‘All jurisdictions are all-in, fully involved’
Fight against pandemic fraud bringing securities regulators closer together, CSA says
The coronavirus pandemic is pushing Canada’s provincial securities regulators into closer collaboration in an effort to combat scams tied to the outbreak, according to the chairman of the umbrella organization representing the country’s 13 provincial and territorial watchdogs.
Louis Morisset, who chairs both the Canadian Securities Administrators and Quebec’s Autorité des marchés financiers, said that long-running and fractious efforts to create a national regulator are not getting in the way of co-operation.
“No one is really disturbed by that never-ending story of the co-operative regulator,” he said. “We’re doing our job and all jurisdictions are all-in, fully involved.”
The most recent enforcement statistics compiled by the CSA, released Tuesday, reflect the early days of the pandemic-related lockdown in March. But in the 12 months from April 2019 through the end of March this year, provincial and territorial regulators referred 91 cases to each other, and provided formal assistance in 63 others.
Morisset said co-operation and collaboration is crucial because many white-collar crimes cross borders. In the case of COVID-19 scams, some of which touted cures and vaccines, particulars are being shared with other jurisdictions immediately in the hopes of warning investors before they become targets, he said.
“The collaboration since the pandemic has been tremendous on all fronts,” Morisset said, adding that another joint effort — this one more than a year in the making — will bring new tools to regulators across the country later this year.
Provincial regulators pooled their resources through the CSA to create a new technology platform to improve data collection and analysis to help crack down on market manipulation and insider trading.
The financial market analysis platform (MAP) will collect market data and targeted broker data in a central data repository, and provide tools to navigate, analyze and visualize the data, “resulting in meaningful information,” according to the regulatory umbrella group.
Canada’s securities regulators are also continuing to co-operate with self-regulatory organizations, such as the Investment Industry Regulatory Organization of Canada, securities regulators in other countries, and law enforcement agencies in Canada and abroad, Morisset said.
In the past year, fraud and illegal distribution of securities topped the list of market malfeasance pursued by Canadian regulators.
A total of 75 matters involving 163 companies or individuals were closed by CSA members, either through a settlement or final decision from a panel or judge in the year ended March 31, 2020. The majority were accused of fraud and illegal distribution. Other cases brought to a close involved disclosure violations, illegal insider trading and market manipulation, with the latter two accounting for fewer than 10 accused.
Eight individuals received a combined 10.8 years of jail terms under securities acts, with sentences ranging from 90 days to 1.5 years.
In addition to powers under various provincial securities acts, market watchdogs can investigate breaches of the Criminal Code, either independently or in collaboration with law enforcement agencies; these are prosecuted by provincial and federal Crown counsel.
In the past year, seven individuals were found guilty under Criminal Code provisions, and four received a combined total of 18 years and 11 months of jail terms, which ranged from eight months to nine years.
Regulators can also impose financial penalties, though the CSA acknowledged that these can be difficult to collect, particularly in contested rather than settled cases. The 23 fraud cases closed last year resulted in financial penalties in excess of $3 million.