By: Andrew Elbaz and Student-at-Law, Alexander Katznelson
In recent weeks, The Globe and Mail has published several scathing articles concerning Canadian securities regulators and Canadian capital markets. The Globe identified several deficiencies in the regulators’ enforcement and oversight of Canadian capital markets. Among other things, the Globe highlighted a lack of coordination among regulators, their inability to deter repeat offenders, and that over $1 billion in fines have gone uncollected.
The Canadian Securities Administrators responded to these revelations with a letter that seems to have been an attempt to save face, rather than a good-faith effort to address the real and substantial issues uncovered by the Globe’s investigative reporters.
It is no secret that Canadian securities regulators do not have statutory authority to impose criminal sanctions. However, it has also been made clear in the Globe’s report that the powers that regulators do have are not being used effectively. Offender information is not accurately and efficiently shared between regulators, resulting in sloppy record keeping and missing offender information.
Ultimately, the problems lay in at least two places – both with authority and priority. The regulators lack the authority to effectively prosecute offences, even those flagrantly committed by repeat offenders. Moreover, combating white-collar crime does not seem to be at the top of law enforcement’s list of priorities, unlike tackling organized crime and terrorism.
Securities regulators are restricted to general deterrence actions and cannot enter the realm of punishment. What this means is that regulators can issue orders aimed to deter offenders from reoffending; however, regulators cannot punish these offenders, for that would be outside the scope of their authority. As the Globe’s reporting demonstrates, the exercise of the regulators’ powers has not been successful in deterring offenders.
It is time for law enforcement to re-prioritize such financial crimes to ensure that financial scammers are quickly and efficiently investigated and prosecuted. The stock scams and other financial crimes perpetrated by these white collar criminals have been devastating to too many Canadians, wiping out retirees’ life savings and undermining the trust of Canadian investors.
If not addressed now, this problem is likely only to worsen in the near future. While currently unregulated, cryptocurrencies have been utilized in countless market manipulation schemes (such as those affecting CloakCoin, ChainCoin, and many others), which are emblematic of the complicated and difficult-to-identify scams that Canadian regulators are likely to increasingly encounter in the coming years. As such, Canadian regulators and law enforcement agencies must take swift and serious action in order to address both current crimes and looming threats.