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Posts tagged ‘B.C. Securities Commission’

Cross-country events mark Investor Education Month

October 2nd, 2018

by Greg Klein | October 2, 2018

Following the ounce-of-prevention principle, securities commissions across Canada plan a number of initiatives to encourage smarter, safer investment strategies. A month of events begins with World Investor Week, in which Canadian regulators join the International Organization of Securities Commissions from October 1 to 7. Here’s an outline of this country’s events from province to province.

British Columbia
The B.C. Securities Commission will release new research on millennials this month, along with new tools to help people understand their investment returns. The BCSC also plans design updates to InvestRight.org to improve its efficacy.

Cross-country events mark Investor Education Month

Alberta
A digital education campaign called Spot the Odd will raise awareness of the Alberta Securities Commission’s free resources as well as encourage financial literacy and fraud awareness. A number of activities across the province will include Don’t Get Tricked, to be held in Calgary on October 17.  The ASC provides other resources on CheckFirst.ca.  

Saskatchewan
The province’s Financial and Consumer Affairs Authority has a cryptocurrency awareness campaign slated for Facebook, Twitter, the FCAA website and YouTube. In addition, businesses planning to use cryptocurrencies are invited to discuss their project with the FCAA to learn whether it falls under securities legislation.

Manitoba
The Manitoba Securities Commission will formally launch MoneySmartManitoba.ca to promote financial literacy and planning. The MSC will also take to the Twittersphere with news, tips and strategies for investors.

Ontario
The Ontario Securities Commission plans social media chats on Twitter and Facebook with the hashtag #IEM2018. The OSC also hosts GetSmarterAboutMoney.ca, plans a telephone townhall for October 10, presents public events around the province with OSC in the Community and further encourages awareness through an investor newsletter.

Participating in World Investor Week helps promote investor education and protection both locally and globally.—Tyler Fleming,
Ontario Securities Commission

Quebec
L’Autorité des marchés financiers will release results of its fourth Financial Awareness Index, measuring the public’s knowledge and use of financial products and services. The AMF will also present the third edition of its Talking Money in Class! contest for high school teachers and take part in the Quebec Seniors’ Fair.

New Brunswick
The Financial and Consumer Services Commission will present online info with special emphasis on initial coin offerings. For more tips on fraud, investors may visit fcnb.ca and follow the commission on Facebook and Twitter. The Fortune online trivia game allows investors to compete with others across the province to learn more and win prizes.

In addition to all that, the Canadian Securities Administrators umbrella group offers its own online tools and resources. The CSA invites the public to take advantage of Investor Education Month and World Investor Week by following @CSA_News on Twitter and @CSA.ACVM on Facebook.

Read: Regulators emphasize innovation and deterrence as financial sanctions fail.

Follow the money, distantly

July 13th, 2018

Regulators emphasize innovation and deterrence as financial sanctions fail

by Greg Klein

It was a momentous week for Canadian regulators, seemingly. In a ruling on “one of the largest corporate frauds in Canadian history,” the Ontario Securities Commission slammed Sino-Forest scamsters with over $81 million in sanctions. One day later the Canadian Securities Administrators announced a nationwide total last year of nearly $70 million in penalties and a roughly equal amount in payback orders. All that sounds impressive, but a troubling question remains: How much—or, more accurately, how little—will ever be collected?

Regulators emphasize innovation and deterrence as financial sanctions fail

TSX-listed Sino-Forest’s 2012 crash wiped out $6 billion of investors’ money. Six years of OSC reviews expanded on short seller Muddy Waters’ exposé to conclude that “the complexity, scale and duration of the fraud are simply stunning.”

This week the commission imposed disgorgements, penalties and costs on a quartet of Chinese executives totalling $81.4 million, with Gang of Four ringleader Allen Chan responsible for $67.3 million.

In a sense, the OSC showed leniency. “We do not generally apply our penalties to each misstatement or instance of fraudulent conduct occurring even over an extended period of time, as here,” the commission stated. “If that approach were taken, the sanctions sought by staff would be multiplied many times.”

But whether the amounts could be higher would seem a moot point without collection. In an e-mailed response to ResourceClips.com inquiries, OSC public affairs manager Kristen Rose stated: “In addition to the challenges inherent in collecting sanctions generally, there is added difficulty in matters where respondents are outside of North America, and there is uncertainty as to whether there are recoverable assets. That said, as with any such matter, the OSC will make every effort to identify recoverable assets.”

