AMF Enforcement Activity - Sterner sanctions in 2010

Organization

Montréal - In conjunction with the release of the 2010 Enforcement Report by the Canadian Securities Administrators (CSA), the Autorité des marchés financiers (AMF) today reported on its enforcement of the Securities Act and An Act respecting the distribution of financial products and services ("Distribution Act") in 2010.

"The amendments to the laws administered by the AMF have been effective, as they have given the AMF further tools for sterner sanctions," said Me Nathalie Drouin, Executive Director, Enforcement and Legal Affairs at the AMF. In 2010, the courts handed down 80 months of prison terms and fines of over $10 million for securities offences committed in Québec. "When the AMF prosecutes offenders, stiff penalties are its priority," added Me Drouin.

The AMF was highly active in detecting crimes and enforcing laws in 2010: 67 suits were filed and 72 cases were concluded in Québec courts in connection with securities matters. The AMF continued to focus on major offences, such as illegal insider trading and market manipulation involving Dominic Côté, Carol McKeown, and Daniel Ryan (pennystockchaser.com).

Illegal distributions: the most common offence

However, in Québec, as elsewhere in Canada, illegal distribution remains the most common type of offence that was detected and prosecuted in 2010. Freeze and cease trade orders issued against Carole Morinville and Pierre Jolicoeur, prison terms handed down against the promoters of O de Mer Propulsion and Enviromondial and major suits filed against Jean Bissonnette and Hershey Rosen are just some of the illegal distribution cases the AMF actively investigated last year. In a number of illegal distributions uncovered in 2010, the relationship of trust between investors and the individual offering the investment was very strong. All too often this relationship is so well-established that victims cannot imagine that the investment could be anything other than genuine and are hesitant about contacting the AMF.

This is why the AMF also stepped up its community relations with consumers and strengthened its education activities by increasing the number of conferences given by its mobile team and pursuing its "Before investing, investigate" campaign with TV personality Guy Mongrain. The AMF believes that education is a key component of fraud prevention that complements its crime detection measures. In 2010, the AMF partnered with Éditions Protégez-Vous, Gesca and Quebecor to reach even more Québec households.

2010 enforcement highlights

Here are some AMF enforcement figures for 2010:

Charges laid by the AMF

A total of 2,069 charges:

  • 1,822 charges for violations under the Securities Act;
  • 227 charges for violations under the Distribution Act;
  • 20 charges for violations under An Act respecting insurance.

Individuals and companies sanctioned

A total of 751 individuals or companies sanctioned:

  • 80 individuals and 12 companies sanctioned following a decision by the Québec administrative securities board ("Bureau") or a penal court for violations under the Securities Act;
  • 186 individuals and companies sanctioned for late filing of or failure to file insider trading reports;
  • 11 individuals and companies sanctioned in penal court for violations under the Distribution Act;
  • 13 companies sanctioned for violations under sections 115 and 117 of the Distribution Act;
  • 449 individuals and companies sanctioned or covered by decisions related to registration and the right to practice under the Distribution Act.

Fines, penalties and sanctions

A total of $11,445,109.15:

  • $10,326,041.15 in fines for failures or violations under the Securities Act;
  • $168,018 in administrative penalties imposed by the Bureau;
  • $198,000 in administrative penalties imposed by the AMF;
  • $606,000 in fines imposed for late filing of or failure to file insider trading reports;
  • $133,300 in fines for violations under the Distribution Act;
  • $13,750 in administrative penalties imposed on individuals or companies for failures or violations under the Distribution Act.

Prison terms of over six and a half years:

  • A second three-year prison term against Stevens Demers;
  • Five prison terms ranging from three to 12 months in the matter of O de Mer Propulsion;
  • A prison term of 12 months against Joseph Simon Lacroix in the matter of Digital World Financial.

Other data

Decisions rendered in Québec for securities violations accounted for one-third of all securities-related decisions in Canada. Almost 85% of decisions rendered by judicial tribunals under Canadian securities legislation in 2010 were handed down in Québec.

Proceedings launched in Québec for securities violations also accounted for just over one-third of all securities-related proceedings launched in Canada.

Illegal distributions were the most common type of violation prosecuted in 2010 in Québec (55 of the 72 cases concluded by the AMF).

2010 highlights

Date

2010 highlights

 

February 2010 :

A practical guide for investors launched in co-operation with Éditions Protégez-Vous.

The AMF sues René Sauriol, a former insurance representative practising in the Outaouais, who convinced clients to invest in a shell corporation that used the name and logo of a Swiss company, and fines him $682,000. Seven investors are compensated in October 2010.

March 2010 :

Michel L'Italien is fined a total of $500,000 for illegal distributions among North Shore residents.

May 2010 :

Freeze and cease trade orders are issued in connection with the activities of Financière Hélios Capital, Agence Créditis Plus inc. and Altima Environnement Technologie inc. The AMF reminds investors to be careful about withdrawing funds from a LIRA, an RRSP or a pension fund if they are promised cash and high-yield investments with no tax impact.

June 2010 :

The AMF steps in to protect shareholders of Véhicules Nemo inc.

July 2010 :

Stevens Demers, the former president of Enviromondial, is imposed an additional 36-month prison term. He was serving a prison term at the time of sentencing.

August 2010 :

The AMF urgently freezes the accounts of former insurance representative Carole Morinville and Pierre Jolicoeur, a representative in the Beauce region.

O de Mer Propulsion of Sainte-Adèle and five of its officers fined over $4 million and imposed prison terms for illegal distributions made primarily in the Québec City area.

September 2010 :

Joseph Simon Lacroix, the sole director of Digital World Financial inc., found guilty of illegal distributions; he is given a 12-month prison term and fined $660,000.

October 2010 :

The AMF warns investors about solicitations made through popular websites.

The AMF launches major financial education initiatives in partnership with Quebecor Media and Gesca.

November 2010 :

Dominic Côté, a former IT manager at a leading law firm, is found guilty of illegal insider trading and fined $1,260,336.56. He traded on the stock market using privileged information acquired through his IT administrator profile at the law firm.

Martial Côté and Richard Quesnel also found guilty of illegal insider trading. In March 2006, they traded in the shares of Consolidated Thompson while in possession of privileged information, namely, the results of a feasibility study on Bloom Lake Iron Ore Deposit. Richard Quesnel is appealing his conviction.

December 2010 :

The AMF files numerous major suits, including against Jean Bissonnette, Hershey Rosen and six other individuals in the matter of C.T.I.C. In all, 984 charges are filed and the AMF seeks prison terms and more than $12 million in fines.

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