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Posts tagged ‘ontario securities commission’

Maureen Jensen of the Ontario Securities Commission comments on $7.5 million awarded to tipsters

March 18th, 2019

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Speaking out pays off as three whistleblowers reap $7.5 million in OSC rewards

February 27th, 2019

by Greg Klein | February 27, 2019

In the first cash inducements of their kind from Canada’s first program of its kind, the Ontario Securities Commission handsomely rewarded three people for exposing securities misconduct.

Their names remain confidential, as do the companies involved and other details that might help identify the tipsters. Their info, on three separate matters, resulted in the companies making monetary payments to the commission.

Speaking out pays off as three whistleblowers reap $7.5 million in OSC rewards

Not without controversy, the OSC’s Office of the Whistleblower began operations in 2016, offering up to $5 million for the lowdown on insider trading, fraud, misleading financial statements and other dirty trading-related deeds. The OSC pays out after proceedings finish and rights to appeal expire, a process that can take several years.

To qualify for rewards, tips must result in over $1 million in sanctions or voluntary payments by wrongdoers. Submissions may be made anonymously, although the tipster’s identity is required for a payoff. Awards range from 5% to 15% of the sanctions and/or voluntary payments, up to a $5-million maximum.

Whistleblowers who took part in the misconduct might still qualify, although the degree of complicity can decrease the award.

Companies can also squeal on themselves. As of June, 11 no-contest settlements from self-reporting returned over $368 million to investors.

The tips “expose complex securities misconduct that may not otherwise come to light, allowing us to take timely action,” noted OSC director of enforcement Jeff Kehoe. “We hope this announcement, alongside our substantive whistleblower protections, will encourage more whistleblowers to come forward.”

Numbers released last June showed the program had attracted about 200 tips, an average of about two per week. After review, 19 of them went to the OSC’s enforcement department, sparking 15 investigations. Another 68 were “shared with another OSC operating branch or another regulator for further action,” the commission stated.

“Our whistleblower program has proven to be a game-changer for the OSC’s enforcement efforts,” said CEO/chairperson Maureen Jensen. “This would not be possible without courageous individuals willing to come forward and provide valuable information about harm to Ontario’s capital markets.” 

OSC invites suggestions on reducing regulatory red tape

January 17th, 2019

by Greg Klein | January 16, 2019

Some “outdated or unduly burdensome” requirements could be mitigated as the Ontario Securities Commission broadens discussion on reform. By canvassing written comments up to March 1 and scheduling a March 27 roundtable discussion, the OSC hopes to find “short, medium and long-term actions to reduce regulatory burden.”

OSC invites suggestions on reducing regulatory red tape

Some specific topics include:

  • Finding operational or procedural changes to make interaction with the OSC easier or less costly

  • Providing greater certainty on regulatory requirements or outcomes

  • Streamlining or reducing forms and filings

  • Addressing unnecessary or unduly burdensome filings

  • Providing OSC info more efficiently

Respondents can reply via online form by March 1 and also indicate whether they want to take part in the March 27 roundtable. The OSC website will post more info including an agenda and list of participants in the coming weeks.

Following the roundtable, suggestions go to a Burden Reduction Task Force created in November, which will also consider the regulatory regimen from an investor’s perspective. Among issues to be considered is the use of plain language in regulatory disclosure.

“Our markets and businesses are better able to compete, innovate and flourish when we lighten the regulatory load while maintaining strong protections for Ontario investors,” said OSC chairperson/CEO Maureen Jensen.

DRC on the brink

January 3rd, 2019

The Congo’s increasing instability heightens critical minerals concern

by Greg Klein

Update: In what’s been called the DRC’s first peaceful transfer of power since 1960, Felix Tshisekedi was sworn in as president on January 24. That follows a controversial election in which two parts of the country had voting delayed until March and supporters of candidate Martin Fayulu accused the electoral commission of rigging the results in favour of Tshisekedi, who they say struck a pact with outgoing president Joseph Kabila. Catholic church observers had earlier disputed the outcome and Fayulu asked the Constitutional Court to order a recount. “The court, made up of nine judges, is considered by the opposition to be friendly to Kabila, and Fayulu has said he is not confident that it will rule in his favour,” Al Jazeera reported.