In addition to the challenges inherent in collecting sanctions generally, there is added difficulty in matters where respondents are outside of North America, and there is uncertainty as to whether there are recoverable assets. That said, as with any such matter, the OSC will make every effort to identify recoverable assets.—Kristen Rose,
OSC public affairs manager

She added that Chan faces a civil judgement of US$2.6 billion, as well as a class action suit. Wronged investors would get priority over OSC penalties.

This week’s annual enforcement report from the CSA—the umbrella group for securities commissions in 13 jurisdictions—shows $69.4 million in penalties imposed nationwide during the last calendar year, along with another $68.6 million in restitution, compensation and disgorgement orders.

The report doesn’t say how much was collected. CSA chairperson Louis Morisset doesn’t have the figures either, not even for previous years. But he emphasizes that collection efforts continue.

“Those sanctions don’t always align with a person or company’s ability to pay,” he tells ResourceClips.com. “I can certainly assure you that we’re deploying all efforts to collect those monetary sanctions.”

Among the barriers to collection are bankruptcy, competing claims, lack of recoverable assets or offshore residence.

Nevertheless the performance of securities commissions, especially in British Columbia and Ontario, has come under media scrutiny. Beginning late last year, a series of Postmedia stories by Gordon Hoekstra detailed several cases of B.C. Securities Commission sanctions remaining unenforced, despite offenders holding significant assets. Over the last decade the BCSC collected less than 2% of $510 million in fines and payback orders, while the OSC enforced about 18% of its penalties, Hoekstra found.

In December Globe and Mail reporters Grant Robertson and Tom Cardoso released their study of 30 years of regulatory records, finding scams with higher dollar values than the resulting penalties, which often went unenforced anyway.

Morisset declined to comment on the stories, referring only to a December CSA statement that took issue with some aspects of the G&M reports and emphasized the role of police in financial crime investigations.

Still, media coverage seemed to make an impact.

“Immediately after the Postmedia investigation, the BCSC filed at least 10 writs of seizure and sale in B.C. Supreme Court for financial fraudsters owing nearly $70 million in penalties, and renewed three enforcement orders,” Hoekstra reported last month. “Also following the investigation, B.C. Finance Minister Carole James ordered the BCSC to improve its collection record and called for new tools and modernization of the Securities Act to improve collection.”

Regulators emphasize innovation and deterrence as financial sanctions fail

CSA chairperson Louis Morisset:
“There is an array of means and we’re deploying
everything available in the circumstances
to ensure deterrence.” (Photo: CSA)

As the CSA report shows, regulators don’t just go after money. Last year courts handed out prison terms totalling 33 years for offences under provincial securities legislation, with sentences for the 17 individuals ranging from 30 days to five years. Criminal Code cases handled by regulators brought eight sentences totalling 14 years.

Six of the jailbirds were repeat offenders. But a low overall recidivism rate of about 4% shows the power of deterrence, Morisset says. And, regardless of whether it’s responding to media criticism about enforcement, the CSA emphasizes the importance of deterrence.

It’s “also achieved by other means like revoking, suspending or imposing restrictions on registration, imposing bans, freezing accounts,” explains Morisset. “There is an array of means and we’re deploying everything available in the circumstances to ensure deterrence.”

Last month the OSC stated its two-year-old whistleblower program brought 11 no-contest settlements, returning more than $368 million to investors.

Beyond that the CSA plays up its “innovative” approaches, to binary options for example. In addition to a public awareness campaign, the group approached Twitter, Facebook, Google, Apple, Visa and MasterCard. “We made them aware of the issues surrounding binary options and that they were used to a certain extent to facilitate fraud, and I think our approach was very innovative and effective in preventing fraudsters from reaching their targets,” says Morisset.

Also innovative was an outright ban on binary options. “It was the first time in Canada that we banned a product, giving a very strong message that these are toxic products.”

He says new approaches to fraud could expand the pool of potential victims, drawing in millennials with little or no investment experience. CSA publicity campaigns encourage awareness of the cryptocurrency world.

Through its Regulatory Sandbox, the CSA tries to streamline the entry of innovative fintech firms into the regulatory world. The CSA’s new Market Analysis Platform will use updated surveillance technology to monitor manipulation and insider trading. Canada’s first Pump and Dump Summit, held in Calgary last September, brought together four Canadian securities commissions and the RCMP, along with the U.S. SEC and FBI. Across Canada and abroad, inter-jurisdictional collaboration helps regulators join forces, says Morisset.

