A hearing panel has disqualified Stikeman Elliott LLP (Stikemans) from acting for Credit Suisse First Boston Canada Inc. in its defense of allegations by Market Regulation Services Inc. (RS).

The panel, chaired by Hilda McKinlay, found that Stikemans is in breach of its duty of loyalty to RS, and that this “breach of loyalty precludes Stikemans from acting for Credit Suisse in these proceedings”.

The breach of loyalty stems from the fact that Stikemans had provided advice to the Toronto Stock Exchange and the Investment Dealers Association when they arranged the creation of RS. Stikemans argued that it acted only for the TSX and was at no time retained by RS. It also says that the TSX hasn’t raised any objection to Stikemans acting for Credit Suisse in this case.

Counsel for RS argued that the application of the principle that justice should not only be done, but should manifestly be seen to be done, requires in this case that Stikemans be removed as counsel for Credit Suisse. “We are satisfied that most members of the public would be shocked if they were told that counsel could give them legal advice and later argue against that advice in a case against them. They would not see this as justice either being done or being seen to be done. This reinforces our decision that Stikemans must be disqualified from acting in this proceeding,” the panel wrote in its’ decision.

RS alleges that Credit Suisse violated the Universal Market Integrity Rules with respect to certain off-market transactions. In its reply, filed by Stikemans, Credit Suisse raises issues going to the jurisdiction of RS to proceed with the hearing against it and, if the hearing proceeds, it raises issues as to the jurisdiction of RS to impose fines or other penalties against it. It also raises questions as to the independence of RS from the TSX, which originally brought forth the complaints against CSFB.