The Canadian Securities Administrators (the “CSA”) recently released its annual report on the enforcement activities of its members (the “Report”). The CSA is the umbrella organization for the country’s ten provincial and three territorial securities regulators. The 2020 statistics show that the activity level of Canadian securities regulators continues to be generally lower than in 2019 and 2018. The Report acknowledges that the COVID-19 pandemic impacted CSA enforcement activities, but states that the statistics “do not tell the full story of the CSA’s enforcement actions”.
Summary of 2020 Enforcement Statistics
Quasi-Criminal & Criminal Cases
Under their respective securities acts, courts in British Columbia, Ontario and Quebec sentenced 6 individuals to a total of 13 years of jail time. This represents a slight decrease from 2019 when 8 individuals were sentenced to jail terms under provincial securities acts.
In 2020, 6 individuals were found guilty of breaching securities law provisions in the Criminal Code. Only one of these individuals was sentenced to a jail term. Further, there was only one new case commenced under the Criminal Code by CSA members collaborating with law enforcement. All of these statistics represent a decrease from 2019 when there was 7 cases commenced, 7 convictions, and 4 individuals sentenced to jail terms under Criminal Code securities law provisions.
Impact of COVID-19 – Investor Protection & Virtual Hearings
The Report highlights that the uncertainty in the economy created by the COVID-19 pandemic led to an increase in advertised investment scams. To combat this trend, the CSA participated in the North American Securities Administrators Association (the “NASAA”) “Sweep”. In collaboration with Mexican and United States regulators, the CSA worked to identify and remove fraudulent websites, social media posts, and advertisements on digital marketplaces. The NASAA Sweep uncovered over 150 fraudulent schemes, of which 64 were identified by Canadian regulators.
The focus on protecting retail investors was also reflected in the 140% increase in Investor Alerts in 2020 as compared to 2019. Notably, one such alert warned investors about the fraudulent crypto-currency investment scheme “Mercury Crypto Invest”.
The CSA also launched its Market Analysis Platform (“MAP”) in October 2020. MAP is an analytics system that allows CSA members to analyze market data and trading activity with the aim of identifying market misconduct more effectively.
Lastly, the Report praised the effectiveness of the virtual investigations and hearings conducted by the CSA members. Holding virtual hearings facilitated the participation of respondents and witnesses while also reducing costs. Given these benefits, it is likely that some CSA members will continue to hold virtual hearings going forward.
Future Areas of Enforcement Focus
The Report also notes that the CSA remains especially focused on responding in a timely way to emerging types of investment frauds and threats with coordinated investigations and proceedings including those involving forex and cryptoassets.