The British Columbia Securities Commission (BCSC) will soon be issuing the regulatory equivalent of speeding tickets. The regulator will impose monetary penalties for relatively minor regulatory violations without first holding a hearing or engaging in settlement discussions.
The BCSC’s new enforcement tool will enable the regulator to impose administrative penalties of up to $100,000 against individuals and $500,000 against firms for misconduct that doesn’t amount to a breach of securities law, such as rule violations.
Under the new power, which was granted to the regulator in legislative reforms adopted in 2020, BCSC staff who observe a violation can file a report and recommend a penalty to the executive director, who can then issue a notice imposing a penalty.
Recipients of these notices will have 30 days to request a hearing and dispute the allegations and proposed sanctions. Proposed penalties that aren’t disputed will be made public.
“Using this power, the BCSC will be able to quickly respond to less serious contraventions with a streamlined process,” Doug Muir, director of enforcement at the BCSC, said in a release.
The new power aims to give the regulator the ability to sanction minor violations with something more than a warning letter but without going to a full enforcement proceeding.
“Imposing administrative penalties by notice is another enforcement tool the executive director may use to encourage compliance, enabling the executive director to efficiently and effectively respond to contraventions where it is not in the public interest to seek larger sanctions and bans, but something more than a warning is required to encourage future compliance,” the BCSC said in a release outlining the new measure.
The factors that will be considered in determining the magnitude of these penalties include the severity of the misconduct, past disciplinary history, and the need for deterrence, along with potential mitigating factors.
In 2019 the Investment Industry Regulatory Organization of Canada (IIROC) proposed a similar initiative that it later abandoned in the face of public criticism.
IIROC scrapped its proposed program after a consultation raised concerns about the lack of clarity and certainty compared with formal disciplinary proceedings, and the fact that the decisions wouldn’t be publicly reported.