Ontario Securities Commission panel decisions criticize regulators’ disclosure practices

In another disciplinary proceeding, an OSC hearing panel found that the privilege that normally prevents disclosure of settlement discussions did not trump the right of a former Scotia Capital trader to obtain documents relevant to his defence of a proceeding brought against him by Regulation Services (which is now part of the Investment Industry Regulatory Organization of Canada, or IIROC). On a motion by the trader, David Berry, RS was ordered to produce all documents relating to its settlement of a related regulatory proceeding brought against his former employer, Scotia Capital. Initially, RS had pursued both Berry and Scotia Capital in proceedings accusing them of serious market irregularities while Berry headed the Scotia Capital preferred share trading desk. After Scotia Capital settled the proceedings against it, Berry moved for production by RS of documents relating to that settlement and the negotiations leading to it, arguing that this documentation was relevant to the case against him for a couple of reasons. Firstly, Berry argued that the terms of the settlement could impact on the credibility of any Scotia Capital witnesses testifying against him. Secondly, Berry argued that the negotiations leading to the settlement could be relevant to his claim that it was Scotia’s own compliance failures that were the real culprit in any regulatory breaches. The OSC panel agreed – finding that the privilege attaching to settlement discussions is not absolute and had to give way to the ability of Berry to fully defend the serious allegations against him.