Lessons In Suing Securities Regulators: Herner v. Mutual Fund Dealers Association And Ontario Securities Commission, 2026 ONSC 4889

The claimant, Valery Herner, a mutual fund dealing representative and Approved Person, sued the MFDA and OSC for the intentional torts of conspiracy, abuse of process, misfeasance in public office and intentional interference with economic relations, and only the MFDA for malicious prosecution and negligence. He claimed to have suffered $47.5 million in damages for past and future loss of income and loss on his sale of his book of business. He also sought general damages of $5 million and punitive damages of $1 million.

The action arose from the MFDA’s investigation of Herner relating to a client complaint alleging that Herner had made unsuitable investment recommendations, an unsuccessful MFDA enforcement proceeding against Herner, and the OSC’s handling of two applications for reactivation of Herner’s registration both of which resulted in the imposition of terms and conditions. Following a 21-day trial the action was dismissed in its entirety. The court made numerous findings of fact and credibility that were contrary to the version of events advanced by Mr. Herner, including his claims of intentional, bad faith misconduct by the regulators and that he had suffered financial loss as a result of their actions. 

The decision is noteworthy for a number of reasons. In particular, this is the only case in which a civil claim for damages against the OSC by a regulated person has gone to trial and the first time that the statutory immunity provision in Ontario securities legislation has been tested. This was also the first case that considered the availability and scope of a contractual immunity provision in MFDA By-Law No. 1. 

The court also confirmed the following propositions that were advanced by the defendants:

• More than circumstantial evidence of bad faith is required in order to defeat the presumption that staff of a regulator acted in good faith;
• The MFDA did not owe a private law duty of care to the claimant. Among other things, the recognition of such a duty would conflict with the regulator’s mandate to regulate the standards of practice and business conduct of its members and Approved Persons and its obligations to the public to provide protection to investors. (Similar reasoning would apply to a negligence claim by a regulated entity against the OSC.);
• Information sharing between the OSC and MFDA was consistent with the regulatory framework, promoted efficiency and did not support an inference of conspiracy among the regulators; and
• Applications for registration, the imposition of terms and conditions, disciplinary investigations and proceedings by securities regulators do not constitute “legal process” for the purpose of the tort of abuse of process.