An Ontario court has dismissed a challenge to the Financial Services Regulatory Authority of Ontario’s (FSRA) practice of publicizing its allegations in enforcement cases but not the responses of industry firms.
The Divisional Court rejected an application from Harold Gerstel and his mortgage brokerage, Harold the Mortgage Closer Inc., which sought to challenge FSRA’s policy of automatically publishing the details of enforcement cases online.
They also challenged the regulator’s refusal to publish the firm’s request for a hearing before the Financial Services Tribunal (FST) in response to a proposed enforcement case against it — a decision that the firm argued was unreasonable.
According to the court, Gerstel and the firm argue that the regulator’s decisions are “unreasonable, illogical, unjustified, and unfair” and that they “possess an air of arbitrariness.”
“There is no reason why the public should not have access to the applicants’ request for a hearing, following the [publication of the regulator’s allegations],” their application noted.
However, the court sided with the regulator, ruling that FSRA’s policy was reasonable, and not suitable for a judicial review, as it does not affect “the legal rights or obligations of the applicants.”
“The issuance of the transparency guidance is reasonable — as was the process by which it was developed — and it serves the public interest,” the court concluded.
In its decision, the court noted that FSRA’s policy of publishing its enforcement allegations “is consistent with the practice of many other regulators who publish their enforcement actions before an adjudication of the merits before a disciplinary tribunal.”
The court also said a request for hearing could contain “inaccurate information or otherwise objectionable material.”
“The applicants have not shown that the decisions to issue the transparency guidance, to publish the [allegations], and not publish the [firm’s request for hearing], impact upon the fairness of their hearing before the FST,” the court said. “Decisions to adopt general policies are not subject to a duty of fairness.”
In this case, the tribunal still has to hold its hearing, and if the firm objects to any of its rulings, it will have a right to seek a judicial review of those findings, the court noted.
“While the subjects of regulatory action often disagree with the allegations put forward by the regulator, there is a comprehensive statutory remedy, namely a de novo hearing before the FST,” the court said.
“If FSRA’s conduct imperils a procedurally fair hearing, the FST can make an order as required to control its process and rectify the situation. If the applicants wish to challenge the FST’s decision-making, they should do so directly by applying for judicial review of the FST’s decision,” it said.
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