The Ontario Securities Commission is proposing to allow alleged securities offenders to settle their cases without admitting or denying any wrongdoing.

This sort of consent judgment is often employed by the U.S. Securities and Exchange Commission because it is cheaper and quicker than going through a formal adjudication process, and alleged offenders will often agree to significant sanctions if they don't have to admit to any wrongdoing.

Happily, the B.C. Securities Commission is not making a similar proposal. In my view, these sorts of settlement deals are very problematic.

A perfect illustration is the case of John Briner, a 34-year-old Vancouver securities lawyer who has facilitated many grotty companies and dodgy promoters who deal on the unruly Pink Sheets and OTC Bulletin Board in the United States.

Among those promoter-clients has been Louis Dion, who was arrested earlier this month in New York City after FBI agents set up an undercover sting operation and allegedly caught him bribing brokers to buy shares of a U.S. junior called Siga Resources Inc.

In 2006, the Pink Sheets banned Briner from providing legal opinions for companies seeking listings on that market. No reasons were given, but it's clear they didn't think much of his work.

In September 2009, the SEC accused Briner of participating in a scheme to "pump-and-dump" millions of shares of a Pink Sheets stock called Golden Apple Oil & Gas Inc.

In a civil complaint filed in U.S. District Court in Manhattan, the SEC alleged that Briner "laid the initial groundwork for the scheme" in the fall of 2004 by orchestrating an illegal offering of five million shares.

This "sham offering" gave him control of 100 per cent of the company's purportedly tradable stock. Then he illegally distributed the stock to people who started to trade the stock on the market.

Meanwhile, the SEC alleged, Golden Apple president Jay Budd issued a series of allegedly false and misleading news releases touting the "success" of the company's business.

At the same time, Budd and Briner "engaged in a series of additional illegal unregistered securities offerings that enabled affiliates of the defendants to privately obtain shares [and] sell them to the public at a profit," the SEC alleged.

These were serious allegations, but the case never went to court. Instead, Briner and Budd entered into settlement agreements in which they neither admitted nor denied the allegations, but consented to significant penalties.

Briner agreed not to appear or practice before the SEC for five years, and he agreed to disgorge $52,488 in trading profits and pay a $25,000 penalty and $14,880 in prejudgment interest, for a total of $92,368.

In April this year, the B.C. Securities Commission, after hearing submissions from Briner, issued a reciprocal order suspending him from the B.C. securities market for five years.

This suspension prevents him from trading shares in B.C., acting as an officer or director of any B.C. issuing company, or acting in a management or consultative capacity in any securities-related matter.

Unlike the SEC suspension, the BCSC order does not prevent him from practising law in B.C. The commission traditionally leaves the business of practice restrictions to the appropriate authority, in this case the Law Society of B.C.

The law society appears to have taken the matter very seriously. Here is the report that Lesley Pritchard, the society's communications officer, provided earlier this week: "It was a complex cross-border probe including travel to the U.S., a number of interviews, and the gathering of more than 10,000 pages of documents. We contracted an independent securities lawyer [Kevin Hisko] to lead the investigation because of his knowledge of that area of law and his background in regulation.

"After a thorough review of the evidence and the applicable rules and regulations governing lawyer conduct, law society investigators concluded it did not meet the test for a citation, but there was evidence to suggest Briner was practising in areas that were outside the scope of his experience and knowledge. This potentially put the public at risk.

"Investigators recommended discipline in the form of a conduct review to the law society's discipline committee and it has accepted that recommendation."

The review will be conducted at a later date.

So on the one hand, Briner has been banned from practising law before the SEC for five years, is required to pay nearly $100,000 in financial penalties, and has been banned from participating in the B.C. securities market for an equal length of time.

But on the other hand, he will not suffer any consequences from the law society, at least not on account of the breaches alleged by the SEC. He remains a member in good standing and is free to practise securities law in B.C.

I must say, I don't really blame the law society for this unsettling state of affairs. Because the SEC agreed to a consent judgment with no admission of wrongdoing, the law society was thrust into the unenviable situation of having to prove the SEC's allegations. It obviously decided it couldn't do that.

However, such an ambiguous result is bound to create much dissonance in the public mind.

It also puts the law society's members at risk: if Briner commits securities infractions in future, the public will surely wonder why the society didn't press this case.

The moral of the story is, don't allow settlements with no admission of wrongdoing. They leave too much hanging.

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