The British Columbia Court of Appeal has upheld a lower court decision, which found that the B.C. Securities Commission was within its jurisdiction agree to a settlement in which the penalty paid was larger than it could have collected at a hearing.

In the case, Michael Lee Seifert, appealed a lower court’s decision enforcing a settlement agreement between him and the BCSC that called for a $450,000 payment. Back in 1999, he agreed to a settlement agreement that included a $450,000 payment, $200,000 to recover investigation costs, and $250,000 as an administrative penalty.

However, in a different case in 2001, a B.C, court found that the most the commission could impose as a penalty was $100,000 for each proceeding, regardless of the number of separate violations charged in the proceeding.

At this point, after having paid $225,000, Seifert took the position that even if the BCSC had the power to settle, it could not conclude a valid agreement for a penalty greater than $100,000. He also asserted that the respondent could only recover actual investigation costs, which may have been less than the estimated $200,000.

A lower court judge ruled that the BCSC had jurisdiction to settle, and it validly exercised that power. The judge also held that the settlement was a compromise bargain, not an order, and so it was not constrained by the limits in the statute.

The appeal court has now upheld that position. “The amount of the administrative penalty was negotiated before it was judicially determined that $100,000 was the maximum, regardless of the number of violations. The appellant potentially faced many separate counts or charges. He made a compromise. In my opinion, the respondent had the authority to agree to that compromise at the time it was negotiated,” it said.

“It is important to note from the outset that the [Securities Act] is regulatory in nature. In fact, it is part of a much larger framework which regulates the securities industry throughout Canada. Its primary goal is the protection of the investor but other goals include capital market efficiency and ensuring public confidence in the system,” it added. “So long as the financial components of the settlement advanced those goals, and I think they did, it cannot be said that they ran contrary to public policy and were beyond the reach of the respondent’s powers.”