 

This is the place that inspired the term “crimes against humanity.” As a timely new book points out, American writer George Washington Williams coined that phrase in 1890 after witnessing the cruel rapaciousness of Belgian King Leopold II’s rubber plantations in the country now known as the Democratic Republic of Congo. After rubber, the land and its people were exploited for ivory, copper, uranium, diamonds, oil, ivory, timber, gold and—of increasing concern for Westerners remote from the humanitarian plight—cobalt, tin, tungsten and tantalum. Controversy over recent elections now threatens the DRC with even greater unrest, possibly full-scale war.

The Congo’s increasing instability heightens critical minerals concern

The country of 85 million people typically changes governments through coup, rebellion or sham elections. Outgoing president Joseph Kabila ruled unconstitutionally since December 2016, when his mandate ended. He belatedly scheduled an election for 2017, then postponed it to last December 23 before pushing that date back a week. The December 30 vote took place under chaotic conditions and with about 1.25 million voters excluded until March, a decision rationalized by the Ebola epidemic in the northeast and violence in a western city.

The epidemic marks the second-worst Ebola outbreak in history, the DRC’s tenth since 1976 and the country’s second this year. Although the government delayed regional voting on short notice, the health ministry officially recognized the current epidemic on August 1.

Responsible for hundreds of deaths so far, this outbreak takes place amid violence targeting aid workers as well as the local population. Like other parts of the country, the region has dozens of military groups fighting government forces for control, and each other over ethnic rivalries and natural resources. The resources are often mined with forced labour to fund more bloodshed.

With no say from two areas that reportedly support the opposition, a new president could take office by January 18. Already, incumbent and opposition parties have both claimed victory.

The Congo’s increasing instability heightens critical minerals concern

Voting in two regions has been delayed
until after the new president takes office.
(Map: U.S. Central Intelligence Agency)

Kabila chose Emmanuel Ramazani Shadary as his successor candidate but didn’t rule out a future bid to regain the president’s office himself.

Election controversy contributed to additional violent protests in a month that had already experienced over a hundred deaths through ethnic warfare as well as battles between police and protesters. Yet that casualty toll isn’t high by DRC standards.

Published just weeks before the election, Congo Stories by John Prendergast and Fidel Bafilemba relates a harrowing story of a country the size of Western Europe that’s fabulously rich in minerals but desperately poor thanks to home-grown kleptocracies and foreign opportunists. Forced labour, war and atrocities provide a deeply disturbing backdrop to the story of conflict minerals.

According to 2017 numbers from the U.S. Geological Survey, the DRC supplied about 58% of global cobalt, 34.5% of tin and 28.5% of tantalum. The U.S. has labelled all three as critical metals. Tin and tantalum, along with tungsten and gold, are currently the DRC’s chief conflict metals, Prendergast and Bafilemba note. In addition to Congo tantalum, the world got 30% of its supply from DRC neighbour Rwanda, another source of conflict minerals.

Prendergast and Bafilemba outline the horror of the 1990s Rwandan Tutsi-Hutu bloodshed pouring into the Congo, making the country the flashpoint of two African wars that involved up to 10 nations and 30 local militias. During that time armies turned “mass rape, child soldier recruitment, and village burnings into routine practice.”

For soldiers controlling vast swatches of mineral-rich turf, rising prices for gold and the 3Ts (tantalum, tungsten and tin) provided an opportunity “too lucrative to ignore.” Brutal mining and export operations drew in “war criminals, militias, smugglers, merchants, military officers, and government officials,” Prendergast and Bafilemba write. “Beyond the war zones, the networks involved mining corporations, front companies, traffickers, banks, arms dealers, and others in the international system that benefit from theft and money laundering.”

DRC leaders did well too. “Mobutu Sese Seko, who ruled Congo from 1965 to 1997, is seen as the ‘inventor of the modern kleptocracy, or government by theft,’” Prendergast and Bafilemba state. “At the time of our writing in mid-2018, President Joseph Kabila is perfecting the kleptocratic arts.”

