OSC Investor News
OSC gains momentum in prosecuting fraud
June 28, 2011 -
The Ontario Securities Commission is starting to see the results of its first prosecutions under anti-fraud and anti-misrepresentation provisions that were added to the Securities Act (Ontario) in 2006.
“These provisions have given us the ability to more effectively prosecute cases involving illegal sales of worthless securities,” says Karen Manarin, Deputy Director, Enforcement. “Most of our cases targeting the illegal sale of securities now include both an allegation of illegal distribution and an allegation of fraud.”
The OSC can pursue a case in a proceeding before an adjudicative panel of the Commission, where the sanctions include monetary penalties and bans, or in a quasi-criminal proceeding before the Ontario Court of Justice, which has the power to impose fines and jail terms.
Cases relating to fraud often involve intensive investigation and litigation over a period of several months or years. In 2010, the Commission released decisions relating to its first four proceedings concluded under the fraud provision. The Commission found that acts constituting fraud included non-disclosure of important facts in offering memoranda, use of investor funds for personal expenses, misrepresentation of background and experience in the securities industry, and unauthorized diversion of funds.
A significant milestone was reached in April 2011, when the Ontario Court of Justice made its first finding of guilt for fraud in proceedings brought by the OSC. In May 2011, the court found multiple defendants guilty of fraud in relation to a boiler room operation. One of the defendants, Abraham Grossman, was recently sentenced to three years in jail for his role. The others will be sentenced in July.
The OSC applies a number of criteria to determine whether to pursue a case before the Commission or the court. For example, the OSC will look at the seriousness and complexity of the case, egregiousness of the conduct and the appropriateness of the sanctions, among other things. The process often involves balancing the desire for speed with the appropriate deterrence measure.
In general, the OSC has more control over the timing of a Commission proceeding than a court proceeding. The Commission may also be better equipped to deal with complex matters in securities law because its panels consist of legal and industry experts who have specialized expertise in capital market regulation. However, the court has the ability to impose jail terms, which sends a strong message of deterrence to those who try to exploit investors.
You can find information about proceedings before the Commission and before the courts under OSC Proceedings on the OSC website.
For more information:
“These provisions have given us the ability to more effectively prosecute cases involving illegal sales of worthless securities,” says Karen Manarin, Deputy Director, Enforcement. “Most of our cases targeting the illegal sale of securities now include both an allegation of illegal distribution and an allegation of fraud.”
The OSC can pursue a case in a proceeding before an adjudicative panel of the Commission, where the sanctions include monetary penalties and bans, or in a quasi-criminal proceeding before the Ontario Court of Justice, which has the power to impose fines and jail terms.
Cases relating to fraud often involve intensive investigation and litigation over a period of several months or years. In 2010, the Commission released decisions relating to its first four proceedings concluded under the fraud provision. The Commission found that acts constituting fraud included non-disclosure of important facts in offering memoranda, use of investor funds for personal expenses, misrepresentation of background and experience in the securities industry, and unauthorized diversion of funds.
A significant milestone was reached in April 2011, when the Ontario Court of Justice made its first finding of guilt for fraud in proceedings brought by the OSC. In May 2011, the court found multiple defendants guilty of fraud in relation to a boiler room operation. One of the defendants, Abraham Grossman, was recently sentenced to three years in jail for his role. The others will be sentenced in July.
The OSC applies a number of criteria to determine whether to pursue a case before the Commission or the court. For example, the OSC will look at the seriousness and complexity of the case, egregiousness of the conduct and the appropriateness of the sanctions, among other things. The process often involves balancing the desire for speed with the appropriate deterrence measure.
In general, the OSC has more control over the timing of a Commission proceeding than a court proceeding. The Commission may also be better equipped to deal with complex matters in securities law because its panels consist of legal and industry experts who have specialized expertise in capital market regulation. However, the court has the ability to impose jail terms, which sends a strong message of deterrence to those who try to exploit investors.
You can find information about proceedings before the Commission and before the courts under OSC Proceedings on the OSC website.
For more information:
