The British Columbia Court of Appeal has handed down a decision upholding the Investment Dealers Association of Canada’s (IDA) jurisdiction over former members, a decision that contradicts an earlier decision by an Ontario court, which found that the self-regulatory organization couldn’t claim continuing jurisdiction.

In the case, Charles Dass, a former member of the IDA, appealed a decision of the B.C. Securities Commission, which ruled that a panel of the Pacific District of the IDA did not err when it concluded that he remains subject to the IDA’s investigatory and disciplinary by-laws.

The BCSC considered whether the IDA’s disciplinary jurisdiction is located in its by-laws, which represent terms of a contract between the appellant and the IDA, or whether the jurisdiction is statutory and if so, whether the statute limits the IDA’s jurisdiction to current members. The commission held the source of jurisdiction is the by-laws and that the jurisdiction is not limited by statute.

Dass argued that the commission erred in law and asked the appeal court to declare that the IDA does not have jurisdiction over him. The court ruled that the standard for reviewing the commission’s decision is “reasonableness”, and applying that standard, it found the commission’s decision was reasonable.

“In my view, the commission’s process of reasoning reflects a thoughtful, orderly, and logical consideration of the facts and the applicable legal rules and, as well, its reasons present a rational, transparent, and intelligible justification for its decision,” it said.

“By way of contrast, a decision that the IDA could not discipline former members despite their agreement to submit to IDA jurisdiction for five years after termination of their membership would undermine the regulatory scheme,” the court said. “A non-compliant member would be able to avoid any oversight of his conduct simply by resigning and any general deterrence to be gained by findings of misconduct and consequential penalties would be lost. Such a result would diminish investor protection and damage public confidence in the regulatory system. It would accordingly be unacceptable to hold that the appellant could so easily shed himself of a contractual commitment entered into in part for the protection of the investing public.”

However, the B.C. court notes that its conclusion stands in contrast to a recent decision in Ontario (IDA vs. Taub), which was handed down after the hearing of this appeal.

It says that the material facts in that case are virtually identical to those in this case. The Ontario court also concluded that the applicable standard of review was reasonableness, but by a majority of two to one, it found that the decision of the Ontario Securities Commission (upholding jurisdiction over a former member) was unreasonable.

“Their view of legislative intent was heavily influenced, as I understand their reasons, by their conclusion that recognition under the statute transforms SROs and modifies the contractual relationships between SROs and their members,” the B.C. court said.

However, it disagrees with that view, saying, “With respect, I do not find the majority reasons in Taub persuasive and they do not dissuade me from my view that the decision of the commission in the case at bar was reasonable.”