CIRO Celebrates pending legislation to enhance its investigative and enforcement powers in Ontario
In a recent Press Release, the Canadian Investment Regulatory Organization (CIRO) has applauded the Ontario government’s decision to give it what it calls the “full enforcement toolkit” of powers to investigate and bring enforcement proceedings against the individuals and firms it regulates. This toolkit includes a power that CIRO already has in Ontario – the power to enforce fines as judgments in the Superior Court. What is new is the ability in Ontario to compel witnesses to provide oral and documentary evidence during CIRO investigations and proceedings and express statutory immunity for CIRO staff for measures undertaken during the investigation and enforcement process. When these new provisions are enacted, Ontario will become the seventh province to provide the full “toolkit” to CIRO, joining Alberta, Newfoundland and Labrador, New Brunswick, Nova Scotia, Prince Edward Island, and Quebec.
What will be interesting to see is whether existing protections against self-incrimination for compelled testimony will apply to future CIRO investigations and proceedings. While CIRO is recognized by the Ontario Securities Act as a self-regulatory organization empowered to regulate its mutual fund dealer and investment dealer members, it is primarily governed by contract between CIRO and its members and the individuals who work for its members. It is not considered a government body in the same way that the Ontario Securities Commission is a government entity. Because it is in many ways a “private club,” CIRO is not subject to the Charter of Rights and Freedoms and its right against self-incrimination. Similarly, CIRO interviews have not been considered to be compelled and thus subject to the protections against self incrimination that are afforded, for example, to OSC interviewees under the Ontario Evidence Act. In past years, this has led to a practice by CIRO of interviewing regulated persons during investigations under the threat of regulatory sanctions if they do not cooperate, and then feeling free to read in that testimony against the interviewee in subsequent enforcement proceedings. While the potential sanctions for failing to cooperate with an investigation are very real for a CIRO registrant, CIRO interview testimony has not been considered “compelled” in the strict sense of the word, as imprisonment and the full slate of quasi-criminal sanctions for non-compliance has not traditionally been available. This contrasts with witnesses who are compelled to provide evidence to the OSC who have always been able to invoke their Charter rights and the federal and provincial Evidence Acts to protect themselves against self-incrimination. This appears to be set to change with the proposed legislative amendments – where CIRO interviews will be truly compelled.
The devil is in the details and will depend on the text of the amendments. It would still appear to be the case that the Charter will not extend its protections to an investigation by a non-governmental body such as CIRO. However, if the legislation passed by other provinces is any indication (for an example see Alberta Securities Act, s.69.1), it would appear that CIRO will be able to compel evidence in the same manner as for court proceedings, and there will be an argument to be made that protections against self-incrimination under s.9 of the Ontario Evidence Act should therefore be available. Under the Evidence Act, a person “shall not be excused from answering any question upon the ground that the answer may tend to criminate the witness or may tend to establish his or her liability to a civil proceeding at the instance of the Crown or of any person or to a prosecution under any Act of the Legislature” but may invoke the provisions of that Act and, if they do so they are still compelled to answer, but “the answer so given shall not be used or receivable in evidence against him or her in any civil proceeding or in any proceeding under any Act of the Legislature.” While it may be a stretch to characterize a CIRO enforcement proceeding as being brought under an Act of the Legislature, given that it is a private organization, CIRO proceedings have been characterized by the courts as governed by the law of contract between CIRO and its members and are arguably civil in nature.
It remains to be seen how CIRO will use these new powers in Ontario and whether CIRO will try to still use compelled testimony in enforcement hearings. It also remains to be seen how the courts will interpret any new provisions. However, with CIRO having similar powers to the OSC, we may see CIRO interviewees try to maximize their possible protection against self-incrimination – both by insisting that a CIRO interview be compelled rather than voluntary and by invoking their Evidence Act protections to try to prevent the use of their testimony against them at subsequent CIRO enforcement hearings.
