Securities regulators are working to disrupt market frauds before they get started, says David Wilson, chairman of the Ontario Securities Commission.

Speaking at the Securities Superconference in Toronto today, Wilson focused on enforcement. “People who perpetrate economic crimes may target individuals — but they end up hurting all of us. Misconduct makes it more expensive to raise capital and maintain a robust economy. These are the invisible costs of economic crime,” wilson said. “Put simply, you can have the best regulations in the world, but if you don’t enforce them effectively, they don’t mean a damn thing.”

“One of the most important things we must do is maintain a proactive approach. We have to prevent, detect and deter economic crime,” Wilson added. To that end, he cited a recent case worked by the Joint Securities Intelligence Unit (JSIU), a partnership among the OSC, the Investment Dealers Association of Canada, and the RCMP, which aims to detect criminal activity– and disrupt it — before investors are ripped off.

In a recent case, Wilson noted, “It started with a report from a foreign law enforcement agency, referring to a stock that was being manipulated in the United States. An RCMP member of the JSIU noticed that some of the people mentioned in the report from the foreign agency were also involved in a company that had filed to issue stock in Canada.”

“The JSIU and the OSC’s Corporate Finance team began asking hard questions of both the company that had filed a prospectus and its underwriters. We learned that the company’s initial seed capital came from a well-known organized crime family,” he added. “The inquiries of the OSC and JSIU prompted the company to pull the proposed offering — sparing investors from being snared in a potential $150-million scam.”

“This JSIU initiative demonstrates the value of being proactive. With relatively little time, effort and resources we were able to save a lot of money for investors – and a long and costly post-fraud investigation,” Wilson said.

Wilson also revealed that the OSC is considering setting up a unit to fight boiler rooms. “Such a scam unit would deploy staff with market, regulatory and law-enforcement expertise to collaborate with law-enforcement agencies, such as the RCMP. A major challenge is to act quickly. We have to guard against the risk of a boiler room suddenly evaporating and starting up again in a different location,” he explained.