Advisors who are banned by their securities commission better not think about setting up shop somewhere else, as the number of reciprocal orders has shot up over the past year.
Since 2006, securities commissions across the country have been using reciprocal orders in order to sanction people in one province after they were sanctioned in another. If an advisor in Manitoba is banned from the market, the Alberta Securities Commission can prevent that person from practising in its province too.
Although the measure has been around in most jurisdictions for a couple of years, more reciprocal orders are being issued now. Between April 2007 and March 2008, the British Columbia Securities Commission made four orders. Since April 1 of this year, there have been 16.
“It’s still a fairly new process, and it’s taken some time to move forward,” says Ken Gracey, a spokesperson for the BCSC. “But now we’re trying to reciprocate as much as possible.”
John Petch, the ASC’s director of enforcement, explains that new amendments were made to the province’s legislation in late 2007 that allowed reciprocal orders of interim decisions. Partly because of that, reciprocal orders made by the ASC have risen from four in 2007 to 11 since the beginning of this year.
“The amendments have broadened our scope,” says Petch.
Commissions are also doing a better job at catching rogue advisors, so naturally, the number of orders has risen. “There’s a general increase in enforcement activity countrywide, and there’s an ongoing number of people being sanctioned,” Petch explains.
Reciprocal orders are not issued arbitrarily. Generally, commissions look at who has been banned in other provinces, and they decide whether or not that person has ties to their own jurisdiction. Sometimes an advisor could be executing trades in more than one area, or there might be evidence that the person is moving to another province to start a new operation.
“Our commission has issued a ruling indicating that there has to be some connection with Alberta, or have an apparent risk to our capital markets,” says Petch. “In addition, sometimes we might have reasons to think that a person who offended will relocate to Alberta, so we’ll issue an order.”
The Ontario Securities Commission does not technically have reciprocal orders in its enforcement arsenal, but it has similar legislation. Matthew Britton, manager of litigation for the OSC, says issues have increased, though he cannot offer any hard numbers.
He chalks up the rise in OSC’s orders to, simply, “more cooperation between the jurisdictions.”
Like the Alberta commission, the OSC will only issue its version of a reciprocal order if there’s a chance the banned advisor could affect Ontario’s markets. “Let’s say there was a ban on a resident from B.C.,” says Britton. “If the conduct occurred there, and there was no evidence the person would come to Ontario, it would probably be a situation where we wouldn’t expend our resources, but it doesn’t mean we couldn’t.”
Despite the timing of the rise in orders, this is not formally part of the new Passport system streamlining Canada’s regulatory bodies. “It’s part of a general effort towards harmonization between the various regulators,” says Petch. “This was an enforcement initiative that began before Passport.”
With increased attention being paid to reciprocal orders, will we see more coming down the pike in the months ahead? “It remains one of our strategic initiatives,” explains Petch. “We find it a very useful tool, and we intend to try and take as much advantage of this as we can.”
Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com
(08/21/08)