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The British Columbia Securities Commission (BCSC) now has greater powers to advance investigations of investment market misconduct and hold people accountable for their illegal acts, thanks to some recent legislative amendments.
The updates to B.C.’s Securities Act, which came into force on July 17, allow the BCSC to impose consequences for people failing to comply with a summons or demand to provide information. Previously, the regulator had to apply to the Supreme Court for an order, which it says was time-consuming.
The regulator says it can now act more quickly to handle penalties such as restricting market participation and imposing administrative penalties of up to $1-million for those failing to comply.
BCSC executive director Peter Brady says B.C. is Canada’s only province and territory with this type of power. Globe Advisor recently spoke with Mr. Brady about the amendments.
What’s the major change here?
The big change is that people who don’t cooperate with the BCSC investigation can now be banned from our markets or ordered to pay an administrative penalty of up to $1-million. There are other amendments, but this is the big one.
It’s significant because we sometimes have major challenges getting people to testify. These amendments say that ‘if you’re going to be in the capital markets, but you’re not going to play by the rules and cooperate with the regulator, then the risk exists that you will be banned from participating in that market.’ Potential penalties include a trading ban, prohibiting someone from being a director or officer of a company, prohibiting someone from holding a market licence or doing investor relations activity. If B.C. issues this kind of order, other provinces will likely reciprocate.
How did this change come about?
We’re fortunate to speak to our provincial government occasionally and let them know about the challenges we face in administering securities legislation. There are frequent complaints that enforcement in the securities and public markets is too slow or may not be hard enough on the bad actors.
One of the barriers to the securities commissions disciplining people who are breaking the rules for investment advisors is that, sometimes, the people we need to interview to make our case don’t cooperate. In the past, if a person didn’t respond to our summons, the only remedy would be to go to the B.C. Supreme Court and ask for the person to be held in contempt of court.
Getting a contempt of court order is usually a lengthy process. They could be ordered to go to jail if held in contempt. The courts are often reluctant to do this for various reasons that involve time and money. And, if someone is finally sent to jail, we still don’t have the evidence. So, it’s an ineffective way to get people to give us the information we need.
How often does the BCSC deal with this scenario?
I don’t have exact numbers, but we have multiple incidents per year where people don’t cooperate for various reasons. It’s not like we go to court every time because, as noted earlier, it’s ineffective in getting information.
This interview has been edited and condensed.
- Brenda Bouw, Globe Advisor reporter
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