CSA enforcement persisted through pandemic

Latest annual report shows $20 million in fines and penalties, $42 million in restitution, and efforts against COVID-19 scams

CSA enforcement persisted through pandemic

Even amid a historic global pandemic, the Canadian Securities Administrators (CSA) went on supporting their mandate to uphold trust in the capital markets by taking action against violations and scams.

“We continued to investigate and take actions to better detect, deter and stop securities misconduct, including fraud, illegal distributions, market manipulation, insider trading, and misconduct by registrants such as broker-dealers and investment advisers,” the CSA said in its Enforcement Report covering the fiscal year 2020/2021.

As more individual investors took to the stock market, CSA members issued 159 Investor Alerts warning the public about potentially harmful activities during the period. That represented a 140% increase compared to the previous fiscal year.

“This year, we saw an unfortunate rise in wrongdoers who attempted to capitalize on the uncertainty related to the pandemic and the economy, a common occurrence with any significant market or news event,” said Louis Morisset, who chairs the CSA. “Among our actions to protect investors against harmful activity, we quickly dedicated resources to address emerging threats and to protect investors.”

The CSA emphasized its participation in a North American Securities Administrators Association (NASAA) Sweep, which focused on COVID-19 related investment scams. Aside from disrupting such activity by shutting down advertising on social media and digital marketplaces, the initiative took on disruption and prevention activities such as reviewing and shutting down websites promoting financial fraud. All in all, Canadian regulators uncovered 64 frauds and schemes, more than half of the 150 frauds and schemes uncovered by the NASAA Sweep.

“Prior to 2020, not many CSA members conducted virtual investigations and virtual hearings – this became the new norm across the country,” Morisset said.

Over the past fiscal year, CSA members commenced 52 matters involving 133 respondents, including individuals and companies. A total of 43 matters involving 93 respondents were concluded.

The report said that the CSA issued a total of $20,373,707 in fines and penalties. Its member regulators also ordered an even higher number, $42 million, in restitution, compensation, and disgorgement.

With respect to quasi-criminal cases, it said courts in British Columbia, Ontario, and Quebec collectively ordered 6 individuals to serve 13.4 years of jail terms under their respective securities acts. The sentences ranged in length from 5 months to 4.5 years.

A total of 22 asset-freeze orders, covering $19.66 million in bank accounts and property liens, were also issued in relation to 49 respondents.

Considering the urgency of the pandemic-driven crisis, the report said that the CSA members adapted and found a balance between investor protection amid intense market volatility and measures to alleviate the burden and facilitate compliance with regulatory requirements.

The report also delved into the CSA’s typical work of conducting investigations and overseeing cases. The pan-Canadian regulatory organization moved to help its members more effectively identify and analyse market misconduct more effectively with its Market Analysis Platform (MAP), a data repository and analytics system that was launched in October 2020.

“MAP has increased our efficiency and speed in accessing and analyzing trading activity, which is critical as capital markets continue to rapidly evolve,” Morisset said.


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