White-collar sanctions rise to nearly $110M

‘Collecting money from wrongdoers continues to be challenging’: regulators

Canadian regulators and courts issued orders for restitution, compensation and disgorgement totalling nearly $110 million for white-collar crimes including fraud in the fiscal year ended in March, up from just under $59.2 million a year earlier.

Nearly $11 million of the latest total was ordered in no-contest settlements, in which the accused neither admit nor deny wrongdoing, according to figures released Wednesday by the Canadian Securities Administrators.

In addition, the 13 provincial and territorial securities regulators that are members of the CSA imposed just over $77.5 million in fines, administrative penalties and other sanctions for securities law breaches including disclosure violations, fraud, illegal insider trading, market manipulation and other misconduct. That compared with about $65.6 million a year earlier.

Canada’s securities regulators tend to only collect a fraction of the monetary sanctions imposed in contested cases against individuals, with funds often disappearing to offshore locations, being spent or lost before regulators intervene, or becoming tied up in related tax or criminal matters. Collection rates are typically higher in cases where there are negotiated settlements.

“Imposing a monetary sanction and collecting are two entirely different matters,” the CSA report acknowledged. “In some cases, monetary sanctions do not align with a person or company’s ability to pay.”

Louis Morriset, chair of the umbrella group for the country’s provincial and territorial securities regulators, said the CSA does not have consolidated numbers on collections by its members.

Individual regulators publish lists of those who are delinquent making payments on their websites, and some also disclose overall collection rates. The Ontario Securities Commission, for example, had a collection rate of 47 per cent in 2017-18, according to the regulator’s 2018 annual report.

“Collecting money from wrongdoers continues to be challenging as they often have spent, hidden, or simply lost any funds they have collected when breaching securities laws,” Morriset said. “As well, these people often cannot be located.”

The CSA report said members “vigorously pursue all available avenues to collect outstanding monetary sanctions” through powers that include garnishing wages, seizing and selling debtors’ assets, hiring external services including private investigators and collection services, and registering orders with the courts and enforcing them as court judgments.

“If there is a chance regulators may recover even a modest amount, they pursue it,” Morriset said, adding that non-financial sanctions such as “market bans that keep securities-law violators out of Canadian capital markets” are also imposed by regulators.

The CSA report said 63 individuals were banned from participating in the country’s capital markets as a result of regulatory enforcement proceedings that concluded by the end of March — almost half permanently and the rest for between one and 20 years.

In addition, white-collar cases prosecuted under the Criminal Code in court last year in which securities regulators supported the investigation led to 12 offenders receiving jail time, with sentences totalling a combined 36 years, according to Wednesday’s report.

Provincial regulators also supported quasi-criminal cases, which are litigated in court with potential sanctions of fines and imprisonment of up to five years less a day. In the past fiscal year, such cases resulted in 11 individuals being sentenced to jail terms ranging from 90 days to three years.

Repeat offenders represented 6.4 per cent of the violators whose matters were concluded in the past fiscal year, according to the report. Three-quarters of the 12 recidivists were prosecuted in court and, of those, seven were sentenced to prison terms, while two received probation terms of 18 and 24 months.

As Canada moves slowly towards the creation of a more cohesive cooperative regulator with the federal government — only some provinces are on board and Alberta and Quebec have rejected the plan outright — the CSA reported that there was formal assistance among regional regulators in 42 cases over the past fiscal year. In addition, 82 files were referred among the jurisdictions for further enforcement action, the report said.