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Investment Ideas Alberta boosts investment industry regulator's investigative powers

Alberta Finance Minister Joe Ceci, shown in this 2015 photo, said, “We have the second-largest capital market in Canada so it is critical that investors and consumers feel confident in our capital markets here.”

TOPHER SEGUIN/THE CANADIAN PRESS

One of Canada's investment industry regulators has been granted greater investigative power in the province of Alberta, sparking hope that other provinces will follow suit to help strengthen investor protection.

Last Friday, the Alberta legislation amended its securities act, with the passage of Bill 13 – which now provides the Investment Industry Regulatory Organization of Canada (IIROC) with legal authority to more effectively investigate and prosecute those who harm investors.

The bill received royal assent and became effective immediately following the announcement on Friday morning.

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"Today, Alberta becomes the first province in Canada to provide IIROC with the necessary toolkit to carry out the responsibilities we have been assigned as a public interest regulator," Andrew Kriegler, president and chief executive of IIROC said in an interview.

Alberta is the first province in Canada to pass such a bill.

"Being the first out of the gate shows the importance that this government places on securities regulation," Joe Ceci, Finance Minister of Alberta said in an interview. "We have the second-largest capital market in Canada so it is critical that investors and consumers feel confident in our capital markets here."

In addition to more legal authority, the legislation also provides IIROC and its disciplinary tribunals protection against lawsuits while acting in good faith to protect investors.

"Being granted immunity from lawsuits when you are acting in the public interest is an important tool to be given as a regulator – it allows you to be shielded from malicious lawsuits as long as you are acting in the public's interest," Mr. Kriegler said. "It is now not possible to throw off an investigation simply by trying to sue us and distract us."

Regulators will be able to identify possible offenders – individual advisers or investment firms – that it wants brought before a hearing on a more timely basis – as well as start collecting evidence on these alleged wrongdoers immediately – as opposed to having to wait to gather evidence in hearings. IIROC will be able to ask people who are not registered with IIROC to co-operate either by providing testimony or by providing documents.

"Shortening the amount of time identifying someone and getting the evidence more quickly from these individuals were extremely important changes to make as many of these wrongdoers were covering their tracks in the interim," Mr. Ceci said. "This measure represents the commitment this government has to modernize and streamline securities law and if other provinces see the benefits of these actions it just reinforces how important an independent securities regulators is – one who can push the envelope forward for better protection of investors."

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This is not the first time Alberta has led the charge in making industry changes.

Over a decade ago, Alberta was the first jurisdiction in Canada to grant IIROC the ability to collect fines against individuals and investment firms that engage in misconduct directly through the courts. Quebec followed suit in 2013.

Earlier this year, Prince Edward Island joined Alberta and Quebec in enabling IIROC to collect fines directly through the courts and Ontario recently passed a similar law as part of its budget legislation.

"Allowing these investment industry self-regulatory organizations to file their decisions with the court improves their ability to collect fines, deters potential offenders and increases funds available to the SROs for strengthening investor protection," said Scott Blodgett, spokesperson for the Ontario Ministry of Finance.

IIROC's national collection rate of fines from individuals was just 8 per cent in 2016, according to IIROC's annual enforcement report.

As a result of the amendments, IIROC has seen Alberta and Quebec collection rates increase. For the period between 2008 and 2016, the collection rate of fines in Alberta was 26 per cent, while 36 per cent of fines have been collected in Quebec – both of which are well above the national average.

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Since 2008, IIROC has issued a total of more than $39-million in sanctions against individuals across the country. As of March, 2017, the regulator had collected just over $7.5-million, leaving about $32-million of unpaid fines.

Ontario has the largest amount owing – approximately $19-million outstanding, which IIROC wants to see reduced over time with the recent amendments. The second jurisdiction with the largest amount owing is B.C. with approximately $4.5-million.

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