The Ontario Securities Commission has collected less than 1 per cent of the millions in fines it levels against fraudsters and other securities-law violators after contested hearings.
The country’s largest securities regulator revealed the statistics on Wednesday, along with a list of those with outstanding fines dating back to 2005. The agency insists that it goes to great lengths to track down or freeze assets, but that some fraudsters are skilled at hiding what they own.
Since 2005, when it was granted the power to level $1-million fines for each violation of securities law as well as order the return of ill-gotten gains, the OSC has demanded nearly $230-million in sanctions and costs.
That total includes both penalties agreed to in settlements made with violators to avoid a full hearing before an OSC panel and those won by the OSC after such a fight. Over all, close to half the total amount has actually been collected.
Of the amount agreed to in settlements, about 70 per cent is paid up. For securities violators prosecuted in contested hearings, the OSC has won $73.36-million in fines since 2005. But it has only collected a mere $690,000 – or 0.94 per cent.
“It’s a very difficult problem, and first and foremost we wanted to be transparent to the public and show them the difficulty we’re having,” Tom Atkinson, the OSC’s director of enforcement, said in an interview.
He said the list, posted on the OSC’s website, may help.
“If we have this sort of name-and-shame list, people may know some of these people, may know where they have assets, and may point them [out] to us. ... I think we should be doing everything we can to collect this money, and this is one more step.”
The OSC pledged on Wednesday to get better at collecting this money by looking at how other institutions do it in both in the public and private sectors. It also promised to disclose its collection rates in its annual reports.
Lawyer Kelley McKinnon, former deputy director of OSC enforcement who is now with Gowling Lafleur Henderson LLP in Toronto, said the commission in recent years has started increasing the penalties it demands in settlement talks, without regard to what those facing allegations can afford to pay.
That may be behind a spike in the number of fines that are agreed to in settlements going unpaid, she said.
“The real deterrent would be if they had a credible recovery system in place so that people who have monetary orders against them know there’s a real chance that serious collection efforts will take place,” Ms. McKinnon said.
Mr. Atkinson defended the practice of asking for larger fines in settlement talks, saying it was necessary to deter others: “You don’t want to waive your penalties because someone comes before you and says ‘I’ve stolen a million dollars from victims, but I’ve spent it all now, so don’t fine me and I just want to walk out of here.’ ”
And he pointed to the OSC’s recent efforts to take fraudsters who repeatedly breach OSC orders to court and impose more and longer jail sentences, which he said are an even better deterrent.
The OSC says the total length of jail sentences it obtained in 2011 was 14.5 years, compared with 195 days in 2010. But Mr. Atkinson said courts would likely not grant jail sentences for unpaid fines.
Many of the individuals and companies on the OSC’s list of those with unpaid fines were found by the OSC to be involved in frauds, usually with the illegal sale of questionable securities to often financially unsophisticated victims.
“They’re stealing from church members, widows, orphans, anyone that’s within their grasp,” Mr. Atkinson said.
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THE NAME-AND-SHAME LIST
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