In a recent post, we discussed securities legislation introduced in Manitoba that would add Manitoba to a growing list of provinces that have provided greater legal authority to self-regulatory organizations ("SROs"), purportedly to strengthen investor protection. British Columbia has now also passed amendments to provincial securities legislation that grant SROs enhanced enforcement powers. Despite the momentum the trend has gained, it remains unclear whether the goal of investor protection is in fact served by bolstering SRO collection powers.

The British Columbia Amendments: On April 19, 2018, the British Columbia Legislature passed Bill 16, which amends the British Columbia Securities Act to permit SROs to file their decisions with the British Columbia Supreme Court (the "Amendments"). On being filed under this provision, a decision becomes enforceable as a judgment of the court.


Both of the primary SROs in the securities industry, the Investment Industry Regulatory Organization of Canada ("IIROC") and the Mutual Fund Dealers Association ("MFDA"), are recognized in British Columbia. The Amendments will allow IIROC and the MFDA to use court orders to enforce fines in British Columbia, which reportedly has the largest amount of unpaid fines among the provinces. The Amendments do not grant SROs the ability to retroactively enforce prior decisions.

Attorney General David Eby has also indicated that more changes may be coming.

The Momentum Builds: The trend of provinces giving SROs more legal authority continues to gather steam. British Columbia is the sixth province to provide SROs with enhanced enforcement powers, joining Manitoba, Alberta, Quebec, Prince Edward Island, and Ontario. In its annual Enforcement Report, published on May 4, 2018, IIROC states that it is continuing discussions with other provincial and territorial governments to obtain similar enforcement tools to provide "a consistent level of investor protection from coast to coast".


Collecting More, But What For? In an introduction to the Enforcement Report, IIROC's Senior-Vice President, Registration and Enforcement, Elsa Renzella states these legislative changes "make a positive, crucial contribution to investor protection in Canada." In support of this statement, Ms. Renzella indicates that fine collection rates in Quebec and Alberta, where IIROC has been given enhanced enforcement powers, are significantly higher than the national average. She further reports that in Ontario, where IIROC recently obtained legal authority to enforce fines through the courts, fines collected by IIROC increased from $2.7 million to $3.4 million between 2016 and 2017.

However, IIROC's Enforcement Report does not address comments (including those raised in our previous post) that granting enhanced enforcement powers to SROs may not actually strengthen investor protection. While additional fines are reportedly being collected as a result of these new powers, the concern that these additional fines are potentially being collected at the cost of fairness has not been assuaged. Nor does the Enforcement Report answer questions about where these additional fines go once collected.

IIROC's Enforcement Report does insinuate that the additional powers have had an effect on the behaviour or conduct of advisors. According to Ms. Renzella, IIROC sees "an overall change in behaviour with sanctioned advisors taking their responsibilities to IIROC more seriously" in jurisdictions where IIROC has the ability to collect fines through the courts. There is no further elaboration on this assertion, or the basis for it, in the Enforcement Report.

Even if this observation is true, it fails to address the point of commentary, like ours, that such enhanced enforcement powers are not necessary to deter offences or hold dealers and advisers accountable for wrongdoings. Despite Ms. Renzella's assertion (in her introduction to the Enforcement Report) that millions in fines remain uncollected from individuals who "walked away from discipline without any repercussions", the Enforcement Report itself notes that firms and individuals who wish to remain members or registrants of IIROC must pay their fines. In other words, as we highlighted in our previous post, to avoid payment of fines or penalties imposed by an SRO, an individual needs to leave the securities industry. IIROC's Enforcement Report does not explain why a career-ending punishment is not sufficient.

The Takeaway: British Columbia recently passed amendments to its securities legislation that will give SROs the ability to enforce payment of fines through the courts. While the trend of giving more legal authority to SROs appears to be building momentum across Canada, and is reportedly resulting in higher fine collection rates, concerns that the goal of investor protection is not being served remain unanswered.

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