“We are innovative and we have to be, because the markets are innovative.”

But when the regulators fail, others might step in—with fraudsters on one side and, on the other, maybe opportunistic vigilantes like Muddy Waters.

B.C. Securities Commission executive director Peter Brady says the agency’s proposed fee hikes would spur enforcement

May 31st, 2018

…Read more

Have your say on the BCSC’s proposed fee hikes

May 1st, 2018

by Greg Klein | May 1, 2018

Some hefty cost increases now seem likely for British Columbia’s investment industry, but the B.C. Securities Commission’s giving participants a chance to comment. These would be the first such raises since 1994, according to the agency, which says it “funds its operations entirely from fees paid by market participants and receives no government or taxpayer funding.” Written comments will be accepted up to May 31.

“People need to have confidence that securities markets are being regulated appropriately,” said executive director Peter Brady. “With increased funding, the BCSC can expand its work on critical regulatory priorities, including hiring significantly more criminal investigators.”

Late last year a series of articles by Postmedia journalist Gordon Hoekstra slammed the commission for lax enforcement against serial scammers and others with unpaid fines but substantial assets. The BCSC has a staff of 234 and a budget of $46.6 million, Hoekstra reported.

Apart from beefing up enforcement and fine collection, a bigger budget would help address “regulatory challenges” including new marketplaces, rapid fintech innovation, increased cyber risk, increased private market capital raising and over-the-counter derivatives regulation, the BCSC stated.

Possibly reflecting a newly found frugality, the BCSC got through this year’s Fraud Awareness Month without producing a music video, as the agency did in 2017 and 2016.

Click here to see BCSC staff salaries for fiscal year 2014 to 2015.

Pamela McDonald of the B.C. Securities Commission warns that some sales pitches are too good to be true

April 3rd, 2018

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Fraud Awareness Month begins amid criticism of lax enforcement against serial scammers

March 7th, 2018

by Greg Klein | March 7, 2018

Education more than deterrence seems to be the focus of Canadian securities commissions as Fraud Awareness Month begins. Two series of articles by Postmedia and the Globe and Mail reveal numerous examples of con artists evading administrative penalties and criminal charges, leaving victims powerless to recover losses.

Fraud Awareness Month begins amid criticism of lax enforcement against serial scammers

The British Columbia Securities Commission kicked off the annual awareness campaign by releasing results of a survey. The people most susceptible to investment scams, the poll found, are millennials. Over 500 respondents were tested on their reaction to a fictional investment offer that guaranteed no-risk returns of 14% to 25%.

“Although the claim contains several investment fraud warning signs, 26% of respondents said the offer was ‘worth looking into,’” the BCSC reported. “More troubling, 20% of the respondents who would look into the offer said they were interested because they need the money, indicating even greater vulnerability.”

Adults aged 18 to 34 showed the greatest naiveté, with 47% of women and 35% of men that age expressing interest. Just 13% of people 55 years and over gave similar answers, a decline from 26% in a similar 2012 study.

“Investors should always be skeptical of anyone offering a risk-free investment with an unusually high return, because there’s no such thing,” warned BCSC director of communications and education Pamela McDonald. “We encourage investors to look carefully at every investment they make, but also to listen to your gut. If something doesn’t make sense, or doesn’t feel right, we encourage you to contact the BCSC.”

The admonition follows criticism of weak enforcement by the BCSC and its counterparts. In December the Globe and Mail’s Grant Robertson and Tom Cardoso reported their analysis of 30 years of regulatory records, finding one in nine people pronounced guilty of securities fraud go on to re-offend, some even defying multiple lifetime trading bans through aliases and “jurisdiction-hopping.” Ill-gotten gains can far exceed penalties, which at any rate often remain unenforced.

In November a Postmedia series by Gordon Hoekstra reported numerous cases of uncollected BCSC fines and payback orders on scammers who in some cases continue to hold significant assets. Others transfer assets with relative ease.

Between the fiscal years ending in 2008 and 2017, Hoekstra stated, the BCSC collected less than 2% of $510 million in fines and payback orders. The Ontario Securities Commission did somewhat better, collecting 18% over the last decade.

