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In a ruling released Monday, OSC vice-chair Jim Turner said there would be “manifest unfairness” to Marc McQuillen if his settlement deal with the Investment Industry Regulatory Organization of Canada were to remain in place after an IIROC panel cleared his manager – former preferred share trading king Dave Berry – of wrongdoing in 2013 for the same activities.Peter Power/The Globe and Mail

The Ontario Securities Commission has taken the rare step of overturning a voluntary settlement agreement signed by a former junior employee of Scotia Capital Inc. with Canada's brokerage industry regulator after his manager was cleared of wrongdoing in the same matter following a long legal battle.

In a ruling released Monday, OSC vice-chair Jim Turner said there would be "manifest unfairness" to Marc McQuillen if his settlement deal with the Investment Industry Regulatory Organization of Canada were to remain in place after an IIROC panel cleared his manager – former preferred share trading king Dave Berry – of wrongdoing in 2013 for the same activities.

Mr. Turner ordered that Mr. McQuillen's disciplinary record should be expunged and ordered IIROC to pay him $25,000, which was the amount he paid in penalties to settle his case in 2007.

"McQuillen continues to suffer damage to his reputation and career as a result of the settlement agreement that he should not suffer," Mr. Turner ruled.

Mr. McQuillen's lawyer, Linda Fuerst, said Monday she was "pleased the commission recognized and remedied the manifest unfairness that Mr. McQuillen has suffered" from entering into a settlement based on rule breaches that turned out not to have occurred.

Mr. McQuillen signed a settlement deal with IIROC in 2007 shortly after the regulator unveiled a case alleging Mr. Berry made trades that manipulated the sale of new share issues being underwritten by Scotia Capital, and alleging Mr. McQuillen wrongly participated in conducting the trades at the direction of Mr. Berry.

Mr. Berry fought a long legal battle to combat the charges, and a hearing panel ruled early last year that IIROC staff had failed to prove the allegations. Until he was fired by Scotia Capital, Mr. Berry was one of Canada's most prominent traders, once controlling more than 60 per cent of preferred share trading in Canada and earning more than $15-million annually.

Mr. McQuillen asked IIROC to overturn his settlement agreement following the decision in Mr. Berry's case. IIROC said it did not have the jurisdiction to reopen a settlement agreement, so Mr. McQuillen appealed to the OSC as the regulator overseeing IIROC in Ontario.

Mr. Turner concluded it would be unjust to leave sanctions in place on an administrative assistant who was acting under Mr. Berry's supervision, and who did not personally profit from trading that was later found to not breach IIROC rules.

He said Mr. McQuillen "realistically had little choice but to agree to a settlement" in 2007 because of the time and expense entailed in fighting the case through a contested hearing.

"I do not accept the submissions of IIROC staff and OSC staff that these circumstances are not manifestly unfair to McQuillen," Mr. Turner wrote in his decision.

Mr. Turner also said he did not agree with IIROC's argument that a decision to overturn the settlement would "open the floodgates" and many more people would ask to have settlements set aside.

He said settlements will only be overturned in the "unique and rarest of circumstances" and the governing principle for settlement agreements remains that they are binding and permanent and cannot be reopened.

Mr. Turner said there was precedent for his decision, noting the OSC overturned two 2007 settlement agreements reached by AiT Advanced Information Technologies Corp. and its CEO after the commission ruled in 2008 that the company's legal counsel had not breached disclosure rules during merger talks with another company. The OSC said the settlements should not stand when the core of the allegations had been overturned in a related hearing.

An IIROC spokeswoman said Monday the regulator will not appeal the OSC ruling.

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