On February 27, 2017, The Canadian Securities Administrators (CSA) published its 2016 Enforcement Report (The Report).  The ninth annual report highlights actions taken by the CSA to police the capital markets.

The report states that as a result of increased cooperation between the CSA and the RCMP, both the number of successfully concluded criminal proceedings and the amount jail time rose during the last year. The CSA introduced new measures to fight insider trading and tipping and a market analytics program aimed at detecting securities violations in trades made through automated trading systems.

Highlights of the 2016 report include:

  • 39 years of jail time ordered for those committing securities-related misconduct.
  • $299 million in compensation that respondents undertook to return to investors through no-contest settlements and $51 million in restitution and disgorgement orders.
  • 120 people and 82 companies placed under interim and asset freeze orders, preventing further harm to investors.
  • 109 concluded cases.
  • $62,148,866 in fines, administrative penalties, and other voluntary payments.

The Report highlights the growing “serious and growing problem” of penny-stock “pump-and-dump” fraud, where fraudsters artificially inflate the price of shares through misleading information in order to sell them at a profit before their price crashes. The Report discusses a number of “ponzi schemes” that were successfully prosecuted for fraud. The Report defines “ponzi schemes” as “a fraudulent activity in which the promised rate of return on an investment is paid to initial investors using funds provided by subsequent investors.”  A number of illegal distributions, where sale or attempted sales of securities to investors failed to comply with securities registration, prospectus and report of trade requirements are also discussed in the Report.

The full 2016 Enforcement Report is available for download from the CSA’s website.

For more information, please call Barbara Hendrickson at BAX Securities Law (416.601.1004).

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.