The Canadian Securities Administrators (the “CSA”) recently released their 2016 Enforcement Report (the “Report”) which highlights actions taken by the CSA across Canada. The Report was summarized by the Chair of the CSA as follows:
The CSA’s efforts to prosecute serious cases in the courts resulted in several significant jail terms in 2016. The CSA also saw an increase in the number of criminal proceedings commenced and concluded in 2016. The increase follows CSA members’ efforts, in recent years, to collaborate more closely with law enforcement agencies. The Alberta Securities Commission and RCMP announced a Joint Serious Offences Team this past year, following similar initiatives in Ontario and Québec.
Among the activities involving CSA Enforcement staff in 2016, significant efforts were made in combating illegal insider trading and tipping. As well, multiple CSA members worked to stop the activities of people who were allegedly trading in securities while possessing privileged information by using search warrants, asset freezes and cease trade orders.
CSA teams are also dedicated to identifying and responding to emerging issues and trends to protect Canadians investors. For example, in 2016, CSA members issued numerous investor alerts to warn Canadians of the risks of binary options investing, and initiated a task force to facilitate intelligence‑sharing with international regulators. In a world of algorithmic trading and massive trading volumes, CSA members also collaborated on information systems, launching an initiative to develop a new national market analytics platform. This important electronic oversight project will enhance our ability to identify and investigate potential misconduct in our markets.
Ways to improve enforcement effectiveness are diverse. In 2016, three additional CSA members implemented legislation for automatic reciprocation of other securities regulators’ decisions, a change which was made in Alberta in 2015. Now any order imposing sanctions, conditions, restrictions or requirements issued by another CSA regulator or securities administrative tribunal based on a finding or admission of a contravention of securities legislation is now automatically reciprocated in Alberta, New Brunswick, Nova Scotia and Québec.
Also, the Ontario Securities Commission (“OSC”) used its recently implemented no‑contest settlement program to successfully return more than a quarter of a billion dollars (approximately $320 million) to investors.
In 2016, the OSC and the Autorité des marches financiers put in place whistleblower initiatives to encourage individuals to come forward with tips on possible violations of securities law. Whistleblowers share information that might not otherwise come to light, enhancing regulators’ ability to identify and pursue potential misconduct. The whistleblower programs have already shown signs of early success, attracting several credible tips.
Further, CSA members stay on top of international securities regulatory issues, in part through membership in the International Organization of Securities Commissions (“IOSCO”), which is recognized as the global standard‑setter in securities regulation. Involvement in IOSCO creates opportunities to share information with CSA members’ international counterparts, allowing us to contribute to and benefit from a larger pool of knowledge and enhance our enforcement efforts accordingly.
With the increased focus by the CSA on enforcement it is more important than ever to ensure that issuers are in full compliance with their obligations.
The foregoing is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, please contact the author who would be pleased to discuss the issues above with you, in the context of your particular circumstances.