The Canadian Securities Administrators launched more than double the number of proceedings in 2008 than in 2007, and saw a surge in appeals, the regulator’s 2008 enforcement report shows.

Throughout the year, the CSA commenced 215 proceedings, up from 104 in 2007. The number of cases concluded fell to 123 in 2008, down from 130 in 2007, and cases appealed more than doubled to 26 in 2008, up from 10 in 2007.

According to the CSA, the rise in appeals displays that securities law is becoming more litigious.

Among the cases concluded, the vast majority—at 65—were illegal distribution cases. There was a sharp rise in the number of cases involving misconduct by registrants, jumping from 15 to 30, while disclosure violations fell from 14 to 11.

Fines and administrative penalties in 2008 totalled $12.5 million, and costs ordered were $1.6 million. Penalties also included jail terms for six individuals, ranging from six months to eight and a half years.

To protect investors by prohibiting a potentially illegal activity while an investigation is underway, CSA members implemented trading restrictions on 168 individuals and 112 companies.

As the CSA moves to strengthen enforcement coordination between the provinces, several CSA jurisdictions passed legislative amendments to authorize their use of reciprocal orders in 2008. As a result, the number of reciprocal orders—used to deter individuals and companies who have been sanctioned elsewhere from engaging in similar misconduct in that jurisdiction—soared from 18 orders in 2007 to 90 orders in 2008.

Jean St-Gelais, chair of the CSA, said that market volatility in 2008 underscored the need to protect investors and foster confidence in capital markets.

“The events triggered by the collapse of the sub-prime mortgage market in the U.S. and the general credit market crisis that ensued highlighted again how crucial the capital markets are to the functioning of the broader economy,” said St-Gelais. “In turn, the importance of fostering confidence in the capital markets by enforcing securities laws is clear.”

Major cases to wrap up in 2008 included that involving B.C.-based mutual fund salesman Ian Thow, who convinced 26 clients to invest in non-existent construction loans and shares of a Jamaican bank. He was ordered to pay an unprecedented $6 million by the BCSC.

Another key case saw the CEO of Montreal-based mutual fund company Norbourg, which defrauded more than 9,000 investors of $130 million through illegal dealings, get sentenced to 12 years in prison, and fined $255,000. The sentence was subsequently reduced on appeal to 8.5 years.

IE