CSA levied more than $58M in fines and penalties in 2014

The CSA reports that a total of 105 proceedings were initiated in 2014, involving 281 total respondents (189 individuals and 92 companies). This is down slightly from the 112 proceedings commenced in 2013, which involved 160 individuals and 110 companies.

Illegal distributions remain far and away the biggest violation that the regulators are confronting, representing approximately 45% of the 281 total respondents. Fraud is a distant second at 29%, and misconduct by registrants represents just 8% of respondents.

The CSA also reports that it concluded a total of 105 cases in 2014, compared to 133 cases in 2013. Those cases involved 255 respondents (149 individuals and 106 companies), compared with 382 respondents in 2013.

Most of these cases were concluded in a contested hearing, rather than through a settlement agreement, it reports, with cases involving 144 respondents concluded by a hearing (56%), versus 78 respondents who settled with a regulator (31%), and 33 respondents who had their cases concluded by a court decision.

Despite the modest decline in the number of cases concluded, the total monetary penalties jumped year over year. These totals do vary a great deal from year to year depending on the types of cases that regulators are faced with. In 2014, approximately $58.2 million was ordered in fines and administrative penalties by the CSA, up from $35.4 million in the previous year.

In 2014, fraud offences were the biggest source of these penalties, accounting for just over $25 million worth, followed by illegal distributions at $17.6 million, and registrant misconduct at $7.5 million. Back in 2013, illegal distributions generated about $17 million in sanctions, but fraud only accounted for $13 million and registrant misconduct was just $1.3 million.

Orders for restitution, compensation and disgorgement also increased year over year to $65.7 million in 2014 from $55 million in 2013 (although this is far below the $120.6 million total that was ordered in 2012). Registrant misconduct was the biggest source of these sanctions, representing $26.4 million in sanctions, outpacing fraud at $23.7 million, and $12.7 million for illegal distribution cases.

Total costs ordered by CSA members also increased in 2014 to over $5.5 million, compared with $4.1 million in 2013. And, courts in Ontario, Alberta and Quebec ordered jail terms for five individuals in 2014, ranging from two months to three years, during the year. In total, the CSA reports that approximately seven and a half years of jail time was handed down in 2014, compared to 13 years worth of prison time in 2013.

During the year, the CSA also issued 24 freeze orders against a total of 57 individuals and companies, involving more than $18 million in assets.

The CSA says that the self-regulatory organizations (SROs) — the Investment Industry Regulatory Organization of Canada (IIROC), the Mutual Fund Dealers Association of Canada (MFDA), and the Chambre de la sécurité financière (CSF) — also concluded a total of 112 enforcement cases during the year, down from 132 in 2013.

“Canadian securities regulators play an important role in the enforcement mosaic that identifies and removes threats to Canadian investors and ensures strong, secure and fair capital markets in Canada,” said Bill Rice, chairman of the CSA and chairman and CEO of the Alberta Securities Commission (ASC). “Our effectiveness is enhanced by a strong spirit of cooperation among our members and with other agencies that allows the CSA to stay ahead of emerging misconduct trends.”