Why Securities Regulators Can’t Collect Monetary Sanctions, and What They Plan To Do About It
Securities regulators across Canada impose significant monetary sanctions against market participants each year. The CSA recently reported that provincial securities regulators collectively imposed $138.3 million in fines and administrative penalties and $111.7 million in restitution, compensation and disgorgement orders in 2015. This was an increase of 102% from the previous year and the highest amount of monetary sanctions imposed since 2009.
At the same time that regulators are imposing increasing monetary sanctions, they are facing an increasing inability to actually collect these sanctions. For example, the British Columbia Securities Commission has collected less than 5% of monetary sanctions imposed since its incorporation in 1995 and estimates that of the $340 million in sanctions that are outstanding to it, only $0.3 million is likely collectible. The BCSC’s collection rate in fiscal 2015 was 0.58%. These collection difficulties stem from the fact that respondents often have limited assets or poor credit, have absconded from the jurisdiction or may have simply decided to cease their activities as a market participant in the province. The Ontario and Alberta Commissions had collection rates of 14.16% and 12.7%, respectively, in their most recent fiscal years.
In an effort to improve their collection record, securities regulators continue to push for greater collection tools. In the most recent example, Andrew Kriegler, the President and CEO of IIROC, made a presentation to the Ontario Standing Committee on Finance and Economic Affairs on February 1, 2016. Mr. Kriegler requested two substantive amendments to the Ontario Securities Act: the ability to enforce IIROC decisions through the courts; and statutory immunity for the enforcement activities that have been delegated to it.
Court Enforcement of Regulatory Sanctions
In Alberta and Quebec, securities regulators have the ability to file decisions that are rendered following a hearing with the courts. Upon filing, those decisions are deemed to have the same force and effect as if it were a judgment of the court, allowing regulators to utilize the court collection machinery. The existence of this power has materially increased IIROC’s ability to collect monetary sanctions in these provinces. In Alberta, the collection rate between 2008 and 2014 was 35.75%, compared to 17.6% nationwide. In Quebec, the collection rate for personal fines was 59% in 2014 (the first full year that the court enforcement power existed), compared to 17.3% nationwide.
Given the positive impact that court enforcement measures have had on collection rates in Alberta and Quebec, it is not surprising that IIROC has expanded its efforts to encourage legislators such as those in Ontario to implement similar powers.
The Ontario Securities Act provides immunity to the Ontario Securities Commission and its employees for acts done in good faith in the performance of any duty or power under Ontario securities law. This immunity does not extend to self-regulatory organizations like IIROC.
IIROC has implemented a number of more aggressive measures in recent years to collect monetary sanctions. For example, since June 2014, IIROC has published an Unpaid Fines Report quarterly, which lists all individuals that have not paid the full amount of a fine, disgorgement and/or costs order within 60 days of it being levied by an IIROC hearing panel. Additionally, IIROC has sought to collect sanctions through the courts by characterizing the failure to pay a monetary sanction as a breach of contract. In light of this increased collection activity, it is not surprising that IIROC is seeking some protection against a corresponding increase in actions being brought against it.
As the non-payment of monetary sanctions has become an increasing issue in recent years, securities regulators have implemented several new tools and strategies to bolster their ability to collect outstanding amounts. We expect that securities regulators will continue to add novel tools and strategies to their repertoire in an attempt to give monetary sanctions with the deterrent effect that they are designed to have.
 Annual Report of the British Columbia Securities Commission, 2014-2015: http://www.bcsc.bc.ca/uploadedFiles/About_Us/Annual%20Report%202014-15.pdf?t=1455194444499
 Annual Report of the Alberta Securities Commission, 2015: http://www.albertasecurities.com/news-and-publications/Pages/reports-and-publications.aspx
 Annual Report of the Ontario Securities Commission, 2015: http://www.osc.gov.on.ca/en/Publications_annual-report_index.htm
 Remarks by Andrew Kreigler to the Standing Committee on Finance and Economic Affairs, IIROC (February 1, 2016): http://www.iiroc.ca/Documents/2016/FinanceCommitteePresentation1Feb2016.pdf
 Securities Act, RSA 2000, c. S-4 s. 200.
 An Act Respecting the Autorité des Marchés Financiers, CQLR c. A-33.2, s. 115.12.
 IIROC Pushing for More Authority to Collect Fines, Advisor.ca: http://www.advisor.ca/news/industry-news/iiroc-pushing-for-more-authority-to-collect-fines-188796.
 Protecting Canadian Markets, Protecting Canadian Investors, Andrew J. Kriegler, Chief Executive Officer of IIROC (May 7, 2015): http://www.iiroc.ca/Documents/2015/1a7944d6-a4cd-4512-90d4-ca1a892538a5_en.pdf
 Securities Act, RSO 1990, c S.5, s. 141.
 http://www.iiroc.ca/investors/Pages/Unpaid-Fines-Report.aspx. Similar reports are published by Securities Commissions in Ontario, Alberta and British Columbia.
 Investment Industry Regulatory Organization of Canada v. Vitug, 2013 CarswellOnt 2292 (S.C.J.), aff’d 2013 ONCA 636. While IIROC characterized this decision as providing it with “legal authority to enforce the payment of cost orders made in other IIROC disciplinary matters” (2013 Enforcement Report, pp. 23-24), it does not appear that IIROC has pursued this argument in any other actions in the time since.
administrative penalties Andrew Kriegler fines IIROC monetary sanctions statutory immunity