COURT OF APPEAL FOR ONTARIO
CARTHY, ROSENBERG and CRONK JJ.A.
B E T W E E N: )
CHRISTOPHER MORGIS, JOANNE ) Darryl A. Cruz and Erica J. Baron,
MORGIS and CM HOLDINGS INC. ) for the appellants
- and - )
THOMSON KERNAGHAN & CO. )
LIMITED, PAT TEGGART, DAVID )
GRAND, F. G. LEE SIMPSON, )
RONALD D. KELTERBORN and )
LANCE LONGMORE )
- and - )
INVESTMENT DEALERS ) Gary H. Luftspring,
ASSOCIATION OF CANADA, ) for the respondents
TERRANCE K. SALMAN, G. F. KYM )
ANTHONY and JOSEPH J. OLIVER )
) Heard: April 28, 2003
On appeal from the order of Justice Ruth E. Mesbur of the Superior Court of Justice
dated September 26, 2002.
 We are concerned on this appeal with the civil liability in negligence for damages
of an unincorporated, voluntary association of Canadian securities dealers and certain of
its officers and employees in connection with economic losses sustained by investors in
their margin accounts with a member of the association. The central issues are whether,
in accordance with the test propounded in Anns v. Merton London Borough Council,
 A.C. 728 (H.L.), the circumstances of this case give rise to a relationship of
proximity sufficient to ground a duty of care owed by the association and its
representatives to the appellants and, if so, whether policy considerations negate such a
duty of care.
 The appellants opened margin accounts with Thomson Kernaghan & Co. Limited
(“TK Co.”), a member of the Investment Dealers Association of Canada (the “IDA”).
After they suffered losses in their accounts, the appellants sued TK Co. and Pat Teggart, a
broker. Subsequently, after TK Co.’s membership in the IDA was suspended and it was
petitioned into bankruptcy, the appellants sought to amend the statement of claim in their
pending action to add the IDA and certain of its representatives as defendants for the
purpose of advancing claims in negligence against them. By order dated September 26,
2002, Mesbur J. of the Superior Court of Justice dismissed the motion on the basis that
the proposed claims disclosed no reasonable cause of action. For the reasons that follow,
I agree. Accordingly, I would dismiss the appeal.
 TK Co. is a brokerage firm which, at the relevant times, carried on business in
Toronto. It was a member of the IDA and its activities were subject to the Securities Act,
R.S.O. 1990, c. S.5, as amended, (the “Act”) and the rules of the Toronto Stock
Exchange. In March 1999, the appellants opened two margin accounts with TK Co. Mr.
Morgis provided instructions to TK Co. concerning the accounts and was authorized to
make and approve trades in the accounts.
 The appellants allege that TK Co. advocated an investment strategy that
emphasized securities in the high technology sector in the United States and aggressive
daily margin trades. They maintain that Mr. Morgis took various positions of a
speculative nature, investing in volatile securities through his trading activity in the
appellants’ margin accounts in accordance with advice from TK Co. and its represent-
atives. They also allege, among other matters, that TK Co. allowed trades to be made in
contravention of TK Co.’s own margin requirements and those of the industry, and that
trades were made and money was withdrawn without the appellants’ authorization.
Between March and April 2000 and thereafter, the appellants sustained substantial losses
in their accounts with TK Co.
 On January 8, 2001, the appellants commenced an action against TK Co. and Pat
Teggart claiming damages in the aggregate amount of $5.75 million for breach of
contract, negligence, breach of fiduciary duty, and negligent misrepresentation in
connection with the operation of the appellants’ margin accounts and the losses they
 On July 11, 2002, the IDA suspended TK Co.’s membership in the IDA. On the
following day, TK Co. was petitioned into bankruptcy.
 On July 22, 2002, the appellants brought a motion under rules 26.01 and 26.02 of
the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 seeking leave to amend their
statement of claim to add David Grand, F. G. Lee Simpson, Ronald D. Kelterborn and
Lance Longmore (collectively, the “TK Co. parties”) as defendants.
 In the same motion, the appellants also sought to add the IDA, Terrance K.
Salman, G. F. Kym Anthony and Joseph J. Oliver (collectively, the “IDA parties”) as
defendants in their pending action. They claimed in their proposed amended statement of
[The IDA] is an unincorporated voluntary Association of Canadian
Securities Dealers governed by a constitution, by-laws and regulations
which deal with the conduct, management and control of the
Association’s affairs including the conditions of membership, the rights
and duties of and standards to be maintained by members, the
investigation of complaints against members and the imposition of
discipline for the misconduct of its members.
They further asserted that Terrance K. Salman is the Chair of the IDA, G. F. Kym
Anthony is its Vice-Chair, and Joseph J. Oliver is its President and Chief Executive
 By order dated September 26, 2002, the motions judge granted the appellants’
motion concerning the TK Co. parties but dismissed their motion regarding the IDA
parties. In connection with the IDA parties, she held:
I am therefore of the view that the proposed amendments to the claim in
relation to the proposed added IDA [parties] discloses no reasonable
cause of action. It is “plain and obvious” the action against them cannot
succeed. Accepting, as I must, all the facts pleaded as true, they are
insufficient at law to support a cause of action. Since that is the case, the
relief sought against the IDA [parties] is dismissed.
The appellants appeal the dismissal of their amendment motion concerning the IDA
II. INVESTMENT DEALERS ASSOCIATION OF CANADA
 Membership in the IDA is voluntary. It is based on the contractual commitment of
members to abide by the constitution, regulations, rules and by-laws of the association.
The IDA is not created by and does not derive its authority from statute. Rather, it
operates under the authority of its own constitution and is recognized under some
securities legislation. In Ontario, s. 21.1 of the Act provides in part:
21.1 (1) The [Ontario Securities] Commission may, on the application
of a self-regulatory organization, recognize the self-regulatory
organization if the Commission is satisfied that to do so would
be in the public interest.
(3) A recognized self-regulatory organization shall regulate the
operations and the standards of practice and business conduct
of its members and their representatives in accordance with its
by-laws, rules, regulations, policies, procedures, interpretations
(4) The Commission may, if it is satisfied that to do so would be
in the public interest, make any decision with respect to any
by-law, rule, regulation, policy, procedure, interpretation or
practice of a recognized self-regulatory organization.
 The IDA was recognized by the Ontario Securities Commission (the
“Commission”) as a self-regulatory organization under s. 21.1 of the Act on December
14, 1994: In the Matter of the Investment Dealers Association of Canada (1994), 17
O.S.C.B. 5961 (Ont. Sec. Comm.). The recitals to that recognition included the
WHEREAS the IDA is an unincorporated association in which
membership is voluntary. It has approximately 111 investment dealers
as members, all of whom, to the extent they trade in securities or act as
underwriters in Ontario, are registrants under the Act and subject to
regulatory oversight of the Commission. The IDA represents its
members and is organized for the purpose of regulating the operations
and the standards of practice and business conduct of its members and
their representatives with a view to promoting the protection of investors
and the public interest. The IDA regulates the conduct of its members
and their trading in securities through rules set forth in its by-laws and
WHEREAS the Act and the Commodity Futures Act contemplate and
encourage self-regulation by registrants, but place the ultimate
responsibility for registrants’ conduct with the Commission. …
WHEREAS each client of an IDA member is protected by [the Canadian
Investor Protection Fund] against losses resulting from dealer failure to
a maximum amount per client of $500,000 [emphasis added].
 The IDA’s 1994 recognition by the Commission was subsequently renewed for the
period up to and after October 31, 1995, subject to terms and conditions specified by the
Commission. Those terms and conditions vest considerable supervisory control of the
IDA in the Commission. For example, they require the IDA to enforce compliance by its
members with the rules of the IDA, as a matter of contract and without prejudice to any
discipline by the Commission under Ontario securities law. They also require the IDA,
among other matters, to report misconduct or apparent misconduct by IDA members to
the Commission, to notify the Commission on a monthly basis of investigations and
reviews of IDA members and of all complaints which lead to investigations being
commenced by the IDA, and to refrain from making fundamental changes to the
organizational structure of the IDA which would affect its self-regulatory functions
without the prior approval of the Commission: In the Matter of the Investment Dealers
Association of Canada (1995), 18 O.S.C.B. 5294 (Ont. Sec. Comm.).
III. THE PROPOSED CLAIMS AGAINST THE IDA PARTIES
 It is common ground that, for the purpose of the appellants’ amendment motion
concerning the IDA parties, the motions judge was required to assume that the facts
alleged against the IDA parties in the appellants’ proposed amended statement of claim
were true. In that pleading, the appellants allege that the IDA is responsible for
regulating investment dealers to protect the investing public and that the IDA parties are
responsible for overseeing professional standards to ensure the competence of IDA
members. They further assert that Mr. Morgis complained to the IDA concerning
T. K. Co. and one or more of its representatives in about March 2001 and that, although
Mr. Morgis followed up with the IDA on several occasions concerning the status of the
complaint, the IDA failed to arrange to interview Mr. Morgis in connection with the
complaint until March 2002.
 Paragraphs 46 to 49 of the appellants’ proposed amended statement of claim read
46. The IDA [parties] owed a duty of care to the [appellants], as
investors of [TK Co.] to ensure that the [TK Co. parties]
complied with the IDA’s rules, regulations and by-laws.
47. The IDA [parties] were negligent and breached their duty to the
[appellants] in the following respects:
(a) the IDA [parties] failed to ensure competence of the
[TK Co. parties];
(b) the IDA [parties] failed to ensure that [TK Co.’s]
employees, particularly Mr. Teggart and Mr. Grand were
of good character;
(c) the IDA [parties] failed to ensure that [TK Co.]
maintained sufficient capital to protect the [appellants] in
(d) the IDA [parties] failed to ensure that the [TK Co.
parties] conducted their business in accordance with the
IDA’s rules, regulations and by-laws;
(e) the IDA [parties] failed to ensure that [TK Co.] had
effective procedures in place to supervise the handling of
client accounts; and
(f) the IDA [parties] failed to investigate and discipline
[TK Co.], Mr. Teggart and Mr. Simpson in a timely or
48. The IDA [parties] knew or ought to have known that these
failures would constitute a risk to [TK Co.] investors, and in
particular, to investors dealing with [the individual TK Co.
49. The IDA [parties’] failures caused or contributed to the
 Although the appellants appeal on several grounds from the dismissal of their
amendment motion concerning the IDA parties, in my view all of the issues raised are
embodied in the core issue of whether the motions judge erred in her application of the
two part test established by Anns v. Merton London Borough Council to the facts of this
 The appellants’ requested pleadings amendment to add the IDA parties as
defendants in this action is premised on the existence of a duty of care owed by the IDA
parties to the appellants, the breach of which gives rise to a cause of action in negligence
for damages. In this case, as characterized by the appellants in their proposed amended
statement of claim, the alleged duty of care is a duty to the appellants in their capacity as
investors of TK Co. “to ensure that [the TK Co. parties] complied with the IDA’s rules,
regulations and by-laws”. Without the existence of a duty of care, no cause of action in
negligence exists against the IDA parties.
(1) The Anns Test
 The motions judge correctly proceeded on the basis that “the categories of
negligence are not closed”: Donoghue v. Stevenson,  A. C. 562 (H.L.) and Cooper
v. Hobart (2001), 206 D. L. R. (4th) 193 (S.C.C.). She also recognized that where an
alleged duty of care is as yet unrecognized under Canadian law, the test set out in Anns v.
