CSA enforcement activity down in 2013

While the number of new cases brought in 2013 was down, the number of proceedings concluded during the year was more or less unchanged from the previous year. The various CSA regulators concluded a total of 133 cases in 2013, compared to 135 cases in 2012. The cases concluded in 2013 involved 382 firms and individuals (216 individuals and 166 companies), which is up from 322 total respondents in 2012.

Of the concluded cases, the total penalties handed down in these cases was also close to flat year over year. In 2013, approximately $35.4 million was ordered in fines and administrative penalties, down slightly from $36.65 million in 2012.

However, the total restitution and disgorgement ordered in 2013 was down notably to about $55 million in 2013, down from $120.6 million in the previous year. That said, 2012 was an exceptional year, back in 2011, the CSA ordered $49.6 million in disgorgement.

The CSA report also shows that total costs ordered against respondents in 2013 was essentially flat at $4.1 million, compared with $3.9 million in 2012. And, total jail time ordered by courts in Ontario, B.C. and Québec collectively amounted to 13 years, up from nine years in 2012.

The report notes that 156 respondents has their cases resolved in contested hearings, 150 respondents settled, and 76 respondents faced court decisions.

The use of interim orders and asset freeze orders was also down in 2013, with 35 orders issued during the year, imposing restrictions on 38 individuals and 38 companies. In 2012, the CSA issued 44 interim and asset freeze orders, involving 64 individuals and 63 companies.

One area where CSA activity increased in 2013 is in the use of reciprocal orders, with 103 orders issued last year, up from 66 in 2012.

Illegal distributions continue to be at the top of the list of offences that regulators are tackling, the report shows. In 2013, illegal distribution cases accounted for more than half of the respondents facing new cases, representing 144 of 270 total respondents. Similarly, these sorts of offences led the cases concluded during the year, and topped the monetary penalties ordered, accounting for $17 million of the $35 million total.

Fraud is the next biggest offence, followed by misconduct by registrants, illegal insider trading and disclosure violations.

Although, in 2013, the number of respondents involved in new cases for registrant misconduct dropped to 19 from 38 in the previous year; and, those involved in concluded cases fell to 36 in 2013 from 61 in 2012. Monetary penalties for registrant misconduct also dropped to $1.3 million in 2013 from $1.75 million in 2012 and $2 million in 2011. Disgorgement ordered in those cases fell sharply too, from $9.2 million in 2012 to just over $500,000.

The CSA report also notes that enforcement cases concluded by the self-regulatory organizations was essentially flat in 2013, as they wrapped 132 enforcement cases during the year, compared with 128 in 2012.

Bill Rice, CSA chairman, stresses that regulators are developing new tools to deal with increasingly sophisticated, complex violations. “Canadian securities regulators are responding to online violations that continue to grow in sophistication, number and complexity with the development of new cyber tools to efficiently identify and halt illegal activities,” said Rice, who is also chairman and CEO of the Alberta Securities Commission (ASC).

“As online schemes frequently transcend geographic boundaries, CSA members collaborate and share information whenever possible with each other, international securities regulators as well as law enforcement agencies to protect investors and to foster markets that are fair, efficient and transparent,” he added.