Any person engaged to any degree with (a) the trading, advising and/or the distribution of securities in the Province of British Columbia; or (b) the preparation, certification and/or filing of prescribed continuous disclosure or securities commission reporting documents to the British Columbia Securities Commission should be aware of, and become familiar with, amendments to the Securities Act (British Columbia) (the “BC Securities Act”) introduced by the British Columbia government on October 21, 2019 and which received Royal Assent on November 28, 2019. The Securities Amendment Act, 2019 includes sweeping amendments aimed at strengthening the enforcement powers of the British Columbia Securities Commission (the “BCSC”) including:
increasing maximum fine and jail term amounts and introducing minimum sentences for multiple offenders;
expanding the BCSC’s investigative powers, including powers to obtain information;
strengthening obligations and sanctions relating to records;
adding an ability to order administrative monetary penalties without a hearing for contraventions of regulations or decisions;
providing the BCSC with enhanced powers to freeze and seize property transferred by fraudsters to third parties for below market value;
allowing the BCSC to seize registered retirement savings plans;
allowing the BCSC to direct the Insurance Corporation of BC to refuse to issue or renew a driver’s licence or licence plates; and
codify protections for whistleblowers.
The amendments also bring British Columbia’s regulation of derivatives in line with other Canadian jurisdictions including Alberta and Ontario.
The BCSC will have significantly expanded investigative powers, including facilitating access for investigators to a business premise and residence to conduct investigations of potential contraventions of the BC Securities Act; imposing new obligations on the owners or occupiers to assist investigators; authorizing investigations into property transactions that may have been implemented to avoid the enforcement of orders under the BC Securities Act; and, in order to encourage co-operation with BCSC investigations, providing for potential fines or imprisonment for failing to comply with preservation or production orders made under the BC Securities Act.
Maximum penalties for securities-related offences will increase (from $3 million to $5 million with the maximum term of imprisonment concurrently increasing from three years to five years); new mandatory minimum penalties for offences committed under the BC Securities Act will be introduced (a minimum sentence of one-year imprisonment for individuals who commit serious or multiple fraud offences) and the amendments will provide for the imposition of an administrative penalty of up to $5 million for contraventions of the BC Securities Act’s record keeping requirements. The BCSC will also now have a mechanism for levying administrative monetary penalties without a hearing for contraventions of certain regulations or BCSC decisions.
As reported in the media, low collection rates for penalties imposed for securities-related offences have historically been a consistent theme Canada’s securities regulators and self-regulatory agencies like the Investment Industry Regulatory Organization of Canada. Many amendments set out in the Securities Amendment Act, 2019 are directed at facilitating, and improving, the BCSC’s enforcement and collection of the fines it levies against offenders. The amendments include, but are not limited to: providing the BCSC the ability to expend funds collected through enforcement proceedings to assist with further collection activities; providing the BCSC with the ability to obtain and enforce a lien over all of a person’s property for amounts that person has been ordered to pay to the BCSC; granting the BCSC the power to seize registered retirement savings plans for the purposes of enforcing orders made under the BC Securities Act; and establishing a new mechanism to instruct ICBC to withhold a person’s driver’s license and license plates until that person pays amounts owing to the BCSC.
The BCSC will also have new preservation and collection powers with respect to property transferred to third-parties in attempts to avoid the enforcement of BCSC orders such that if a person is suspected of contravening the BC Securities Act has transferred property at below market value to a family member or third-party, the BCSC now has the authority to make orders regarding the preservation and disposition of that property and can also now apply for a court order declaring any recipient of property transferred at below market value liable for the amount they benefitted from the transfer or ordering the forfeiture of the transferred property.
While British Columbia has not yet adopted a program for compensating whistleblowers who provide regulators with information on securities-related misconduct similar to the Ontario Securities Commission and the U.S. Securities and Exchange Commission, the coming amendments will codify protections for individuals who report potential securities law violations to authorities or regulators and will expressly prohibit employers from taking retaliatory actions against employees who disclose or seek advice about disclosing securities-related misconduct perpetrated by their employers.
Regulations are still required to make the majority of these amendments operational. However, the Securities Amendment Act, 2019 is a significant development in the efforts by British Columbia legislators to crack down on white-collar crime. While other provincial securities regulators have not necessarily followed the example adopted by British Columbia, it is likely that changes are coming. These expanded powers and increased penalties make it as important as ever that all those engaging or potentially engaging in activities regulated by the BC Securities Act make every effort to be aware of laws, regulations and policies that apply to them and continue to monitor the implementation of existing and proposed laws, regulations and policies and the ways in which the BCSC or any other regulatory body with jurisdiction makes use of them.
Endeavor Law can assist any existing or proposed securities market participants with securities law compliance and reporting matters. Endeavor Law will always seek to provide competitive pricing for any legal services requested and is pleased to discuss fee arrangements that suit any potential client.
Does not constitute legal or other advice and must not be used as a substitute for legal advice from a qualified legal professional in your jurisdiction who has been fully informed of your specific circumstance. Information may not be up-dated subsequent to its initial publication and may therefore be out of date at the time it is read or viewed. Always consult a qualified legal professional in your jurisdiction.