B.C. gives investment industry power to ‘punish the bad guys’
The B.C. government is giving the investment industry ’s self-regulatory bodies the power to enforce their penalties in court.
The measure — already in place in four other provinces — is meant to help increase the collection of penalties from investment advisers who violate industry standards; for example, by purchasing unsuitable investments for their clients.
Under amendments to the Securities Act, the Investment Industry Regulatory Organization of Canada and the Mutual Fund Dealers Association will get the power to file their penalty decisions directly with B.C. Supreme Court.
Quebec and Alberta provided the court-like powers several years ago, Ontario and Prince Edward Island more recently. Manitoba, like B.C., introduced legislation this spring.
Filing in court means that selfregulatory agencies will be able to pursue outstanding fines, and order a person to comply with decisions.
In mid-April, when the Securities Act changes were introduced, Finance Minister Carole James said in a written statement the province was giving the self-regulatory organizations the tools they need to collect fines and deter fraudulent behaviour.
Andrew Kriegler, president of the Investment Industry Regulatory Organization of Canada, said the ability to enforce penalties in court is important because it shows people can’t break the rules and simply walk away.
“There are consequences to misdeeds. And that’s important because it punishes the bad guys and acts as a deterrent to others that may be considering wrongdoing,” said Kriegler.
In provinces that have already given the self-regulatory bodies the power to enforce penalties through the courts, collection rates are higher, noted Kriegler.
In B.C., Investment Industry Regulatory Organization’s collection rate is 20 per cent. It has $4.8 million in outstanding fines in British Columbia dating back to 2008.
Seniors groups welcomed the new enforcement tool. Almost 40 per cent of all cases reviewed and approximately 30 per cent of prosecutions involve seniors as victims.
“Retirees in British Columbia need to trust that they — and their investments — are protected from rule breakers who prey on older investors,” said Laura Tamblyn Watts, an official with CARP, formerly known as the Canadian Association of Retired Persons.
The B.C. government has also promised to take steps this year to improve penalty collections of the B.C. Securities Commission, which regulates the province’s investment markets.
Finance Ministry officials have said they continue policy work on the Securities Commission’s proposals to improve its enforcement capacity. James has noted changes may require new legislation. (She was not available for comment on Friday).
A Postmedia investigation published in November 2017 found that less than two per cent of $510 million in fines levied on fraudsters by the Securities Commission had been collected in the past decade.
The commission has acknowledged the poor collection record, but says it’s the nature of the fraudulent activity and the perpetrators that makes collection difficult and unlikely. The money has been spent or hidden, sometimes abroad, or the fraudsters have fled.
The Postmedia investigation also found that criminal conviction of fraudsters is rare in B.C. James has also said she expects her government to take steps to increase emphasis on court convictions of fraudsters.