Fraudsters, beware. The OSC wants to close more cases, raise fines and ban more respondents.
That was the message of OSC enforcement director Tom Atkinson at today’s OSC Dialogue event in Toronto.
He took part in an afternoon panel that discussed whether global regulators are successfully deterring fraudulent activity. It also focused on whether OSC resources are being used effectively.
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He was joined by New York SEC director Andrew Calamari, U.K. Financial Conduct Authority director Tracey McDermott, and University of Toronto criminology professor Anthony Doob. The panel was moderated by Poonam Puri, associate dean and professor at York University’s Osgoode Hall Law School.
To kick off the session, Atkinson said the commission wants to expedite its enforcement process.
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Currently, firms and institutions facing charges often fight allegations for years to protect their reputations—but it’s mainly large banks and firms that can afford to do so. After years of hearings, the sanctions and warnings handed down lose their impact, he added.
The Commission also wants to jail more fraudsters. The OSC formed a crime unit in June 2013, which investigates boiler-room and fraud schemes. It works with police forces to uncover these schemes, and Atkinson said the unit has jailed 15 people so far.
In the U.S., the SEC is also working on its reputation, said Calamari. Currently, it’s focused on: insider trading; accounting fraud and compliance-related cases; and regulating the asset management space. He doesn’t want firms to dismiss fines as “the cost of doing business.”
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McDermott agreed with that statement, adding U.K. regulators want to eradicate incompetence at financial firms. They’re specifically targeting uncooperative and repeat-offender institutions, as well as those who don’t report employees’ bad behaviour.
The problem, said Doob, is regulators are considered weak. Criminals compare what could happen and what will likely happen, and often determine they won’t be caught.
That could change, he added, if they were more aware of regulators’ efforts, and if punishments were swift and significant.
Efficiency is main concern
Both no-contest settlements and the increased use of whistleblowers were brought up during the panel. Both measures could help regulators speed up the enforcement process.
But no-admit, no-deny settlements concern investor advocacy groups; they’re worried the settlements will allow firms to be less accountable for their actions.
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However, Atkinson said such settlements will only be offered on a case-by-case basis. Before allowing a firm to settle without accepting charges, the OSC will consider how the public would react.
“We don’t want to dilute accountability, so the nature of the offense [and the history of the respondent or firm] will be key,” he added, saying those who commit fraud will still have to admit guilt and will be monitored by regulators.
So far, the Commission is still reviewing the proposal and the comments made at its June forum.
The OSC is also proposing a whistleblower program, but Atkinson noted the Comission would have to set up a fund that would be partially used to compensate those who come forward. “We’re watching how SEC handles its credit for cooperation program, and there’s a lot to consider,” he said.
Calamari says SEC’s whistleblower program mirrors the one used by police during criminal investigations. Regulators target the advisor or respondent they’ve built a strong case against, and use them to get the information needed to prosecute higher executives or scheme kingpins.
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All panel participants agreed investors are most concerned about getting back stolen funds, rather than about the particulars of the enforcement process.
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