Story by Gordon Hoekstra • Thursday
The B.C. government introduced changes this week to laws meant to help its financial market regulator better investigate and target white-collar crime.
Brenda Leong, CEO and chairperson of the B.C. Securities Commission.© Provided by Vancouver Sun
Changes will strengthen the B.C. Securities Commission’s powers to gather evidence and close a loophole that prevented it from collecting penalties from pension retirement savings.
Amendments to two acts pertaining to pension savings and to the Securities Act will also allow the BCSC to be able to impose its own orders more rapidly if someone is convicted criminally in the court system of investment-related crime.
The changes were introduced and received a first reading Wednesday and are expected to be passed during this spring’s B.C. legislative session.
“By strengthening protections against fraudsters, we’re making sure the B.C. Securities Commission continues to have the tools it needs to ensure the rules are being followed and people’s financial well-being is protected, ” said Minister of Finance Katrine Conroy.
The latest changes build on Securities Act amendments that went into effect in 2020 that also strengthened the BCSC’s ability to pursue financial criminals and collect penalties.
The earlier changes included increased powers for the BCSC to freeze and seize property transferred to third parties for below market value. Transferring property to third parties — such as spouses or other relatives — is a technique sometimes used by fraudsters to put assets out of the reach of regulators trying to collect on penalties.
The changes came after then-B.C. finance minister Carole James ordered the securities commission to improve enforcement and fine collections.
James called for the enforcement improvements immediately after a 2017 Postmedia investigation found more than half a billion dollars in penalties had gone uncollected by the BCSC in the previous decade, and that criminal prosecutions by police were rare.
The 2020 amendments also allowed, for the first time, the regulator to freeze and seize retirement savings, which are normally off limits in settling penalties.
However, a 2021 B.C. Court of Appeal ruling found the BCSC’s effort to freeze the retirement savings of Earle Douglas Pasquill and go after them to pay $21.7 million in penalties he owed was outside its authority.
A BCSC tribunal had ruled in 2015 against Pasquill and Michael Patrick Lathigee for raising tens of millions from almost 700 investors without telling them the real estate development projects pitched were in serious financial difficulty. The panel also found millions raised to invest in U.S. foreclosures had been redirected to prop up the real estate developments with unsecured loans.
The high court found, however, provisions in the pension acts protected Pasquill’s pension retirement savings, taking precedence over the Securities Act.
The latest amendments to be passed this spring will change the exemption for pension savings specifically for BCSC penalties.
The 2023 legislative changes also allow the BCSC to impose an administrative penalty of up to $1 million or impose market restrictions such as a ban on trading securities if a witness does not comply with a demand to provide evidence. Previously, the BCSC’s only recourse to compel witnesses was to apply to the B.C. Supreme Court for a contempt charge, a lengthy process that could delay and negatively affect investigations.
“These amendments will give the B.C. Securities Commission better tools to go after the bad actors who harm investors and undermine confidence in the investment market,” said Brenda Leong, CEO and chairperson of the B.C. Securities Commission.
Other changes the B.C. government have made include that claims from the securities commission now take precedence over other creditors, and its sanctions will no longer expire after 15 years.
The intention is that these changes will allow more money to be returned to victims of financial fraud.
Postmedia’s analysis of securities commission and court records showed at least 4,900 fraud victims lost $185 million in schemes from fiscal 2007-08 to 2016-17.