Canada’s securities regulators saw a sharp decline in the actions initiated by them against wrongdoers over the past year, according to numbers released on Tuesday by their national umbrella organization.
The Canadian Securities Administrators annual enforcement report shows that Canada’s provincial and territorial securities commissions commenced proceeding in 38 matters – a 40-per-cent drop from the previous year.
In the 2018-19 fiscal year, securities regulators initiated proceedings in 63 matters. The year before that, 2017-18, there were proceedings initiated in 70 matters. The CSA defines the commencement of a proceeding as any instance when a securities regulator has filed a notice of hearing or statement of allegation, swore an information before the courts or, in the case of Quebec, served a statement of offence.
In an interview, the chair of the CSA, Louis Morisset, acknowledged that proceedings were down, but said such actions are part of a spectrum of tools that Canada’s regulators have at their disposal.
“I can’t deny, just looking at the numbers that there was less,” said Mr. Morisset, who is also president and chief executive of Quebec’s securities regulator, the Autorité des marchés financiers.
“It’s difficult for me to say there was a reason,” he said. “It really depends. I can tell you that no efforts were spared. At the end of the day, we want to be in a position to commence as many cases as possible. But from a year to another, there are differences.”
Mr. Morisset highlighted several other figures, including an increase in investor alerts. Last year, regulators issued 66 alerts about potential scams, which was an increase of 20 from the previous year. Enforcement referrals from one Canadian regulator to another were also up, a fact that Mr. Morisset said spoke to heightened collaboration between the 13 securities commissions across the country.
The report also highlighted a spike in investor warnings in March, as the COVID-19 pandemic spread in Canada and economic anxiety set in for retail investors.
“The current situation is prone to fraud of all kinds. People, often elderly people, are more vulnerable and the number of fraudulent schemes that we are seeing, and [Canada Revenue Agency] is seeing are, unfortunately, extraordinary at the moment,” Mr. Morisset said. In that environment, it was important that regulators act pro-actively and target possible scams before investors fell “into the trap,” he said.
One example of such an alert is the case of Crestview Exploration Inc., a penny stock that has been promoted through a pan-Canadian mail campaign launched in early April. Six securities commissions have issued warnings to the public about a letter, labelled “Coronavirus affecting markets: Read now,” that promotes Crestview as a safe-haven investment despite the company holding zero dollars in precious metals reserves. The CEO of Crestview and the company’s chair have denied any involvement in the promotion.
Mr. Morisset declined to comment specifically on the Crestview promotion, but predicted that next year’s enforcement report will see an increase in actions connected to the pandemic. “I think the current situation will lead to more proceedings commenced next year that will be COVID-19-related,” he said.
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