CSA 2015 Enforcement Report Reveals Increased Regulatory Activity and Significantly Higher Monetary Sanctions
On February 23, 2016, the Canadian Securities Administrators (CSA) released its annual report on the enforcement activities of its members. Enforcement and pre-enforcement activity has increased significantly in 2015. Monetary sanctions imposed by regulators more than doubled year-over-year and regulators concluded 38% more cases in 2015 even as the number of new proceedings increased slightly.
The 2015 Results
Monetary sanctions doubled: The regulators collectively imposed the highest amount of monetary sanctions on market participants since 2009, the year their investigation into the crash of the asset-backed commercial paper market was settled. In 2015, regulators imposed $138.3 million in fines and administrative penalties ($58.2 million in 2014) and $111.7 million in restitution, compensation and disgorgement ($65.7 million in 2014). This represents an overall increase of 102% in monetary sanctions year-over-year.
More cases concluded and commenced: The regulators commenced 108 cases (2014: 105) against 165 individuals and 101 corporations in 2015. They concluded 145 cases (2014: 105) against a total of 223 individuals and 117 corporations. By comparison, the three key self-regulatory organizations (Investment Industry Regulatory Organization of Canada, the Chambre de la sécurité financière and the Mutual Fund Dealers Association of Canada) concluded 139 enforcement cases in 2015 (2014: 112).
The most prevalent violations targeted by regulators were illegal distributions (46% of proceedings commenced), fraud (24% of proceedings commenced) and insider trading (10% of proceedings commenced).
Increasing use of preventive measures: The regulators issued 52 interim orders and asset freeze orders (2014: 35) protecting $13.6 million in bank accounts (2014: $18.2 million). They also issued 84 investor alerts (2014: 52) warning the public about not to invest with certain companies or their representatives. Finally, the regulators issued 96 reciprocal orders (2014: 58) recognizing and applying orders issued in another jurisdiction.
The CSA report highlighted measures that had been implemented in the last year to increase collaboration between its members and boost their inter-jurisdictional reach, including:
- Federal legislation changes that allow FINTRAC to share information and work with the CSA.
- Amendments to Alberta’s Securities Act that provide for automatic effect in Alberta of most new orders and settlement agreements made by other CSA members.
- The launch of a Special Investigations Unit by the British Columbia Securities Commission to investigate complex misconduct and offshore trading activity.
- The co-location of the RCMP’s Integrated Market Enforcement Team on the premises of the Ontario Securities Commission.
 Securities Act, RSA 2000, c S-4, 198.1(3).
asset freeze order British Columbia Securities Commission CSA CSA annual report 2015 CSA enforcement report 2015 enforcement FINTRAC fraud illegal distributions insider trading interim order investor alerts OSC RCMP reciprocal order sanctions Special Investigations Unit