CSA increased bans, fines in latest fiscal year

The Canadian Securities Administrators (CSA) banned nearly twice as many people and companies in fiscal 2022-2023 than it did the previous year.

On Thursday, CSA released its annual summary of activities through to the end of June 2023, highlighting its greater oversight of crypto firms, ongoing reviews of advisor titles, client-focused reforms, and the banning of 81 individuals and 23 companies, including permanent bans for 39 people and 16 companies.

In the previous year (ending March 31, 2022, with results updated in July 2022), it banned 44 individuals and 13 firms.

Fines handed out in fiscal 2022–23 totalled $18.4 million, while compensation and disgorgement totalled $20.9 million, compared to $15.5 million and $14.9 million respectively in the previous year.

Three people faced total jail time of five-and-a-half years for Securities Act violations, compared to six people who received 9.4 years jail time the previous fiscal year. Two people were sentenced in criminal court for a total of 27 months’ house arrest, compared to one person who received a six-year criminal sentence in the previous year.

CSA also issued 758 investor alerts during the year, up significantly from 236 the previous year. Of the year’s 758 alerts, 422 were crypto-related.

The regulators took enforcement action in 16 crypto-related matters, the report said, compared to 14 the previous year.

Twelve crypto asset trading platforms signed pre-registration undertakings (PRUs) — a new development implemented last year — to continue operations while their registration applications for registration are being reviewed. The PRUs don’t necessarily mean the firms will be granted registration, the report said.

Further, “we encourage all investors to exercise caution and consider seeking advice from a registered investment advisor before investing in these inherently high-risk assets,” Stan Magidson, CSA chair, said in the report.

New rules, proposals and reviews were also highlighted in this year’s summary, including those related to total cost reporting, chargebacks in mutual funds and the client-focused reforms (CFRs).

Related to the CFRs, the regulators continue to consult on client-facing titles and how they align with services and products offered, the report said. The regulators also reminded registrants that CFR-related reviews will continue later this year, specifically concerning enhanced know-your-client, know-your-product and suitability requirements.

A review already conducted of the CFRs’ conflicts-related provisions among 172 firms found deficiencies.

Launches in the year included SEDAR+ to improve disclosure and the CSA investor advisory panel (IAP) to improve investor protection.

“The retail investor perspective is key to our work,” the report said. “The feedback provided by the IAP is instrumental to our long-standing commitment to protecting retail investors.”

The implementation of the new self-regulatory organization (the Canadian Investment Regulatory Organization) was noted, as was the creation of a task force to foster engagement with Indigenous Peoples, and work on climate-related disclosure rules consistent with international standards.

Ongoing activities included providing the Ombudsman for Banking Services and Investments with the authority to make awards that are binding on firms.

The regulators also said they’re reviewing comments on trusted contact persons and temporary holds on client accounts, and considering “conducting a retrospective review of the amendments that would assess the efficacy of the framework.”