The AMF is called to order by the Québec Superior Court

In a rare judgment, the Québec Superior Court dismissed an administrative decision rendered by the Autorité des marchés financiers (the AMF, the Québec Securities Commission) in which the AMF refused to issue a licence (or some authorization) under a Québec law.

Faced with an application for judicial review, the Québec Superior Court did not hold back from rendering a decision vis-à-vis the AMF, criticizing, among other things, the lack of rigour displayed by the AMF in an application for a licence to operate an automated teller machine. More specifically, the judge was of the opinion that in order to refuse the issuance of the requested licence, the AMF could not satisfy itself with a mere recommendation by the Sûreté du Québec (the Québec Provincial Police). According to the judge, the AMF had to at least make use of its investigative powers to verify the information received by the Sûreté du Québec in order to assess the observations submitted by the applicant. The judge also criticized the AMF for having demanded documentary evidence that was not required under the law.

Legal context

The Money-Services Businesses Act (MSBA) was adopted in 2010 as part of the Québec Government’s offensive against economic and financial crimes. This act imposes upon any individual and entity wishing to operate an automated teller machine the specific obligation to obtain from the AMF a licence for this purpose.

In accordance with the MSBA, the AMF analyzes the applications and delivers the licences to businesses displaying, namely, good moral character and the integrity required to carry on their activities. The Act provides that the Sûreté du Québec (the SQ) and different local police forces within the municipal territory must collaborate with the AMF so that the latter may carry out its mandated analysis. This collaboration is materialized through the transmission of a security clearance report with regard to the applying company. This report states the grounds on which, if such is the case, a recommendation is made to refuse to issue a licence.

Before refusing to issue a licence or cancelling a licence, the AMF must notify the applicating company in order to allow the business to submit written observations and provide any relevant documentation.

9192-6899 Québec inc. v. Autorité des marchés financiers

In 9192-6899 Québec inc. v. Autorité des marchés financiers, the Plaintiff was refused a licence to operate an automated teller machine for the purpose of installing one in his bar (the Decision). The AMF’s decision was based on a recommendation by the SQ, which relied upon the SQ’s own security clearance reports. Said reports listed events that had occurred in the bar and that had required police intervention. According to the AMF, the Plaintiff and its officer did not meet the requirement of good moral character. The AMF further criticizes the Plaintiff for having failed to provide a sworn statement seeking to attest the authenticity of its written observations.

On March 9, 2018, in an application for judicial review, the Québec Superior Court cancelled the Decision and referred the file to the AMF so that it may render a decision in accordance with the MSBA. The Honourable Suzanne Ouellet was of the opinion that the Decision did not possess “[translation] the standards of reasonableness with regard to justification, transparency and comprehensibility of the decisional process.”

First, the judge reminded the AMF that a security clearance report provided by the SQ is nothing more than a recommendation and that the AMF is not bound by such recommendation. The judge also reminded  the AMF that the requirement of “good moral character” provided in the MSBA must be analyzed according to an individualized analysis characterized by facts and should not be performed in a subjective manner or according to general opinion. Yet, the reports provided by the SQ in this case were not the object of any details as to the nature, circumstances and outcome of the events that occurred. Given these circumstances, it was imperative for the AMF to exercise its investigative powers so as to verify the information transmitted by the SQ. The AMF failed to do this.

This AMF investigation was all the more important to the extent that the Plaintiff’s president categorically denied having any responsibility whatsoever in relation to the events that occurred. The judge further criticized the AMF for having vacated the Plaintiff’s written observations without any real justification. In fact, the judge noted that the written observations are neither discussed nor are they further detailed in the AMF’s decision-making process.

Finally, while the AMF criticized the Plaintiff for having failed to provide a sworn statement in support of its observations, the Superior Court was rather of the opinion that this reason was not justifiable in law. In fact, nowhere in the law can we find an obligation to provide documentation or a sworn statement in support of written observations.

Commentary

This decision is important since it will most certainly impact upon several legal areas in which, prior to rendering a decision, the administrative decider has the obligation to i) issue a prior notice mentioning the reasons justifying the decision in question and ii) allow the individual or the entity in question the opportunity to provide its written observations in order to complete the file. The repercussions of this decision will be more directly felt in cases where a police force is involved in the decision process.

For example, we can think of the Act respecting contracting by public bodies where the AMF may refuse to grant to a company an authorization that would allow it to enter into contracts with public bodies, or even the Act respecting insurance (which, on June 13, 2019, will be replaced by the Act respecting insurers) under which the AMF may order a legal person to cease a course of action.

This judgement is the subject of an application for leave to appeal before the Court of Appeal of Québec.

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Editors

Lawrence E. Ritchie

Partner, Litigation

Alexander Cobb

Partner, Litigation

Shawn Irving

Partner, Litigation

Kevin O’Brien

Partner, Litigation

Lauren Tomasich

Partner, Litigation

Lia Bruschetta

Associate, Litigation