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2011 an active year for OSC enforcement


Date: Monday, February 27, 2012
Author: James Langton

Ontario regulator ordered a total of $60.4 million in penalties, disgorgement and costs

Following the lead of the Canadian Securities Administrators, which published its enforcement stats earlier this week, the Ontario Securities Commission Friday published its own enforcement data from 2011, highlighting its pursuit of longer jail terms and more protective orders.

The OSC reports that it commenced a total of 25 proceedings last year, involving 49 individuals and 47 companies. So-called "illegal distributions", such as boiler room scams, accounted for 13 of those cases; and the OSC says that approximately half of the proceedings included allegations of fraud.

Additionally, a total of 27 proceedings were concluded during the year, the OSC says; generating a wide array of sanctions, including 110 cease trade orders, 83 director and officer bans, 118 exemption removals, and 45 registration restrictions. In terms of monetary sanctions, the commission ordered a total of $60.4 million in penalties, disgorgement and costs (comprised of $42.7 million in disgorgement, $15.6 million in penalties and $2.1 million in costs).

While the commission has historically had a tough time collecting monetary sanctions, it reports that during the year it also pursued more cases in criminal courts, and made greater use of proactive investor outreach and protective orders. It made 11 interim orders during the year, which aim to protect investors by prohibiting or inhibiting a potentially illegal activity while an investigation is underway. It also issued three asset freeze orders, affecting more than $4 million.

More importantly, in an effort to maximize deterrence by bringing more cases before the courts, it secured more than 14 years in jail sentences in 2011, compared with just 195 days in 2010. And, it says it's also aggressively pursuing jail terms for breaches of its protective orders — in 2011, three people received jail sentences for breaches of commission orders, it notes. The OSC says taking cases to court will remain a focus in the year ahead, and that it has five cases currently in litigation before the provincial courts.

"This was an active year for our enforcement team and we are pleased with the results we are seeing in court and in our overall effectiveness," said Tom Atkinson, director of enforcement at the OSC. "Going forward we will continue to intensify our efforts and work with our international regulatory partners in order to protect investors and our markets."

Additionally, the commission reports that to warn investors about potential harm, it issued five investor alerts during the year, and added 31 companies to its investor warning list; adding that it's making more use of social media, including Twitter and Facebook, to reach investors with these warnings directly and in real-time. The OSC says it is also exploring new methods to proactively reach at-risk investors.

The OSC also notes that international coordination remains a key focus, and it continues to actively establish working relationships with international securities regulators and organizations.

Looking ahead, the OSC says it will continue to focus on detecting misconduct that causes direct harm to investors, while also addressing the challenges that result from increasingly multi-jurisdictional enforcement matters.

"Maintaining a rigorous and effective enforcement regime is fundamental to the OSC's ability to actively protect investors and promote confidence and the integrity of the markets," said Howard Wetston, chair and CEO of the OSC. "During 2012 we will continue to adapt to the increasing complexity and international scope of enforcement files while building on the success we are seeing in our actions before the courts."

The OSC is also still considering a series of policy proposals designed to enhance its enforcement regime, and plans to hold a policy hearing on the possibility of introducing a new ‘no-contest' settlement program later in the spring.