The Congo’s increasing instability heightens critical minerals concern

Westerners might be even more disturbed to learn of other beneficiaries: Consumers “who are usually completely unaware that our purchases of cell phones, computers, jewelry, video games, cameras, cars, and so many other products are helping fuel violence halfway around the world, not comprehending or appreciating the fact that our standard of living and modern conveniences are in some ways made possible and less expensive by the suffering of others.”

Not all DRC mines, even the artisanal operations, are considered conflict sources. But increasing instability could threaten legitimate supply, even the operations of major companies.

The example of Glencore subsidiary Katanga Mining TSX:KAT, furthermore, shows at least one major failing to rise above the country’s endemic problems. In mid-December Katanga and its officers agreed to pay the Ontario Securities Commission a settlement, penalties and costs totalling $36.25 million for a number of infractions between 2012 and 2017.

Katanga admitted to overstating copper production and inventories, and also failing to disclose the material risk of DRC corruption. That included “the nature and extent of Katanga’s reliance on individuals and entities associated with Dan Gertler, Gertler’s close relationship with Joseph Kabila, the president of the DRC, and allegations of Gertler’s possible involvement in corrupt activities in the DRC.”

In December 2017 the U.S. government imposed sanctions on Gertler, a member of a prominent Israeli diamond merchant family, describing him as a “billionaire who has amassed his fortune through hundreds of millions of dollars’ worth of opaque and corrupt mining and oil deals” in the DRC.

“As a result, between 2010 and 2012 alone, the DRC reportedly lost over $1.36 billion in revenues from the underpricing of mining assets that were sold to offshore companies linked to Gertler.”

Just one day before imposing sanctions, U.S. President Donald Trump signed an executive order calling for a “federal strategy to ensure secure and reliable supplies of critical minerals.” Approaches to be considered include amassing more geoscientific data, developing alternatives to critical minerals, recycling and reprocessing, as well as “options for accessing and developing critical minerals through investment and trade with our allies and partners.”

Unofficial DRC election results could arrive by January 6. Official standings are due January 15, with the new president scheduled to take office three days later. Should the Congo see a peaceful change of government, that would be the DRC’s first such event since the country gained independence in 1960.

 

January 7 update: The DRC’s electoral commission asked for patience as interim voting results, expected on January 6, were delayed. Internet and text-messaging services as well as two TV outlets remain out of service, having been shut down since the December 30 election ostensibly to prevent the spread of false results. On January 4 the U.S. sent 80 troops into nearby Gabon in readiness to move into the DRC should post-election violence threaten American diplomatic personnel and property. The United Nations reported that violence in the western DRC city of Yumbi over the last month has driven about 16,000 refugees across the border into the Republic of Congo, also known as Congo-Brazzaville.

Updated: DRC’s increasing instability heightens critical minerals concern

December 31st, 2018

This story has been updated, expanded and moved here.

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.

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.

OSC tele-townhall encourages scam awareness

October 16th, 2017

by Greg Klein | October 16, 2017

OSC tele-townhall encourages scam awareness

Courts and regulatory agencies notwithstanding, there’s probably no greater frustration for con artists than con-resistant investors. With that in mind, the Ontario Securities Commission has a public outreach program underway including a tele-townhall.

Taking place October 24 at 6:30 p.m., the one-hour event will work “much like a call-in radio show,” the commission explains. Staff will provide information about frauds and scams commonly perpetrated in Ontario. Callers may ask questions and take part in live polls. Participants can register here up to noon of that day.

As part of an outreach program called From Bay Street to Main Street, the OSC also has several investor awareness meetings scheduled over the next few months. Many of the events will take place with groups representing Canadian newcomers or seniors, two particular scam targets.

The OSC also promotes investor knowledge through its Get Smarter About Money website.

Among other strategies across the country, the British Columbia Securities Commission has promoted investor awareness through entertaining videos, a few of which can be seen here and here.

Ontario Securities Commission director of enforcement Jeff Kehoe comments after two con men get jail time for a Tanzanian mining scam

February 7th, 2017

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