OSC handed out 2 jail terms in 2014

The Ontario Securities Commission bolstered its enforcement program in 2014.

As a result, the Commission:

• launched more quasi-criminal and criminal proceedings;
• enhanced its forensics capabilities; and
• strengthened its alliances with police services.

In total, the OSC commenced 22 proceedings in 2014, which included eight cases brought before the courts. Out of those eight cases, six were commenced pursuant to section 122 of the Securities Act (Ontario), and two to the Criminal Code of Canada. In comparison, OSC commenced 27 proceedings in 2013 but only brought six cases before the courts.

Read: CSA levies more than $58 million in fines for 2014

In a breakdown, the OSC says it closed cases against 91 individuals and companies in 2014, compared to 170 in 2013. Out of the 2014 total, 87 respondents dealt with the Commission, while the remaining four had their cases concluded before the court—two under provincial securities legislation and two under the Criminal Code.

Overall, two defendants received jail terms: one was sentenced to three years after pleading guilty to two charges contrary to the Criminal Code, while the other was sentenced to 60 days for breaching the Securities Act (Ontario), following a quasi-criminal proceeding.

The number of proceedings opened and cases closed has dropped, conceded Howard Wetston, Q.C., chair and CEO of the OSC, at a press conference yesterday. But that’s because the cases the OSC is taking on are becoming increasingly complex and wider in scope, he explains. Consider, for example, that OSC handed out more than $73 million in monetary sanctions, compared to about $58 million in 2013.

Read: OSC sent more to jail in 2013

Also, the Commission plans to work more closely with RCMP, and with international agencies (see last two tables below) to combat cross-border misconduct.

Read: Canada offers top regulatory environment

“The collaboration between OSC Staff and police, particularly in the Joint Serious Offences Team (JSOT), is producing results,” says Tom Atkinson, director of enforcement at OSC. “Since May 2013, the JSOT has investigated 22 matters [and] brought five cases before the courts on criminal matters, as well as another nine on quasi-criminal proceedings.”

Going forward, says Wetston, the OSC will work more closely with the RCMP’s Integrated Market Enforcement Team (IMET) in Ontario—these teams are funded by the government and help prosecute those using capital markets to harm investors. They were launched by the RCMP in 2003 to investigate major fraud cases, and there are teams in Toronto, Montreal, Vancouver and Calgary.

Effective April 1, 2015, Ontario’s 28-member IMET (the largest of the teams) will move into the same building as OSC and JSOT. Each party will remain as separate governing bodies, but they’ll collaborate when deciding whether to handle cases via OSC tribunals or the courts.

Read: 10 reasons Canada needs a single regulator

New enforcement tools

The OSC approved the first two no-contest settlement agreements in 2014. Those involved a total of four corporate respondents and, in one settlement, the respondent agreed to pay $8 million to advance the Commission’s mandate. In the second, three respondents agreed to pay compensation of more than $13.5 million to clients.

Read:

• Should you take a no-contest settlement?
• OSC to approve no-contest settlement with TD Bank

The OSC also recently proposed a new whistleblower program to encourage the reporting of serious misconduct. Under the program, a whistleblower could be awarded a financial incentive of up to $1.5 million upon the final resolution of an administrative enforcement matter.

The whistleblower proposal was published in Staff Consultation Paper 15-401, and the public can submit comments on the paper until May 4, 2015.

Read: Canadians file U.S. whistleblower claims

The OSC also has an enhanced in-house digital forensics lab. During investigations, both the JSOT and the Enforcement Branch have been able to search and seize more digital evidence found on traditional media, such as computer hard drives, optical disks and USB thumb drives. They’ve also been able to analyze data found on mobile devices.

2014 enforcement data

Total Proceedings Commenced

Category	Number of cases 2014	Number of cases 2013
Illegal Distributions	7	6
Misconduct by Registrants	5	2
Disclosure Violations	N/A	N/A
Insider Trading	1	2
Market Manipulation	N/A	1
Fraud	8	9
Miscellaneous	1	7
Total	22	27

–

How Proceedings Were Commenced

Category	2014	2013
Before the Tribunal	14	21
Court Proceedings (Quasi-Criminal*)	6	4
Court Proceedings (Criminal**)	2	2
Total	22	27

* Proceeding commenced pursuant to s. 122 of the Securities Act (Ontario)
** Proceeding commenced pursuant to the Criminal Code.

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Proceedings Commenced – Respondents

Category	Individuals 2014	Companies 2014	Individuals 2013	Companies 2013
Illegal Distributions	7	2	9	40
Misconduct by Registrants	5	8	3	3
Disclosure Violations	N/A	N/A	N/A	N/A
Insider Trading	1	N/A	2	N/A
Market Manipulation	N/A	N/A	1	N/A
Fraud	12	8	18	9
Miscellaneous	1	1	6	5
Total Respondents	26	19	39	57

–

Concluded Proceedings – Respondents

Category	Individuals 2014	Companies 2014	Individuals 2013	Companies 2013
Illegal Distribution	18	10	30	59
Misconduct by Registrants	6	11	3	5
Disclosure Violations	1	N/A	1	N/A
Insider Trading	3	N/A	2	N/A
Market Manipulation	N/A	N/A	1	N/A
Fraud	16	17	35	26
Miscellaneous	4	5	5	3
Total	48	43	77	93

–

How Matters were Concluded – Respondents

Category	2014	2013
Hearing before the Tribunal	58	71
Settlement Agreement	29	95
Court Proceedings (Quasi-Criminal*)	2	4
Court Proceedings (Criminal**)	2	N/A
Total Respondents	91	170

* Concluded pursuant to s. 122 of the Securities Act (Ontario)
** Concluded pursuant to the Criminal Code

–

Cases ongoing before the courts, as at December 31

	2014	2013
Courts (Quasi-Criminal)	10	7
Courts (Criminal)	2	2

–

Protective Sanctions

	2014	2013
Cease Trade Orders	67	159
Director and Officer Bans	37	67
Exemption Removals	67	118
Registration Restrictions	39	81
Total	210	425

–

Monetary Sanctions

OSC	Total 2014	Total 2013
Administrative Penalties/Settlements	$19,498,461	$14,741,854
Disgorgement	$49,081,332	$40,242,705
Costs	$4,867,150	$3,176,936
OSC Total	$73,446,943	$58,161,495
Courts (Quasi-Criminal Proceedings)
Fines	$5,000	N/A
Restitution	N/A	$155,000
Total	$5,000	$155,000
Courts (Criminal Proceedings)
Restitution	$4,841,806	N/A
Total	$4,841,806	N/A

–

International Efforts

Jurisdiction	Requests for assistance received by OSC in 2014	Requests for assistance received by OSC in 2013
International	18	17
United States	39	37
Domestic	22	14
Total	79	68

Jurisdiction	Requests for assistance made by OSC in 2014	Requests for assistance made by OSC in 2013
International	10	19
United States	17	20
Domestic	7	7
Total	34	46