Securities enforcement action in Canada remains well below prepandemic levels, with regulators launching fewer of them in the 12 months ended in March than in any of the past seven years.
The annual report published Tuesday by the Canadian Securities Administrators, an umbrella group for the provincial regulatory bodies, only includes statistics for the past year of 2023-24. The CSA does not include the numbers for previous years in its annual reports, so The Globe and Mail compiled them for comparative purposes.
The CSA says its 13 members commenced 36 securities actions – which refers to allegations of fraud, market manipulation or other behaviours that contravene securities laws – in the year ended March 31, or about three a month. That’s down from 40 in the prior year, 63 in 2018-19 and 70 in 2017-18.
The provincial regulators assessed $27.6-million in sanctions and penalties in the past year, the highest number in the past four years.
However, the CSA members assessed $45.6-million in the year ended March 31, 2020, the year that concluded with the onset of the pandemic. In the two years prior to that, the CSA members assessed $77.5-million and $65.6-million in sanctions and penalties.
Regulators do not expect to collect most of the money from penalties, as many defendants have absconded with or spent their ill-gotten gains. Instead, the announced financial penalties are supposed to serve as a deterrence against future crimes by others.
“Results vary considerably from year to year, depending on the number and complexity of cases, respondents and victims,” CSA spokesperson Ilana Kelemen told The Globe.
“In addition, one particularly big case or cases can skew a number for any particular year, making it difficult to draw much meaning from year-to-year comparisons, especially if you’re being selective about the years and categories you’re comparing.”
To assess enforcement activity, The Globe looked at numbers for cases launched and concluded; cease-trade and asset-freeze orders; the numbers of individuals and companies banned from the markets; criminal cases completed; the amounts of restitution and sanctions and penalties won; and years of jail time defendants receive after a securities-law conviction.
The CSA did not comment on the trends in the narrative portions of the new annual report.
“More broadly speaking, the enforcement numbers included in our report are there because they are easily quantifiable,” Ms. Kelemen said. “But much of our members’ enforcement can’t be quantified.”
She added: “We are spending more time and resources on disruptive efforts that aren’t so easily counted, such as taking down websites or shutting down social-media groups, because traditional enforcement processes are of limited impact against overseas law-breakers.”
In CSA chair Stan Magidson’s comments in an introductory letter to the new report on “enhancing investor protection,” he highlighted the group’s proposal for changes to the dispute-resolution process for investors currently maintained by Canada’s Ombudsman for Banking Services and Investments.
The CSA’s proposal “would provide firms and investors with a more attractive avenue for resolving disputes than litigation in court, which can be complicated, expensive and stressful for all parties,” he wrote.
The recent year’s numbers were not all bad: In the past year, CSA members banned 39 companies from participating in the markets, either temporarily or permanently. That’s the highest number since the CSA began publishing that statistic in the 2018-19 year.
CSA members also won restitution awards amounting to $75.7-million; only 2018-19′s $109.9-million was higher.
Other numbers, however, trail past accomplishments. The combination of 40 cease-trade or asset-freeze orders compares with 95 in 2019-20 and 100 in 2018-19.
While the cumulative 16.5 years in prison sentences is the highest number in four years, it is much less than 48.7 years in 2018-19 and 43.9 years in 2017-18.