Sanctions by the Commission
The Commission has the authority to impose a range of sanctions on individuals and companies for violations of securities law or conduct that is contrary to the public interest in Ontario. Sanctions are imposed either at the conclusion of a contested proceeding or as part of a settlement reached between the respondent and OSC staff and approved by the Commission.
The purpose of the Commission’s sanction powers is to deter future wrongdoing in the capital markets. Temporary or permanent bans can be imposed on the conduct of an individual, such as trading bans and bans against acting as a director or officer of a public company and acting as or becoming a registrant in Ontario. Conduct orders are imposed to restrict an individual’s future activity in the capital markets or to ban them from the markets entirely, and thereby deter wrongdoing. The Commission has the authority to bring cases before the Ontario Court of Justice involving alleged violations of Commission orders. Breaches of the terms of a Commission conduct order can be punishable by jail sentences imposed by the Court.
The Commission also has the power to impose monetary sanctions for breaches of Ontario securities law and has exercised this authority since 2005. Monetary sanctions include administrative penalties and disgorgement orders. In imposing administrative penalties, the Commission may order a person or company found to have breached securities law to pay up to $1 million for each failure to comply. Disgorgement orders require the respondent to pay the amount obtained as a result of the non-compliance with securities law. Sanction amounts depend on the circumstances of each proceeding. The Commission has the discretion to consider a respondent’s ability to pay as a factor in imposing financial sanctions but it is the Commission’s practice to impose the monetary sanctions that are appropriate in the circumstances, irrespective of a respondent’s ability to pay. That practice is intended to deter others from contravening the Securities Act.
Adjudicative panels can also order a respondent to pay the costs of an investigation and/or hearing.
OSC staff make every reasonable effort to enforce sanction orders, collect monetary sanctions and, where appropriate, preserve assets related to an investigation or proceeding. For example:
- Sanction orders are routinely filed in court by OSC staff. Under securities law, Commission orders then become court orders as well.
- Collection methods used for monetary sanctions include seeking additional court orders granting the Commission a security interest in a respondent's assets, such as shares, and registering the orders on titles to real property so that the property cannot be sold unless the money is paid.
- Staff may seek freeze orders on assets at the earliest possible stage of a proceeding or, in some cases, during investigations. Freeze orders can prevent investors’ assets from being transferred or dissipated.
- Staff also seek Commission orders that extend a conduct ban until monetary sanctions are paid in full.
The recovery of monetary sanctions in many proceedings is limited because respondents may have no assets or limited assets, may no longer reside in Ontario, or cannot be found. Some respondents may have hidden assets in the names of others.
From 2005 up to December 31, 2012, the Commission has assessed $306,641,400 in monetary sanctions and costs, of which $118,097,683, or 38.51%, has been collected. The Commission collected $112,845,817, or 61.17%, of the $184,480,470 in monetary sanctions and costs assessed from settlements and $5,251,866, or 4.30%, of the $122,160,930 assessed from contested hearings.
For the 2013 fiscal year to date, the collections rate for monetary sanctions and costs assessed from settlements is 5.78%, or $3,710,366, of the $64,179,616 in total assessments. $1,951,866 of the $36,408,854 assessed from contested hearings and $1,758,500 of the $27,770,763 assessed from settlements has been collected. The OSC Annual Report now includes disclosure about the collections rate which will be provided on an ongoing basis.
Staff are continuing to consider ways in which to improve the Commission’s collections procedures. Staff are examining the collections experience of other organizations in both the public and private sector to see what methods may be effective and could be used by the Commission.
Information on respondents who are delinquent in paying monetary sanctions, disgorgement orders and costs is available under Respondents Delinquent in Payment of Commission Orders.
Please note the delinquent respondents list does not include amounts owing to the Commission in proceedings that are subject to ongoing litigation or outstanding appeals or costs owing to the Commission which were imposed by courts in Ontario.