Merton London Borough Council must be applied to determine if the circumstances
support the recognition of a duty of care.
 The parties acknowledge that the recent decisions of the Supreme Court of Canada
in Cooper and in the companion case of Edwards v. Law Society of Upper Canada
(2001), 206 D.L.R. (4th) 211 are of particular relevance. In my view, those cases and the
related subsequent jurisprudence dictate the outcome of this appeal.
 In Cooper, the court was concerned with the civil liability of a statutory financial
regulator. In considering that issue, the Supreme Court of Canada reaffirmed and
clarified the content and applicability of the Anns test in Canada. Chief Justice
McLachlin and Justice Major, writing for the court, said at pp. 201 and 203 of the Cooper
In [Anns v. Merton London Borough Council] at pp. 751-52, the House
of Lords, per Lord Wilberforce, said that a duty of care required a
finding of proximity sufficient to create a prima facie duty of care,
followed by consideration of whether there were any factors negativing
that duty of care. This Court has repeatedly affirmed that approach as
appropriate in the Canadian context.
In brief compass, we suggest that at this stage in the evolution of the
law, both in Canada and abroad, the Anns analysis is best understood as
follows. At the first stage of the Anns test, two questions arise: (1) was
the harm that occurred the reasonably foreseeable consequence of the
defendant’s act? and (2) are there reasons, notwithstanding the proximity
between the parties established in the first part of this test, that tort
liability should not be recognized here? The proximity analysis involved
at the first stage of the Anns test focuses on factors arising from the
relationship between the plaintiff and the defendant. These factors
include questions of policy, in the broad sense of that word. If
foreseeability and proximity are established at the first stage, a prima
facie duty of care arises. At the second stage of the Anns test, the
question still remains whether there are residual policy considerations
outside the relationship of the parties that may negative the imposition of
a duty of care [emphasis in original].
 The appellants in the Cooper case invested funds with a mortgage broker. They
alleged that the Registrar of Mortgage Brokers under the Mortgage Brokers Act, R.S.B.C.
1996, c. 313 was liable to them in negligence for failing to properly oversee the conduct
of the broker, which had been licensed by the Registrar. The question before the court
was whether the Registrar owed a private law duty of care to investors resulting in tort
liability for the economic losses sustained by the investors. Chief Justice McLachlin and
Justice Major commented at p. 204 concerning the proximity analysis required under the
first branch of the Anns test:
[I]t seems clear that the word “proximity” in connection with negligence
has from the outset and throughout its history been used to describe the
type of relationship in which a duty of care to guard against foreseeable
negligence may be imposed. “Proximity” is the term used to describe the
“close and direct” relationship that Lord Atkin described as necessary to
grounding a duty of care in Donoghue v. Stevenson …
As this Court stated in Hercules Managements Ltd. v. Ernst &
Young,…at para. 24, per La Forest J.:
The label “proximity”, as it was used by Lord Wilberforce in
Anns, supra, was clearly intended to connote that the
circumstances of the relationship inhering between the plaintiff
and the defendant are of such a nature that the defendant may
be said to be under an obligation to be mindful of the plaintiff’s
legitimate interests in conducting his or her affairs.
Defining the relationship may involve looking at expectations,
representations, reliance, and the property or other interests involved.
Essentially, these are factors that allow us to evaluate the closeness of the
relationship between the plaintiff and the defendant and to determine
whether it is just and fair having regard to that relationship to impose a
duty of care in law upon the defendant [emphasis in original and citations
 The appellants argued in Cooper that the Registrar of Mortgage Brokers should
have acted earlier to suspend the broker in question, or to warn investors of the broker’s
breaches of the statute’s requirements. They claimed that their economic losses were
occasioned by the Registrar’s failure to act more promptly. The Supreme Court held that
those allegations did not bring the case directly or by analogy within a category of cases
in which a duty of care had previously been recognized. It also held that a new duty of
care should not be recognized because the Registrar’s duty under the applicable statutory
scheme was to the public as a whole, rather than to individual investors. Consequently,
there was insufficient proximity between the Registrar and the investors to ground a
prima facie duty of care and the case did not meet the first branch of the Anns test.
