Positive enforcement outcomes in 2017
Montréal – The Autorité des marchés financiers (the “AMF”) today reported on its annual enforcement of the laws governing the Québec financial sector. In 2017, AMF teams generated many positive outcomes in complex cases and intensified their efforts and partnerships with a view to developing and refining technology tools that help the AMF carry out its mission more effectively.
“The AMF was very active on the enforcement front in 2017. In response to the Jordan decision, which limits the duration of court proceedings in penal matters, additional resources were hired and our teams worked hard to advance and complete a significant number of cases within the new framework outlined by the Supreme Court of Canada,” said Jean-François Fortin, Executive Director of Enforcement at the AMF. “The surge in cryptocurrencies also drew our attention as some individuals are taking advantage of the digital currency craze to pursue illegal activities and defraud investors. The AMF has therefore stepped up its preventive measures to caution the public about the dangers associated with cryptocurrencies and put an end to the illegal schemes as soon as they are launched.”
In 2017, 142 individuals and firms were sanctioned by the courts for various offences under the laws administered by the AMF. In all, approximately $44,405,919 in fines and administrative penalties were imposed further to AMF interventions. Moreover, proceedings by the AMF resulted in seven individuals receiving prison sentences of more than 26 years.
Eight individuals were given prison terms totalling nearly 17 years at the conclusion of cases involving investigations by the Sûreté du Québec, Revenu Québec or the RCMP in partnership with the AMF, and proceedings launched by the Director of Criminal and Penal Prosecutions of Québec and the Public Prosecution Service of Canada.
Prohibition of binary options
In recent years, the AMF has noticed an increase in Web platforms illegally offering binary options to Québec consumers. The promoters of these platforms promise quick and easy profits that, ultimately, are never paid out to investors. Instead, the fraudsters embezzle the funds invested and sometimes even steal personal data from their victims.
On February 1, 2017, after issuing several warnings to Quebeckers about the risks of binary options, the AMF proposed to formally prohibit their sale to Québec consumers. On September 28, 2017, the sale of binary options was formally banned in Québec and the rest of Canada, except for binary options with a term to maturity of 30 days or longer. This ban took effect on December 12, 2017.
“The AMF has been at the forefront in fighting back against illegal binary options trading platforms,” said Mr. Fortin. “The current ban demonstrates our commitment to stop these fraudulent activities and sanction the offenders.”
Initial cryptocurrency offerings: A top AMF priority
Most initial cryptocurrency offerings, more commonly known as initial coin offerings (“ICOs”), are a means of raising capital over the Internet and consist in offering digital “assets” to finance start-ups. In many cases, such operations are conducted in violation of the Securities Act and only serve to enrich individuals or firms that embezzle money invested by their victims.
The AMF is committed to fighting this growing problem and has taken measures to protect consumers and prevent illegal cryptocurrency offerings. Last year, in addition to raising public awareness of ICOs, the AMF took steps to prohibit PlexCoin, PlexCorps and their promoters from soliciting investors in Québec. In July and September (available in French only) 2017, the parties were the subject of two series of orders issued by the Financial Markets Administrative Tribunal (the “Tribunal”) at the request of the AMF. As well, the Securities and Exchange Commission, which oversees and regulates U.S. financial markets, underscored the efforts made by the AMF, which led to actions being taken in the United States.
Technology tools for meeting new challenges
The fast-paced growth of financial technologies and artificial intelligence poses new challenges to regulators with respect to prevention and detection. More than ever, enforcement agencies must collaborate to implement a regulatory framework that is robust and internationally consistent.
To this end, on January 17 and 18, 2018, the AMF hosted representatives from over 35 of the world’s regulators as part of the first international Technology Applied to Securities Markets Conference. Participants shared common issues, presented their current and next-generation technology tools and discussed new potential avenues for enforcement.
In the past few years, the AMF has focused its attention in resolving its cases on ensuring the payment of indemnities to defrauded investors. These efforts helped bring many cases to a positive conclusion in 2017, obtaining refunds totalling $9,377,850 for victims.
Key 2017 enforcement statistics
In 2017, the AMF launched 82 lawsuits before the Court of Québec or the Tribunal against 124 individuals and firms for various offences under the laws it administers. The following charges were laid:
- 64 charges for offences under the Securities Act or the Derivatives Act;
- 109 charges for offences under the Act respecting the distribution of financial products and services (“Distribution Act”);
- 31 charges for offences under the Money-Services Businesses Act;
- 2 charges for offences under the Act respecting contracting by public bodies.
Distribution without a prospectus was once again the most common category of offence identified and sanctioned in Québec. The AMF continued to be the most active regulator in Canada in this regard, bringing 15 lawsuits against 25 individuals and firms and completing 25 lawsuits against 59 individuals and firms. In 2017, the AMF also pursued its efforts to sanction those responsible for market manipulation and illegal insider trading, with eight lawsuits resulting in hefty sentences against 18 individuals and firms.
The AMF also obtained nine freeze orders from the Tribunal against 30 individuals and firms. Freeze orders are issued during an investigation to protect assets and prevent them from being transferred or dissipated, as they may eventually benefit victims. In addition, the AMF obtained orders against 25 individuals and firms to cease certain regulated activities, to cease acting as a representative, officer or director, or to cease trading in securities.
Fines and administrative penalties imposed in 2017
Approximately $44,405,919 in fines and administrative penalties was imposed in 2017 as follows:
- $39,196,284 in fines imposed for offences under the Securities Act or the Derivatives Act;
- $1,354,735 in administrative penalties imposed by the Tribunal for compliance failures under the Securities Act or the Derivatives Act;
- $627,725 in fines imposed for offences under the Distribution Act;
- $527,767 in administrative penalties imposed by the Tribunal for compliance failures under the Distribution Act
- $241,000 in fines and administrative penalties imposed for offences and compliance failures under the Money-Services Businesses Act;
- $5,000 in fines and administrative penalties imposed for offences and compliance failures under the Act respecting contracting by public bodies;
- $2,453,408 in administrative penalties imposed by the AMF;
- 8,891 hours of compensatory work performed by nine offenders, representing a refund of $2,117,200 in penal fines.
Lastly, a total of $620,494 was disgorged to the AMF under the Tribunal’s remedial powers, provided for in the Derivatives Act, the Securities Act and the Distribution Act, that are intended to deprive a person of amounts obtained as a result of non-compliance.
The Autorité des marchés financiers is the regulatory and oversight body for Québec’s financial sector.
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Sylvain Théberge: 514-940-2176
Québec City: 418-525-0337
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