On June 29, 2022 the Canadian Securities Administrators (CSA) issued its fiscal year 2021-2022 Enforcement Report (Report), for the year ended March 31. The Report indicates an increased attention being applied by the Canadian securities regulators on the crypto-asset space, an emphasis on employing various tactics to disrupt ongoing or potential illegal activity, that the CSA is continuing to develop and enhance their market analytics and technological capabilities to address evolving threats, and collaboration on international investigations.
There were 14 crypto cases where the CSA took action to clarify and enhance regulations this past year. The message from the CSA Chair also noted increased instances of “high-pressure sales tactics being used to lure Canadians into fraudulent investment offerings, particularly related to crypto assets”. The message also indicated ongoing development of technologies and training to improve enforcement capabilities in the crypto-asset space. As such, market participants should be aware of the special attention being given to this area.
The message from the Chair also stressed the importance of preventative measures for investor protection. The use of disruption techniques, such as investor alerts, which are used to warn the public about potential harmful or illegal activity, has increased this past year. Specifically, 236 investor alerts were issued by CSA members in 2021, representing a significant increase compared to the 159 issued in 2020.
Over the past year, several CSA members were also involved in a 20-country investigation, resulting in the U.S. Securities and Exchange Commission charging defendants in a fraudulent penny stock scheme that generated more than USD$194 million in illicit proceeds.
Market participants should also note that the 59 matters commenced in 2021 represents a continuation in the uptick of enforcement proceedings over last couple of years (for reference, there were 52 cases commenced in 2020). Of the fines imposed, the majority stemmed from the illegal distribution of securities, which refers to the sale of securities that have failed to comply with securities laws regarding registration, trading, or disclosure.
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August 17, 2022