 The Supreme Court also concluded that the case failed to surmount the second
branch of the Anns test, that is, policy considerations existing outside the relationship of
the parties negated a prima facie duty of care by the Registrar, even if one had been
found to exist. As the reasoning of the Supreme Court in support of that conclusion is of
assistance here, it is useful to set it out in full, as it appears at pp. 210-11 of the Cooper
The decision of whether to suspend a broker involves both policy and
quasi-judicial elements. The decision requires the Registrar to balance
the public and private interests. The Registrar is not simply carrying out
a predetermined government policy, but deciding, as an agent of the
executive branch of government, what that policy should be. Moreover,
the decision is quasi-judicial. The Registrar must act fairly or judicially
in removing a broker’s licence. These requirements are inconsistent with
a duty of care to investors. Such a duty would undermine these
obligations, imposed by the Legislature on the Registrar. Thus even if a
prima facie duty of care could be posited, it would be negated by other
overriding policy considerations.
The prima facie duty of care is also negated on the basis of the
distinction between government policy and the execution of policy. As
stated, the Registrar must make difficult discretionary decisions in the
area of public policy, decisions which command deference. As Huddart
J.A. [of the British Columbia Court of Appeal] (concurring in the result)
found, the decisions made by the Registrar were made within the limits
of the powers conferred upon him in the public interest.
Further, the spectre of indeterminate liability would loom large if a
duty of care was recognized as between the Registrar and investors in
this case. The Act itself imposes no limit and the Registrar has no means
of controlling the number of investors or the amount of money invested
in the mortgage brokerage system.
Finally, we must consider the impact of a duty of care on the taxpayers,
who did not agree to assume the risk of private loss to persons in the
situation of the investors. To impose a duty of care in these
circumstances would be to effectively create an insurance scheme for
investors at great cost to the taxpaying public. There is no indication that
the Legislature intended that result.
 The Edwards case was released by the Supreme Court of Canada concurrently
with its decision in Cooper. While the latter case involved claims in negligence against a
regulator of mortgage brokers in British Columbia, Edwards concerned claims in
negligence against the Law Society of Upper Canada, the governing body of the legal
profession in Ontario.
 The appellants in Edwards deposited money into a solicitor’s trust account, which
was used for the benefit of a securities company. After the money was lost as a result of
the fraudulent acts of the securities company, a complaint was made to the Law Society
which then commenced an investigation. The appellants sued the solicitor but also
sought to claim against the Law Society on the basis that it allegedly failed to ensure that
the solicitor was operating his trust account according to the Law Society’s rules, failed
to conduct an adequate investigation into the complaint, and failed to warn the appellants
that their interests were not protected.
 The Law Society Act, R.S.O. 1990, c. L.8, s. 9 contains an exemption from suit
clause, whereby no action for damages can be instituted against an official of the Law
Society for any act done in good faith in the performance of any duty, or for any neglect
or default in the performance or exercise in good faith of any such duty or power. A
similar statutory exemption from suit was available to the regulator in Cooper under the
legislation applicable in that case.
 For reasoning substantially similar to that set out in Cooper, the Supreme Court
concluded in Edwards that the appellants’ proposed claims against the Law Society failed
on both branches of the Anns test: no prima facie duty of care arose in the circumstances
between the Law Society and the appellants and, further, had such a duty of care been
recognized, it would have been negated by residual policy considerations existing outside
the relationship of the parties. Importantly, the Supreme Court held in Edwards that the
obligations and duties of the Law Society are owed to the public at large and not to
individual members of the public who complain regarding a professional governed by the
Law Society. This court subsequently applied that principle in Rogers v. Faught (2002),
212 D.L.R. (4th) 366 (Ont. C.A.) in relation to claims in a civil negligence action against
the governing bodies of the professions of dentistry and dental hygiene in Ontario.
