Disciplinary law: The reasonable sanction regarding financial markets
In a judgement rendered in September 2016, the Court of Québec recognized that the law grants an important margin of discretion to the Tribunal des marchés financiers regarding the imposition of an administrative penalty, capped to a maximum amount of 2 000 000$ per violation. The Tribunal must consider several factors when determining whether or not a penalty is reasonable in the circumstances, notably the fees associated with the implementation of all imposed administrative measures. Even when the penalty is agreed upon by the parties, it must nevertheless be analysed in light of a number of factors in order to be accepted by the Tribunal (Beaudoin, Rigolt & Associés inc. v. Autorité des marchés financiers, 2016 QCCQ 9295 (CanLII)).
THE FACTS
Marc and Philippe Beaudoin work as mutual fund brokers and are representatives of the firm, Rigolt. In 2009, the firm is inspected by l’Autorité des marches financiers (« AMF ») and a report listing a number of violations results from said inspection. In March 2011, Marc Beaudoin is declared guilty by the Chambre de la sécurité financiers (« CSF ») of having violated his obligations as a representative of his firm. Consequently, the AMF demands that Marc Beaudoin step down from his position as chief executive officer and pay certain administrative penalties. These demands are eventually accepted by Marc Beaudoin.
Following Marc Beaudoin’s voluntary withdrawal as chief executive officer of Rigolt, his son, Philippe takes up the position in May 2012.
In August 2013, the AMF’s inspection services, once again, intervene in Rigolt’s financial activities and a second report is drafted. Despite the firm’s efforts to solve the problems noted by the AMF and bring its practices in line with the law, the AMF addresses its concerns to the Tribunal.
The Tribunal analyses different factors in order to determine the appropriate sanction to impose in order to protect the public, notably the severity of the acts committed, the offender’s past conduct, the losses suffered by the clients, the offender’s experience, position and status at the time the acts were committed, the offender’s intention, the damage caused to the profession’s integrity, the broker’s collaboration and the degree to which he showed remorse.
The Tribunal concludes by imposing the following measures: two administrative penalties of $25 000 and $7 500 to be paid by Rigolt, an administrative penalty of $2 500 to be paid by Philippe, the nomination of an independent auditor, the withdrawal of any rights granted to Philippe as Rigolt’s chief executive officer and a number of different orders regarding the naming of a new chief executive officer.
Unsatisfied with the sanction imposed and the Tribunal’s analysis of the numerous factors considered, the Beaudoins appeal the decision before the Court of Québec.
THE COURT OF QUÉBEC’S DECISION
After having considered the arguments invoked by both parties, the Court of Québec draws the following conclusions :
1. The AMF’s notice suggests the best practices to follow and aims to help brokers better apply the general norms stemming from all applicable laws and by-laws.
2. The AMF’s notice does not have force of law.
3. Even though an important discretion is granted to the Tribunal in its evaluation of whether a penalty is reasonable or not, it must nevertheless consider numerous factors developed by case law.
4. No one factor can be considered alone; putting too much important on one sole factor may result in the Tribunal’s order being considered unreasonable.
5. The important fees associated with any given measure imposed on the broker must be considered by the Tribunal when evaluating whether the general sanction is reasonable or not.
6. These fees may have a significant impact on the administrative penalty imposed.
7. Even when the sanction is recommended and is part of a transaction concluded by the parties, the Tribunal must still determine whether or not the terms of said transaction respects public interest and the reasons for which the law was adopted.
THE LESSONS TO BE LEARNED
1. To verify its reasonability, the Tribunal must examine the sanction imposed as a whole.
2. The factors that must be considered by the Tribunal varies in function of each particular case’s circumstances.
3. The administrative penality negociated by the parties and endorsed by the Tribunal must reflect the balance between the different factors considered by the Tribunal in order to determine whether or not the sanction imposed is appropriate Dubé Légal inc., Montréal disciplinary law lawyers.
