Canadians won’t see harsher penalties for white-collar criminals: OSC

Canada’s track record for jailing white-collar criminals is pretty abysmal, and it appears that it won’t get any better.

“You see articles in the paper where people are calling out for white-collar criminals to be dragged away in handcuffs. That’s not going to happen here,” says Michael Watson, director, enforcement branch, at the Ontario Securities Commission. “It’s not part of the Canadian justice system, and people are not looking for it.”

Watson was part of a panel discussion at the annual Dialogue with the OSC on Tuesday. He told the packed house that there’s no evidence longer jail sentences create more deterrence and that “other than vindictiveness,” he’s not sure why people are calling for harsher penalties.

It doesn’t look as though going after big cases on the registration front will get any better either, as the OSC has to deal with smaller offences that other securities commissions, like the SEC, don’t have to worry about. “In the U.S., there are fifty state regulators who are responsible for SEC regulation,” Watson explains. “A lot of work is done at the state level that involves much smaller cases, which falls in our basket of responsibility. It’s something else we have to put our resources into.”

Lawyer Jeffery Leon, a partner at Bennett Jones, says just because Canada’s not throwing white-collar criminals behind bars doesn’t mean it’s not tough on crime. “Too often regulators have been lambasted for not being tough enough or prolific enough in prosecutions,” he says, “but that simply isn’t the case.”

It’s about quality, not quantity or severity, he says, adding that regulators shouldn’t feel pressured to push cases into criminal courts if it’s just regulation issues that are at play.

In Canada, many cases are settled out of court, says Leon, and that course of action is just as useful as any criminal prosecution. “There’s been a concern that settling will show compromise or weakness,” he says. “[But] it isn’t wrong, and it’s not necessarily contrary to the interest of capital markets for regulators to achieve settlements with those who are said to have committed wrongdoings.”

Canadian regulators might be feeling the heat to come down harder on white-collar criminals, but in the States, regulators are dealing with the opposite reaction. Linda Chatman Thomsen, director, division of enforcement, for the SEC, says her organization is often called out for being too harsh. “We get the flip criticism,” she says. “The rest of the world is held up as more flexible, and we’re too tough.”

While most of the audience kept quiet after the discussion, investor advocate Ken Kivenko voiced his disagreement with Watson’s and Leon’s comments. He told the panel that he’s “disappointed that people don’t want justice. And justice to us does mean sometimes putting people away.”

One comment in particular that Kivenko took issue with was Watson’s statement that the lack of enforcement is just a perception. “We’re saying it’s a problem. The media have said it; the governor of the Bank of Canada has said it; books have been written about it. To say it’s a perception scares us because it means that if you don’t feel [it’s a problem] then you’re not going to do anything about it.”

He adds that white-collar crime is “financial assault” and that he’s seen firsthand how devastated “abused investors” can become. “To hear people say that we have investor protection is disheartening,” he says. “If you take one message away, it’s please do not believe that. Talk to investor advocates much more than you are.”

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com