 The decisions in Cooper, Edwards and Rogers establish that statutory regulators
owe no private law duty of care to individual members of the public who deal with the
organizations or individuals whose conduct is overseen by the regulators. Rather, where
the governance mandate of such regulators is required to be discharged in the public
interest, the duties of the regulators are owed to the public as a whole. Consequently, the
question in this case is whether tort liability may be imposed on a voluntary regulator of
securities dealers at the instance of members of the investing public who complain of the
regulator’s alleged failure to ensure the competence and good character of a dealer’s
representatives and to adequately supervise, monitor, investigate, and discipline the
(2) Application of the Anns Test
 The appellants advance two main arguments in support of their submission that the
motions judge erred in this case by dismissing their amendment motion concerning the
IDA parties. First, they assert that both branches of the Anns test are satisfied here and
that their claims against the IDA parties should be permitted to proceed, at least beyond
the pleadings stage of this action. Second, they submit that, unlike the regulators in
Cooper, Edwards and Rogers, the IDA is not a statutory or quasi-statutory body and it
does not enjoy the benefit of a statutory exemption from suit. Accordingly, they argue
that the developed jurisprudence does not foreclose their claims against the IDA parties at
this stage of the action. Rather, those claims should be determined at trial on a full
evidentiary record. I am unable to accept those submissions, for several reasons.
 First, the motions judge considered the Anns test and the Cooper, Edwards and
Rogers decisions, and correctly addressed the governing legal principles established in
those cases. In connection with the first branch of the Anns test she held:
In my view the IDA’s obligation is to protect investors generally and the
public in general. It does not extend to any particular investor,
notwithstanding a complaint about a member.
 I agree. The IDA, as recognized by the Commission, is organized for the purposes
of regulating the standards of practice and business conduct of its member firms and their
representatives to promote the protection of investors and the public interest. Those
purposes are not directed to individual investors but, rather, to the investing public as a
whole. Moreover, as observed by the Supreme Court at p. 208 of Cooper: “[A] duty to
individual investors would potentially conflict with the [regulator’s] overarching duty to
 Second, I also agree with the motions judge’s conclusion that: “Although the IDA
is not statutory, it nevertheless is cloaked with a similar array of responsibilities as [the
regulators in Cooper, Edwards and Rogers].” Before this court the appellants emphasize
that the IDA is a voluntary association not created by statute. Thus, the source of the
IDA’s duties are not determined by statute. The appellants therefore argue that
recognition of the IDA by the Commission under the Act does not transform the IDA into
a statutory tribunal or otherwise vest it with the status of a government actor: Ripley v.
Investment Dealers Association of Canada (No. 2) (1990), 99 N.S.R. (2d) 338 (N.S.S.C.),
aff’d (1991), 108 N.S.R. (2d) 38 (N.S.C.A.) and Re Derivative Services Inc., 
I.D.A.C.D. No. 29.
 While I agree with those submissions, it does not follow that the functions and
responsibilities of the IDA are divorced from any statutory context. The IDA’s
relationship with the Commission and its recognition as a self-regulatory organization
under s. 21.1 of the Act link its activities to a statutory securities scheme which, under
s.1.1 of the Act, is designed to provide protection to all investors in Canada from unfair,
improper or fraudulent practices and to foster fair and efficient capital markets and
confidence in capital markets. As well, at the time of the incidents relevant to this action,
the conduct of the IDA’s affairs and the nature of its regulatory functions were not
exclusively self-selected. They were subject to the terms and conditions imposed by the
Commission as a condition of recognition as a self-regulatory organization under s. 21.1
of the Act. In my view, those factors inform the analysis of the IDA’s status and duties
as a regulator, notwithstanding that its relationship with its members is contractual in
 In addition, and in any event, as held by this court in Hughes v. Sunbeam Corp.
