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Canadian Securities Regulatory Monitor News and Insight

CSA’s 2016 Enforcement Report: insights into securities regulatory activity

Posted in AMF, CSA, Enforcement, Litigation, OSC
Shane C. D'SouzaRene SorellCristian Blidariu

The Canadian Securities Administrators (CSA) recently released its annual report on the enforcement activities of its members. The CSA is an umbrella group of Canada’s securities regulators.

Summary of 2016 Results[1]

Generally, enforcement and pre-enforcement activity, and monetary sanctions imposed by regulators decreased compared to 2015 but were higher than they were in 2014.

2016 2015 2014
Monetary Sanctions $62,148,866 $138,298,796 $58,239,156
 
Restitution, Compensation and Disgorgement $349,654,379 $111,651,429 $65,717,760
 
Commenced Cases (by notice of hearing, statement of allegations, or sworn Information) 56 108 105
 
Individual Respondents 72 165 189
 
Company Respondents 72 101 92
 
Most prevalent violations Illegal Distributions
Fraud
Illegal Distributions
Fraud
Illegal Distributions
Fraud
 
Concluded Cases (by final decision or a settlement) 109 145 105
 
Individual Respondents 168 253 149
 
Company Respondents 94 117 106
 
Most prevalent violations Illegal Distributions
Fraud
Illegal Distributions
Fraud
Illegal Distributions
Fraud
 
Preventative Measures (Asset Freeze Orders) 45 52 35
 
Reciprocal Orders 63 96 58

 

Increase in cases concluded by SROs

Despite the decrease is cases concluded by CSA members, the three key self-regulatory organizations (Investment Industry Regulatory Organization of Canada, the Chambre de la sécurité financière and the Mutual Fund Dealers Association of Canada) concluded more cases in 2016 than in previous years (2016: 159; 2015: 139; 2014: 112).

Collaborative measures

The CSA report highlighted measures that had been implemented in the last year to increase collaboration between its members and boost their inter-jurisdictional reach, including:

  • CSA members were making increased efforts to collaborate closely with Canadian law enforcement agencies.
  • The Alberta Securities Commission (ASC) and RCMP announced a Joint Serious offences Team, following similar initiatives in Ontario and Quebec.
  • Amendments to the securities legislation in Quebec, Nova Scotia and New Brunswick now provide for automatic effect in those provinces of new orders and settlement agreements made by other CSA members. In 2015, Alberta made a similar change to its securities legislation. As a result, any order imposing sanctions, conditions, restrictions or requirements issued by another CSA regulator or securities administrative tribunal based on a finding or admission of a contravention of securities legislation is now automatically reciprocated in Alberta, New Brunswick, Nova Scotia and Québec.

Impact of OSC’s No-Contest Settlement Program

The OSC’s recently implemented no-contest settlements program resulted in approximately $320 million being returned to investors in 2016 from 4 settlements — almost three times the amounts that were returned to investors for various offences in 2015 in all CSA member jurisdictions.

Comments on success of whistleblower programs

The CSA reported that the whistleblower programs implemented by the OSC and the AMF “have already shown signs of early success” and had “attracted several credible tips.” The ASC recently announced that it is considering implementing a whistleblower program to encourage tipsters to expose wrongdoing in the province’s capital markets. Unlike the OSC’s program, but like the AMF’s, the ASC is not considering rewarding whistleblowers financially.

 

[1] The numbers in this table and in this article have been taken from the CSA’s 2016 Enforcement Report, which can be found at http://www.csasanctions.ca/CSA_AnnualReport2016_English_Final.pdf