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Canadian securities regulators ramp up fraud focus

Jennifer Kwan
Fin - Balance Sheet - CA

Bad doers beware: Canadian securities regulators have pegged fraud, a financial crime of "deceit and deprivation," as a key priority.

Such bad behavior causes tremendous harm and victims of fraud seldom get their money back, said Bill Rice, chief executive of the Alberta Securities Commission and chair of Canadian Securities Administrators, the umbrella group for the country’s provincial and territorial securities regulators.

"Treat these people as fraudsters -- not simply people who have breached provisions of our statues -- and seek jail terms," said Rice.

"We're all dealing with these larger, more dramatic offences. They are really criminal-type offences. We are going to provincial courts to try and have them addressed."

Fraud cases now have a distinct category under securities law violations, according to the recently released 2012 annual enforcement report, which reflects the priority placed on countering fraud in the country's $2.16 trillion capital markets.

There is broad realization regulators are dealing with some big problems involving large sums of money that affect numerous investors, but authorities "are not able to within our own administrative law process get the kinds of sanctions that really make an impact on these people," Rice said in an interview.

As well, complaints are typically made after the fact.

"It isn't our place to run around and close down every operation that might potentially, possibly become a problem. We don't have jurisdiction to do anything until there is a problem," he said.

While the enforcement report outlines some success stories across various jurisdictions, attempts to prosecute some higher-profile cases have fallen flat. The acquittal in January of three former executives of Nortel Networks highlights the long and difficult process.

Last year, authorities commenced 34 fraud cases out of a total 145 cases including illegal distributions, market manipulation and insider trading.

Investor education and maintaining professional standards of financial advisors is a big part in combating the problem, said Jared Webb, a Victoria, B.C.-based financial advisor and membership chair for the Vancouver Island chapter of Advocis, a financial advisors association.

"Financial literary is an incredibly important step for Canadians for ensuring their own success, and make them aware of situations that might otherwise be unfavorable," he said.