(Canada) Ltd. (2002), 61 O.R. (3d) 433 (C.A.), leave to appeal to the S.C.C. refused
 S.C.C.A. No. 446, the application of the principles enunciated in Cooper and
Edwards, including the Anns test, is not confined to statutory bodies.
 Recognition of a duty of care must be justified on the basis of a sufficiently close
and direct relationship between the parties as to satisfy the foreseeability and proximity
requirements of the first branch of the Anns test. In some circumstances, a sufficiently
proximate relationship may be identified by reference to existing categories of negligence
in which a duty of care has been recognized. When a case falls within one of those
categories, or an analogous one, and reasonable foreseeability of harm is established, a
prima facie duty of care may be asserted. Where, however, the claimed duty of care does
not fall within a recognized category of negligence and a new category is asserted, it is
necessary to determine whether the circumstances disclose foreseeability of harm and
sufficient proximity to justify the imposition of liability for negligence: Cooper, at pp.
201 and 203-6, per McLachlin C.J.O. and Major J.
 The respondents do not argue here that the appellants’ losses were not reasonably
foreseeable. As held in Cooper at p. 207, however, mere foreseeability is insufficient to
establish a prima facie duty of care. The first branch of the Anns test also requires the
demonstration of proximity. The appellants claim that the proximity requirement is
satisfied because the asserted facts against the IDA parties establish a close and direct
course of conduct between the IDA parties and the appellants. That course of conduct is
said to consist of the complaint by the appellants to the IDA concerning the TK Co.
parties, the receipt of the complaint by the IDA, the follow-up by Mr. Morgis on behalf
of the appellants concerning the status of the complaint, and the alleged inaction of the
IDA in response to the complaint.
 In my view, those facts do not meet the proximity requirement of the Anns test.
The IDA’s alleged duty of care, as framed by the appellants, is widely cast. It is
described as a duty owed to the appellants, as investors with TK Co., to ensure
compliance by an IDA member with the IDA’s rules, regulations and by-laws. That
suggested duty is similar to the duty of care asserted against the regulator and rejected by
the Supreme Court of Canada in the Edwards case. Such a duty does not fall directly or
by analogy within any category of cases in which a duty of care has previously been
recognized. Accordingly, the issue is whether the IDA’s status as a voluntary regulator,
as distinct from a regulator created and governed by statute, and the nature of the
relationship between the appellants and the IDA set this case apart from Cooper,
Edwards and Rogers such that a new category of negligence should be recognized.
 While it is true, as argued by the appellants, that the evidentiary record in this
action is incomplete at this early pleadings stage, the appellants are bound by their own
characterization of the IDA parties’ alleged duty of care. As described by the appellants,
the claimed duty would be owed to all investing members of the public who dealt with
TK Co. Moreover, the asserted duty would be owed by the IDA to all persons who
complain about investments with any member of the IDA.
 As well, the appellants’ proximity argument rests on mere contact between the
appellants, as complainants, and the IDA. If such contact with a regulator was itself
sufficient to establish the close and direct relationship necessary to satisfy a prima facie
duty of care, the regulator would owe a duty of care to all investors who lodge
complaints, without regard to the merits of the complaints, any subsequent action taken
by the regulator, or the nature of the interaction between the regulator and the
complainants. It is noteworthy that in Edwards, although a complaint was made to the
regulator and an investigation was actually undertaken, the regulator’s duty of care was
held by the Supreme Court of Canada to be owed to the public at large. In this case, the
suggested engagement of the regulator with the complainants, which forms the basis of
their alleged relationship, is far less developed. As a result, the alleged duty of care is
even more remote than the duty of care asserted in Edwards.
 In addition, the appellants do not assert that the IDA parties assumed
responsibility to protect individual investors from economic loss if the investors’ dealings
with an IDA member result in losses sustained in the capital markets. Moreover, the
asserted duty of care is said to be owed by the IDA. No facts are alleged against the other
IDA parties which would support a duty owed by them in their personal capacities.