In a December response to the Globe and Mail, the Canadian Securities Administrators stated that securities commissions are limited to pursuing administrative cases, with police responsible for criminal matters. But last month Hoekstra reported examples of Vancouver police and RCMP refusing to investigate fraud allegations. Vancouver cops say they typically refer cases of investment fraud to the BCSC. The RCMP declined to investigate another example on the grounds that it was a BCSC matter.

In another February story, Hoekstra revealed the BCSC “quietly” stayed more than $35 million of penalties regarding nine cases following a B.C. Court of Appeal decision on a pump-and-dump operation.

B.C. Securities Commission under fire as half a billion in penalties remains unenforced

November 21st, 2017

by Greg Klein | November 21, 2017

Although some small cap companies seem to consider regulators the bane of their existence, big-time scammers might take a more benign view. A Postmedia investigation has revealed that the British Columbia Securities Commission—with 234 staffers and a $46.6-million budget—has collected less than 2% of $510 million in fines and payback orders issued over the last decade. The collection rate manages to fall even farther, to less than 0.1%, for 29 such orders of $1 million or more that total $458 million.

B.C. Securities Commission under fire as half a billion in penalties remains unenforced

Although the BCSC responds that the con artists may have hidden their assets or disappeared, journalist Gordon Hoekstra reports, “Postmedia tracked down $31 million in potential assets linked to the fraudsters,” including homes in affluent B.C. suburbs, Las Vegas and Hawaii.

Among available enforcement strategies, the BCSC “can file any of its decisions in B.C. Supreme Court, a simple administrative exercise, which automatically makes the penalties an order of the court,” Hoekstra points out. “If a property has been transferred to someone else, for example, a spouse, to escape a penalty, that may also be considered fraud.”

Regulators in other provinces do somewhat better, according to the study. Securities commissions in Ontario and Alberta achieved 18% collection rates over the last decade, while Quebec reached about 20% over the past four years. The U.S. Securities and Exchange Commission hit nearly 60% during the past five years.

The exposé seems to have taken both of B.C.’s main political parties by surprise. In a written statement NDP Finance Minister Carole James noted the commission operates at arms-length from the government. “We would encourage any proposals from the BCSC on any new mechanisms they may need to collect the fines,” she stated.

“No details were released by James, who ministry officials said was unavailable for an interview, on how the provincial government would follow up or monitor any proposals,” Hoekstra added.

As for the opposition party that had been government during most of the 10-year period, the BC Liberals “said in an e-mail that ‘unfortunately’ no MLAs were available for comment. The Liberals have 41 sitting MLAs, including two finance critics, Shirley Bond and Tracy Redies.”

The B.C. Securities Commission warns investors about an entity calling itself the Vancouver Stock Exchange Corp

August 23rd, 2017

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About time: BCSC warns investors of “Vancouver Stock Exchange”

July 20th, 2017

by Greg Klein | July 20, 2017

Juniors, brokers, promoters desert Toronto to revive the Vancouver Stock Exchange

Better late than never, a warning sign
stands guard outside the former VSE building.

Whether inspired by a death wish or sheer audacity, an alleged scam has been named after the reputed scam capital of the world. On July 19 the British Columbia Securities Commission warned investors that a company called Vancouver Stock Exchange Corp “appears to have been issuing stock exchange listings to companies in China and B.C…. VSEC holds itself out as being the old Vancouver Stock Exchange (VSE). In fact, the VSE no longer exists.”

Moreover the new entity has no authorization to operate as an exchange in B.C.

The VSE merged with the Alberta exchange in 1999 to form the Calgary-based Canadian Venture Exchange, which was taken over in 2001 by the TMX Group’s (TSX:X) predecessor. But according to the commission, “VSEC claims that, in June of 2016, the old Vancouver Stock Exchange was reinstated as an independent exchange.”

VSEC’s Chinese-language website “identifies the companies that it purports to have approved for listing and capital raising,” the BCSC added. Anyone with info about VSEC is asked to contact BCSC Inquiries at 604-899-6854, 1-800-373-6393 or inquiries@bcsc.bc.ca.

On April 1, 2016, ResourceClips.com spoofed that a group of stock promoters planned to re-open the infamous VSE. See other April 1 stories:

B.C. Securities Commission executive director Paul Bourque promotes the BeFraudAware campaign

April 6th, 2016

…Read more