The total in fines and administrative penalties imposed by Canadian securities regulators for the fiscal year ended March 31 was the lowest annual amount they have been able to sanction in more than a decade.
The Canadian Securities Administrators enforcement report for 2020/21 says provincial regulators imposed fines and obtained sanctions of $20.3-million, mainly from cases involving the illegal distribution of securities. The CSA imposed $45-million in fines the previous year, and $77-million in the 2019 fiscal year.
The last time fines imposed were this low was in 2008, when regulators slapped $12.5-million in fines and administrative penalties at individuals and companies.
Louis Morisset, chair of the CSA – an umbrella group for all 13 provincial and territorial regulators – said that he could not identify a specific reason why the fines were lower this past fiscal year, but acknowledged that collecting fines from individuals and companies convicted by regulators has “proven to be a challenge.”
“Fines can vary from one year to another. The pandemic could have impacted fine collection last year, but I assure you that we have been doing everything we can to get these fines paid,” Mr. Morisset added.
The imposition of fines vary from year to year but securities regulators have often found it difficult to actually collect fines because funds belonging to convicted individuals or companies could have been moved offshore to a location where they are not recoverable. Other barriers to effective fine collection include legal constraints if a person or company is bankrupt, or has forfeited assets if the case was part of a criminal probe.
The Ontario Securities Commission has yet to fully collect fines stretching back more than 20 years from approximately 444 entities, totalling hundreds of millions of dollars. In Alberta, 170 individuals or companies have not paid their fines in full. In fact, a 2017 Globe and Mail investigation revealed that there were more than $1-billion in uncollected fines from violations of securities law across the country.
British Columbia’s securities regulator announced in March that it would block people with unpaid fines from obtaining or renewing a driver’s licence, or registering a vehicle. The Alberta Securities Commission has since said that it is looking into how to expand enforcement of fine collection, beyond the existing tools of using collection agencies and working with law enforcement.
The CSA report also stated that a total of six individuals received cumulative jail time of 13.4 years last fiscal year under various provincial securities acts.
A total of 43 investigations involving 93 individuals and companies were concluded, the enforcement report said, compared with 75 investigations against 163 individuals and companies in the previous year.
In addition, regulators issued 159 alerts warning investors about potential problems in companies, a 140-per-cent increase from the previous year. Mr. Morisset attributed this rise to the proliferation of cryptocurrency companies and investors in Canada, which he said regulators have been keeping a close tab on.
“We saw a huge interest in investors in the crypto environment. It is very easy to create a coin and to get people to start buying that coin. Some are legitimate, others aren’t, so we need to be very vigilant,” he said.
Since asking cryptocurrency trading platforms to register with regulators by April 19 or face a ban from operating in Canada, the OSC has started enforcement actions against three foreign-based platforms, with the help of overseas regulators. It is unclear, however, how the ban on those platforms could be enforced given their overseas locations.
“White-collar crime is a challenging domain,” Mr. Morisset said, on the broad question of enforcing securities rules against individuals and companies that break them. “The reality is some cases are more complex than others and tracking money is complicated.”
Editor’s note: This story has been updated to clarify that Canadian regulators imposed the lowest amount of fines in more than a decade. An earlier version stated that regulators collected the lowest amount of fines in more than a decade.
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