Investment industry body says public interest served by allowing use of information in civil suit

In what could be a precedent-setting decision, a hearing panel for the Investment Industry Regulatory Organization of Canada (IIROC) says the public interest of permitting a party to use the body’s information in a separate civil outweighs the resulting prejudice to the party who disclosed the information.

In Re Malic, 2020 IIROC 37, Gordon Albert Malic, the respondent in this proceeding before the IIROC Hearing Panel (Alberta District) and the defendant in a civil action before the Court of Queen’s Bench of Alberta, filed a motion under IIROC Rule 8420, seeking the Hearing Panel’s permission to use certain information obtained from IIROC staff for the purpose of his application in the Queen’s Bench proceeding.

The IIROC information consisted of a copy of the complaint letter sent by counsel of HW — Malic’s former client, who was the complainant in the IIROC proceeding and the plaintiff in the Queen’s Bench proceeding — and a copy of the transcript of HW’s interview with IIROC staff.

The issue before the Hearing Panel was whether, pursuant to IIROC Rule 8420(6), the public interest served by allowing Malic to use the IIROC information for the purpose of the Queen’s Bench application would outweigh the prejudice caused to IIROC or to HW, from whom the information had been obtained. This is the first time that IIROC has made a decision addressing this particular issue.

The Hearing Panel concluded that the public interest outweighed the prejudice caused to IIROC and HW, so it granted the motion and allowed Malic to use the information acquired from IIROC staff in the Queen’s Bench application. The Hearing Panel compared the objectives of public interest, privacy and efficiency to objectives tackled by courts and tribunals in prior decisions and stated that such objectives were basically similar.

The Hearing Panel also analyzed IIROC Rule 8420(5), which codifies the common law applicable to IIROC and which provides guidance regarding the way that the Hearing Panel should weigh the public interest against the resulting prejudice. This rule attaches significant weight to the public interest and insignificant weight to the resulting prejudice, which aligns with the earlier decisions of Juman v. Doucette, 2008 SCC 8, and of Jomha v. McAllister, 2008 ABQB 597, the Hearing Panel said.

Counsel for HW contended that the IIROC information was not necessary for the Queen’s Bench application, but the Hearing Panel disagreed with this submission, stating that it should not speculate on the possible position of the Court of Queen’s Bench on the application. Instead, the Hearing Panel should only consider the purpose of the application, which will assist it in determining whether, from IIROC’s perspective as shown by IIROC Rule 8420(5), the public interest would outweigh the prejudice caused by IIROC allowing Malic to use the information in making an attempt. IIROC Rule 8420(5) favoured allowing Malic to make such an attempt, the Hearing Panel decided.

This precedent from the IIROC “may discourage complainants from reporting breaches to IIROC and may also conflict with the recent trend in securities law towards incentivizing whistleblower tips,” wrote Lauren Tomasich and Marleigh Dick of Osler, Hoskin & Harcourt LLP in a blog post analyzing the case. “This decision sheds further light on IIROC’s approach to its public interest mandate and may assist the CSA in pursuing improvements to the SRO framework.”