New powers granted to the B.C. Securities Commission in March 2020, to collect fines from people found to have violated the province’s Securities Act, have yet to move the needle on collection rates for monetary sanctions.
Meanwhile, the commission continues to levy sanctions in large sums.
Earlier this month, for example, a B.C. man was fined $500,000 after being found by an independent hearing panel to have illegally distributed shares in two Richmond companies. Although it is a significant fine, if history is any indication, the commission is unlikely to see anywhere near the full sum based on the annual rate of payments of enforcement sanctions such as administrative fines and re-payments of ill-gotten profits.
Last year the commission collected just $258,000 of sanctions despite being owed $553 million since inception. In 2019, the commission collected about $5.2 million, the most in any year, according to annual reports dating back a decade.
Typically, however, the annual collection totals range from $200,000 to $1 million annually. The commission budgeted $600,000 in collections last year.
The commission’s director of enforcement Doug Muir puts an asterisk on the $553 million, claiming $114 million is considered un-collectible due to death, bankruptcy, dissolved corporations or the fine being past a limitation period of 15 years. Another $161 million is considered difficult to collect due to people being in jail, missing or subject to court-ordered restitution. Or, they simply have no assets.
“People we’re going after just don’t have the money,” said Muir.
Furthermore, of the total outstanding balance, $119 million is tied to just four individuals.
One is Rashida Samji, who in 2018 began her six-year prison sentence for criminal fraud. She owes $43.8 million in fines and repayments.
Another is Michael Lathigee, who the commission had to pursue via Nevada Supreme Court to obtain at least some of the $36.7 million he owes.
And so, the commission “focuses” on about $278 million in sanctions, said Muir, adding the new laws aimed at increasing collections will need time to prove their worth for those fines and penalties that are considered collectable.
“How much of a difference will this make? We don’t know. We’re just starting to use these powers now,” he told media April 11 at an information session.
The commission has four new key tools to collect money, stemming from amendments to the Securities Act in March 2020. First, it may target assets transferred to family members, such as cars and homes. Second, the provincial government has lifted a 15-year limitation period to collect sanctions. Third, registered accounts are no longer exempt from collections. And fourth, the commission can now apply to ICBC to prevent the renewal of a person’s vehicle and driving licences.
These tools are to complement existing powers such as the commission’s ability to compel interviews to determine financial status, surveil a residence, garnish wages and restrict market participation, for example.
But the commission has only applied to have two licences not renewed, to date, including that of securities fraudster Paul Oei, who is presently appealing the application, according to the commission. Preventing licence renewals could take up to five years depending on when it was last renewed, Muir noted.
Muir and commission spokesperson Brian Kladko also note targeting property can be a lengthy process. The commission must line up as a competing creditor and still litigate the claim, said Kladko by email.
“Our new power to register against land or property will not yield results for several years,” said Kladko.
The lifting of limitation periods will also need time to bear fruit, he added.
“The removal of the limitation period means we can collect indefinitely, so the results may not be seen for decades,” said Kladko.
The commission is also now using preservation (freeze) orders on assets transferred to third-parties and family members, and in the event an accused person is found to have committed misconduct, these assets may now be turned over before they are sold, or beneficial ownership is concealed. This, again, will take time to reflect in collection figures, Kladko noted.
“We hope that our exercise of the new powers and provisions will help improve the collection rate, but we didn’t expect to see immediately money coming in as a result of the amendments,” he said.
A notable recent preservation order was placed on accountant and stock promoter Anthony Jackson of West Vancouver, who faces a hearing for insider trading this November. Jackson challenged the orders on constitutional grounds but lost his case in B.C. Supreme Court in July 2021.
But the commission found itself on the losing end of a preservation order last year when the B.C. Court of Appeal found in November 2011 the new securities laws do not supersede the Pension Benefits Standards Act. And so, Earle Douglas Pasquill, who owes $36.7 million was able to keep his $644,951 pension fund despite efforts by the commission to obtain it.
Muir said fines and restitution are imposed on market violators as a deterrence. And unpaid sanctions also mean a person cannot participate in the market should they wish following any suspension imposed on them.
“We know it’s quite frustrating to victims if they’re left without any recovery. So, we think this (the new powers) will make a dent in the overall attempt to collect. We also know it will help reinforce that these sanctions are meaningful,” said Muir.