 Consequently, I am not persuaded that the circumstances of this case establish a
relationship between the parties sufficient to support a prima facie duty of care owed by
the IDA parties. The alleged relationship, in my view, does not give rise to the proximity
necessary to warrant the imposition of a duty of care upon the IDA parties. Accordingly,
the appellants’ case against the IDA parties is defeated on the first branch of the Anns
 I am also of the view that, even if it could be said that a duty of care owed by the
IDA parties might be established on a fuller evidentiary record at trial, residual policy
considerations would negate the duty, for several reasons.
 As in Cooper and Rogers, the appellants’ proposed claims against the IDA parties
raise the potential for indeterminate liability in an indeterminate amount. The appellants
do not suggest that the IDA has the means of controlling the number of investors who
engage the services of its members; nor is it suggested that the IDA can control the
number of investors who choose to complain to it regarding IDA member conduct, or the
amount of money invested in the capital markets through securities dealers who belong to
the IDA. The motions judge correctly observed that the issue of indeterminate liability is
a limiting principle in economic loss claims and that the IDA is powerless to limit
potential claims from all investors of all member IDA firms.
 I also agree with the motions judge’s conclusion that the effect of imposing a duty
of care on the IDA parties in the circumstances of this case would be to create indirectly
“an insurance scheme for dissatisfied investors who have paid the IDA nothing.” It is
noteworthy that the Commission’s 1994 recognition of the IDA as a self-regulatory
organization under the Act confirmed the existence of an investor protection fund,
financed by IDA members, to protect investors against losses arising from dealer failures
to a maximum specified amount. Such a fund functions as a safeguard, apart from a
private law of duty of care, to ensure in some circumstances the protection and
compensation of members of the public who invest through securities dealers: see, for
example and in connection with the compensation fund maintained by the legal
profession in Ontario, Edwards at 219.
 It is also significant that the IDA has authority to investigate and to discipline its
members and that it suspended the membership of TK Co. in the IDA in July 2002.
Chief Justice McLachlin and Justice Major observed in Cooper at p. 210:
The decision of whether to suspend a broker involves both policy and
quasi-judicial elements. The decision requires the Registrar to balance
the public and private interests…The Registrar must act fairly or
judicially in removing a broker’s licence. These requirements are
inconsistent with a duty of care to investors.
Those comments are apposite here. The decision to suspend the membership of a dealer
in a voluntary organization like the IDA cannot be made lightly; a suspension decision
must be made in good faith, with a view to the consequences for both the member and its
clients, and in accordance with the rules of natural justice. Those requirements oblige the
IDA to act fairly in its dealing with members. Thus, its decisions affecting members
require the balancing of both public and private interests.
 Finally, it is appropriate to recognize that, unlike the regulators in Cooper,
Edwards and Rogers, the IDA does not enjoy the protection of a statutory exemption
from suit provision. The appellants argue that the effect of not imposing a duty of care
on the IDA parties, or allowing for the possible recognition of such a duty following a
trial, is to provide the IDA with an exemption or immunity from suit not otherwise
legally available to it. That submission, in my view, overstates the significance of a
statutory exemption from suit provision. Such a protection is only one factor to be taken
into account in determining, under the second stage of the Anns test, whether policy
reasons exist to negate a duty of care. As the decision of this court in Hughes illustrates,
the absence of such a provision is not determinative of the policy-based analysis
mandated by the Anns test.
 Accordingly, for the reasons given, I would dismiss the appeal. The IDA parties
are entitled to their costs of the appeal on a partial indemnity basis, fixed in the amount of
$8,500, inclusive of disbursements and Goods and Services Tax.
“JJC” “E. A. Cronk J.A.”
“JUN 24 2003” “I agree J. J. Carthy J.A.”
“I agree M. Rosenberg J.A.”