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Bill Rice, head of the Alberta Securities Commission and chair of the Canadian Securities Administrators, is seen in this file photo. (Tim Fraser/Tim Fraser for The Globe and Mail)
Bill Rice, head of the Alberta Securities Commission and chair of the Canadian Securities Administrators, is seen in this file photo. (Tim Fraser/Tim Fraser for The Globe and Mail)

Securities regulators facing more legal battles, appeals Add to ...

The country’s securities regulators, as they pursue cases against fraudsters and other rule violators, are also facing a growing number of protracted legal battles and appeals.

More decisions by securities commissions are being appealed to the courts, and more people accused of securities violations are fighting the allegations before tribunals or judges rather than settling them.

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The data comes from the Canadian Securities Administrators, the umbrella group made up of Canada’s 13 provincial and territorial market watchdogs, in its annual enforcement report released on Wednesday.

In 2011, the report says, 31 cases were appealed to the courts, up from 19 in 2010 and 21 in 2009. (Securities commissions also occasionally launch appeals.)

The report also says that securities regulators faced more contested hearings before their tribunals last year, with 47 in 2011 compared to 39 in 2010. There were 53 settlements to avoid such proceedings, down from 71 the year before.

In the report, Bill Rice, the head of the Alberta Securities Commission who serves as chairman of the CSA, said regulators are “making progress” toward bringing more cases before courts, which can order jail time, as opposed to securities tribunals, which can only impose fines and bans.

“Since the courts are able to impose jail sentences, prosecuting more serious cases in court illustrates our commitment to deliver greater visibility and deterrence through our enforcement activity,” Mr. Rice writes. “These efforts are beginning to generate results.”

However, only 24 of the 124 cases concluded in 2011 were before a court, down from 64 in 2010 and 35 in 2009. But the report also mentions that courts in Ontario in 2011 ordered jail terms for eight people, ranging from 30 days to three years.

It is hard to draw firm conclusions about trends, as these numbers tend to fluctuate from year. But in all, securities commissions launched 126 new enforcement cases last year, down from 178 in 2010.

More than half were investigations into “illegal distributions,” or sales of securities in which people are accused of breaking disclosure, prospectus or registration rules. Such cases often involve allegations of fraud, Ponzi schemes, and unrealistic promises of sky-high returns.

Regulators also launched 11 illegal insider trading cases, the report says.

Securities commissions actually concluded 124 cases in 2011, down from 174 in 2010. But last year, the cases closed involved 237 people and 128 companies. The 174 cases from 2010 involved 207 people and 100 companies.

Regulators also ordered violators to pay $52.15-million in fines and administrative penalties, down from $63.83-million in 2010. (In 2009, they ordered $106.19-million in fines, but $104.43-million of that was included in the unusually large settlement agreements made with major banks over the 2007 meltdown of the asset-backed commercial paper market.)

Market watchdogs also ordered $49.55-million in compensation for victims. But the report acknowledges that actually collecting the money ordered in these cases is difficult. The Ontario Securities Commission recently acknowledged that only a fraction of the money it demands from wrongdoers is ever paid.

You can read the entire report here

Follow on Twitter: @jeffreybgray

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