, before Rankin entered his deal the OSC.
The court’s decision noted that Rankin argued that he wouldn’t have agreed to a settlement if he’d known Duic was under investigation. OSC staff said they’d informed Rankin’s counsel of the existence of an investigation into possible technical breaches, and that it was up to them to pursue further detail if they thought that was relevant.
In a Nov. 21, 2011 decision, the OSC denied Rankin’s bid to set aside the settlement, and he appealed that decision to the courts, which have also rejected his argument.
OSC dismisses Rankin bid to revoke tipping settlement
In the court’s decision, the majority of the three-judge panel found that the OSC was reasonable in rejecting Rankin’s application for a number of reasons, including that the news of a possible breach by Duic was not information that would have caused a reasonable person to reject a settlement and risk a lengthy criminal trial instead.
“[Rankin] received a good settlement, as the commission agreed not to proceed with the criminal charges, where the appellant was at risk of a conviction,” the court decision states.
As well, the majority rejected the argument that Duic could have been engaged in illegal insider trading, noting there is no evidence of this; and, it said there’s no evidence to support an allegation that the OSC did not adequately investigate this possibility.
The majority also rejected the claim that there was bias due to Jim Turner, OSC vice chairman, participating in both Rankin’s settlement hearing and the sanction hearing involving Duic; concluding that this allegation is “without merit”.
However, in a dissenting opinion, Judge Matlow stated that Rankin’s appeal should be allowed and a new hearing held by the OSC.
Matlow maintains that the appropriate standard of review is correctness, not reasonableness — which was used by the majority on the basis that the OSC is entitled to deference due to its expertise in regulating capital markets and applying public interest jurisdiction. It states that the standard should be correctness because the appeal raises issues of law generally, not issues that require deference to OSC expertise.
Matlow also found that Rankin was entitled to know about anything that could affect his decision to agree to a settlement, and that information about the Duic investigation “would undoubtedly have been of great importance to him in arriving at his decision.”
Matlow concluded that Rankin had grounds to claim that the OSC did not make full disclosure to him; and that OSC staff had an obligation to inform Rankin about its interview of Duic and to provide him with a transcript. Absent that, Rankin was not able to make an informed decision, Matlow states. Matlow also states that the commission applied the wrong test in considering Rankin’s application.