The provincial governments that oversee the vast majority of Canada’s capital markets say the revelations from a recent Globe and Mail investigation into white-collar crime across the country are a serious concern – and that steps must be taken to fix those problems.
The Ontario and Alberta governments, which are responsible for securities regulators that represent 75 per cent of the country’s capital markets, said revelations in The Globe that repeat offenders are gaming the regulatory system with apparent ease, and that $1.1-billion worth of securities fines are being flouted nationally, are unacceptable.
Ontario Premier Kathleen Wynne said her government plans to look at more effective ways to clamp down on stock-market reoffenders and securities rule breakers who don’t pay their fines.
“I’ll work with my Finance Minister to determine what we can do,” Ms. Wynne said during an interview. “Do I think that people should be held to account? Yes.”
The Alberta government told The Globe this week that it was also troubled by the reports and will be looking for ways to address the problems raised.
“The department is concerned,” Alberta Finance Department spokesman Mike Berezowsky said.
He said the Alberta government wants to “make sure regulators have the tools they need to improve collections and get results, so that investors can be confident in our capital markets.”
The Ontario Securities Commission represents 52 per cent of Canada’s capital markets, while the Alberta Securities Commission is the second largest, accounting for 23 per cent, based on market capitalization.
Their comments come in the wake of a year-long investigation by The Globe that uncovered serious oversight problems from Canada’s patchwork of provincial securities regulators. Those include a revelation that one in nine people who break securities rules in Canada go on to reoffend – sometimes again and again – suggesting a lack of proper deterrence by provincial regulators. The Globe’s analysis represents the first time that the reoffender problem has been quantified on this scale in Canada.
The investigation, which analyzed nearly 6,000 case files over a span of 30 years at financial regulators across the country, also revealed that white-collar offenders have racked up $1,101,583,984.44 in unpaid fines – a clear sign that provincial securities commissions are unable to enforce the penalties they issue – and that number has grown more than 22 per cent in the past two years.
The Ontario Securities Commission, the country’s largest financial regulator, has $360-million in delinquent fines, while more than $108-million of penalties are being flouted in Alberta.
Ms. Wynne said she intended to discuss the problems with Ontario Finance Minister Charles Sousa to determine what steps will be taken, with the intent of addressing the issue in the coming months. “Our Finance Minister will look at that,” Ms. Wynne said.
Both Ontario and Alberta suggested that the problem of reoffenders, which securities regulators have been trying to address in recent years with only limited success, could be tackled in conjunction with federal authorities.
“Those infractions are something that have to be dealt with by multiple levels of government,” Ms. Wynne said. “And so we’ll certainly work with our federal partners.”
In response to The Globe’s investigation, the Canadian Securities Administrators took the unusual step of issuing a public call for more support from law enforcement to tackle securities violations, which is something the provinces may discuss with the federal government. “Police officers must be seconded to securities commissions. More law-enforcement resources are always welcome,” said the CSA, which is an umbrella organization that represents Canada’s patchwork of 13 securities regulators.
The problem of unpaid securities fines has ballooned in Canada over the past decade, and The Globe detailed numerous cases where those found guilty of white-collar crimes simply walked away without paying.
In Ontario, The Globe’s analysis found that more than $139-million of the province’s unpaid fines were levied against 209 individuals – and of that, slightly more than 50 per cent of the money can be attributed to just nine people who are flouting the OSCs rulings.
The Globe’s investigation found other examples of weaknesses in the regulatory system, including one white-collar offender who was banned by the OSC for life – twice – after defrauding investors of millions of dollars, but was still not deterred.
Ms. Wynne indicated that the problems raised by the investigation can’t be allowed to persist.
“If you’re asking me if I’m concerned when people break the law or bend the rules and get away with it, or reoffend? Yes. Yes, I am,” Ms. Wynne said.
The investigation also found numerous examples where securities regulators chose to pursue securities cases through regulatory tribunals rather than the courts, because the cases heard by tribunals are easier to win, even though the sanctions imposed in them are difficult to enforce and are often easily ignored by the offenders.
James Sinclair, general counsel for the OSC, said the regulator struggles to collect the fines it imposes because the money is spent, the offender’s assets are placed in another person’s name, or the funds have been hidden offshore.
“If people don’t want to pay, or don’t want to abide by the orders of the commission, they more often than not will go to great lengths to make sure that their resources are not available to us,” Mr. Sinclair said.
But The Globe found examples of securities offenders with significant unpaid fines to the OSC who have assets in their name. Meanwhile, investors who were deceived have yet to see any of that money returned. The cases range from groups of investors being defrauded of a few hundred thousand dollars to upwards of $25-million in some instances.
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