A recent decision by a hearing panel of the Canadian Investment Regulatory Organization (CIRO) illustrates the ongoing tension between securities regulators’ efforts to enhance their enforcement powers in administrative proceedings and respondents’ corresponding attempts to assert enhanced procedural protections.
Background
The decision related to CIRO’s nearly four-year delay in bringing formal enforcement proceedings against Darren Carrigan, a CIRO-registered and dealing representative. In November 2020, Mr. Carrigan learned that a conflict of interest complaint had been made against him. In April 2021, CIRO (then IIROC) advised Mr. Carrigan that it was investigating and, in August 2021, told Mr. Carrigan’s counsel that the investigation was nearly complete. However, despite repeated inquiries by Mr. Carrigan’s counsel, CIRO took no further steps until April 2024, when it provided a draft statement of allegations on a without prejudice basis, while still declining to formally commence proceedings.
In July 2024, Mr. Carrigan brought a motion before a CIRO hearing panel for an order permanently staying CIRO’s investigation or, alternatively, mandating an expedited merits hearing. Mr. Carrigan alleged that the delay was an abuse of process, pointing to several harms he had suffered during the investigation, including unemployment, financial losses, damage to his professional reputation and anxiety. Mr. Carrigan had been terminated or forced to resign from several roles since the investigation began due to the unresolved complaint.
The CIRO Panel’s Findings
The panel dismissed Mr. Carrigan’s complaint, but made significant findings in Mr. Carrigan’s favour while doing so.
As a threshold matter, CIRO Enforcement Staff sought to bar Mr. Carrigan from bringing his motion entirely, arguing he lacked standing until CIRO commenced an enforcement proceeding. The hearing panel disagreed and accepted that Mr. Carrigan could bring his motion before enforcement proceedings began. The panel dismissed Staff’s argument that any concerns over delay were dealt with by the six-year limitation period, noting that the limitation period did not address the possibility of undue prejudice before its expiry.
The hearing panel then considered the substance of Mr. Carrigan’s motion. It applied the stringent test set by the Supreme Court of Canada (SCC) in Blencoe v. British Columbia (Human Rights Commission) to determine when delay in the administrative context amounts to abuse of process.
The panel suggested it was sympathetic towards Mr. Carrigan’s position, finding that CIRO’s delay in commencing formal proceedings was “inordinate” and lacked justification. However, when set against the very limited procedural rights under the Blencoe standard, the panel found that Mr. Carrigan had not shown significant prejudice directly relating to the delay or that he could not be given a fair hearing. The prejudice Mr. Carrigan faced arose in part from the allegations themselves and was “only” exacerbated by CIRO’s delay — not solely caused by it. As a result, the delay was not an abuse of process justifying a stay. However, in Mr. Carrigan’s favour, the panel directed CIRO to either commence a proceeding “in the near term” along with an expedited hearing or to close its investigation.
Context and Implications
The Carrigan decision is notable as the most recent example of a broader procedural fairness tug-of-war between securities regulators and respondents, which has featured multiple SCC appeals and extensive debate at the policy level and in the media.
Procedural disputes in securities enforcement matters have recently attracted attention because securities regulators continue to prefer administrative proceedings over court proceedings, while at the same time seeking to “judicialize” their administrative proceedings by imposing larger and farther-reaching sanctions.
Traditionally, there has been a recognized trade-off between administrative proceedings as compared to criminal or quasi-criminal court proceedings. From the perspective of prosecuting regulators, administrative proceedings required lower standards of evidence, afforded fewer procedural rights to respondents, and accordingly made convictions easier and quicker to obtain. However, as a counterbalance to these reduced procedural rights, the available sanctions in administrative processes were traditionally more limited, including a far more limited ability to impose large monetary fines or penalties.
In recent years, legislatures and securities regulators have consistently sought to change one side of this equation by granting regulators new and expanding powers to impose large monetary penalties in the administrative context. In Ontario, for example, the Capital Markets Modernization Taskforce recently recommended increases to the maximums for administrative monetary penalties and fines that can be imposed by the Ontario Securities Commission (OSC), as well as additional powers enabling the OSC to freeze, seize, and preserve property.
Regulators’ efforts to increase their powers in the administrative sphere have seen corresponding attempts by respondents to assert greater procedural protections and rights that are more in line with those enjoyed by defendants in criminal or quasi-criminal proceedings. As in Carrigan, these procedural fairness challenges have had mixed success. For example, following a series of challenges to the constitutionality of administrative monetary penalties, the SCC held in 2015 that these penalties were, generally, constitutional. On the other hand, in its decision earlier this summer in Poonian v. British Columbia Securities Commission, the SCC held that administrative penalties can, unlike fines imposed in a judicial hearing, be discharged in bankruptcy (a decision that has prompted securities regulators to call for legislative reform).
In this context, Carrigan — where the respondent sought procedural rights to a timely hearing comparable to those recognized in the judicial context — is part of a broader ongoing battle over how and to what degree securities regulatory proceedings should be “judicialized.” So long as Canadian securities regulators are unwilling to prosecute serious securities offences before the courts, both the procedural battles and the policy debate are likely to continue.
For more information, please contact the authors of this bulletin or any member of our Securities Litigation group.
