The British Columbia Securities Commission (BCSC) has recently obtained new tools that significantly enhance its enforcement powers.
The first mechanism enables the BCSC to employ an administrative process that will impose more immediate consequences on persons or businesses for failure to comply with a summons or provide information without having to seek intervention of a court.
The second mechanism gives the power to levy administrative monetary penalties without a hearing for contraventions of certain regulations or BCSC decisions. This new enforcement tool – called Administrative Penalties Imposed by Notice (APIN) – allows the BCSC to impose monetary penalties for less serious violations of securities rules through issuing notices to alleged rule breakers.
Failure to Comply or Provide Information
Legislative changes enable the BCSC to employ an administrative process that will impose more immediate consequences on persons or businesses that fail to comply with a summons or provide information. Failure to comply with a summons or demand for information can now result in restrictions on market participation and/or penalties of up to $500,000 for individuals and up to $1 million for entities. Previously, the BCSC would have to apply to the B.C. Supreme Court for an order to hold non-cooperative individuals and businesses in contempt. Although this process provided greater judicial oversight, it was cumbersome and challenging. The legislative changes do away with the judicial process.
In addition, the BCSC can now seek court orders, including the payment of restitution or damages, if an individual has been convicted of a securities or derivatives-related offence under the Criminal Code. Providing the BCSC with greater powers encourages efficiency in the enforcement process.
Administrative Penalties Imposed by Notice
The BCSC also now has the power to issue a written notice requiring a person to pay an administrative penalty if they consider the person contravened: a prescribed provision of the Securities Act (British Columbia) (the Act); a provision of the regulations of the Act; or a decision of the BCSC or the Executive Director. To date, there are no prescribed provisions of the Act. If the government prescribes certain provisions of the Act in the future, the BCSC will issue a further notice. For now, the Executive Director can only consider issuing a notice of administrative penalty for contraventions of regulations (including instruments and rules), or decisions of the commission or the Executive Director.
A staff member of the BCSC who detects an eligible contravention in the course of their work now has the ability to submit a report to the Executive Director to establish the alleged contravention and recommend that the Executive Director issue a notice of administrative penalty. If the Executive Director considers that the person has contravened an eligible provision or decision, and it is in the public interest to impose a penalty, the Executive Director will deliver a written notice to the person setting out: each contravention; the amount of the administrative penalty assessed for each contravention; and the date by which the person must either pay the penalty or dispute it. The Executive Director is not required to provide a person with an opportunity to be heard prior to issuing such a notice.
The amount of the APIN penalty will be based on the facts and circumstances of each contravention. The Executive Director will consider all relevant factors, including: past conduct; seriousness of the conduct; mitigating factors; need for deterrence; and past precedents. The maximum amount of a penalty imposed under the APIN system is $100,000 per violation for individuals and $500,000 per violation for entities.
A party in receipt of an APIN notice has the ability to pay the penalty by the due date or request to dispute the notice by way of a hearing. There is a 30-day window to request to dispute the notice. In the event the person either pays the penalty or the 30-day window lapses without payment or dispute, the person is deemed to have committed the contravention.
Following a hearing of a disputed notice, the Executive Director must issue an order: confirming whether the party committed the contraventions as set out in the notice; and if the contraventions are confirmed, reducing, revoking or confirming the penalty set out in the notice. Any notices or orders imposing monetary penalties will be published and made publicly available on the BCSC’s website.
Implications
The introduction of these new mechanisms reflects the BCSC’s intention on strengthening its enforcement powers and using them effectively and efficiently. These mechanisms provide the BCSC with a broader set of tools than other Canadian jurisdictions and significantly increased powers to advance investigations of investment market misconduct and hold individuals accountable for illegal acts.
Please contact us if you would like further information.
DISCLAIMER: This post is intended to convey general information about legal issues and developments as of the date above. It does not constitute legal advice and must not be treated or relied on as such.