OSC has trouble collecting sanctions

From the time it became eligible to collect monetary sanctions against industry wrongdoers in 2005, the Ontario Securities Commission has collected less than half of what’s due, according to a report issued by the regulator today.

From the start date in 2005 until the end of 2011, OSC assessed $228.9 million in sanctions and related costs, but collected only $110.4 million. So far in 2012, the OSC has issued $11.3 million in assessments and collected only $904,287—a dismal 8% collection rate.

OSC staff say they’re working on ways to improve on collections, including examining techniques used by both public and private sector operations. It further notes staff make “every reasonable effort to enforce sanction orders, collect monetary sanctions and, where appropriate, preserve assets related to an investigation or proceeding,” including:

• Routinely filing sanction orders in court by OSC staff. Under securities law, Commission orders then become court orders.
• Seeking additional court orders granting the Commission a security interest in a respondent’s assets, such as shares, and registering the orders on titles to real property so the property cannot be sold unless the money is paid.
• Permitting staff to seek freeze orders on assets at the earliest possible stage of a proceeding or during investigations. Freeze orders can prevent investors’ assets from being transferred or dissipated.
• Letting staff seek Commission orders that extend a conduct ban until monetary sanctions are paid in full.

Other regulatory and self-regulatory organizations have similar problems collecting assessments and fines. In 2002 and 2003, the U.S. Securities and Exchange Commission and National Association of Securities Dealers (now FINRA) told a government watchdog that collections were often hampered by miscreant firms going out of business, or culpable individuals fleeing the country.