Jan 2018 Charity & NFP Law Update
On November 30, 2017, the Ontario Securities Commission (“OSC”) released its decision in Mason (Re) to impose “restricted client terms and conditions” on a non-paid minister, lay leader, and mutual fund dealer registrant (“Mason”), from acting as a mutual fund dealer with regard to members of his church’s congregation or for their direct relatives. In this case, the OSC found that the work performed by Mason at his church, which included performing prayers, delivering messages to the congregation, and visiting the sick and persons in need, constituted an “outside business activity” within the meaning of Part 13.4 of Companion Policy 31-103 – Registration Requirements, Exemptions and Ongoing Registrant Obligations. Part 13.4 states that registrants must disclose, among other things, all officer and director positions and any positions of influence, including “paid or unpaid roles with charitable, social or religious organizations where the individual is in a position of power or influence and where the activity places the registered individual in contact with clients or potential clients, including positions where the registrant handles investments or monies of the organization.” In accordance with Part 13.4, the OSC imposed on Mason restricted client terms and conditions (“Restrictions”) because the OSC was of the opinion that Mason was in a position of power or potential influence over potential clients.
Mason had argued that he was not a pastor or religious leader, did not hold a position of authority in the church, and that the Restrictions would result in constructive discrimination under section 11 of Ontario’s Human Rights Code (“Code”) by infringing on his creed rights and adversely affecting his ability to fulfill his religious obligations. However, the OSC stated that “[t]he purpose of the [Restrictions] is not to prohibit registrants from volunteering with charitable or religious organizations, but to protect clients or potential clients from potential undue influence from a registrant who is in a position of power or potential influence, whether spiritual or otherwise”. In this case the Restrictions were intended to protect vulnerable individuals and so it was reasonable and bona fide under section 11(1)(a) of the Code.
This decision serves as a caution that if a charity or not-for-profit has directors, officers, volunteers or employees who are registered dealers with the OSC, then depending upon the role that each individual has within the organization, their involvement may have to be reported by the individual to the OSC as an “outside business activity” and may potentially result in restrictions being imposed by the OSC on that individual’s registration, including where the activities of volunteers and employees within the charity or not-for-profit put them in a position of power or influence, as was the case in this OSC decision.