The Ontario Securities Commission (OSC) has begun discussions with legislators and law enforcement agencies in an effort to expand its powers to include wiretapping rights with respect to parties under investigation.
As the country’s largest and most influential securities regulator, the OSC’s policies and decisions impact the majority of brokerages, mutual funds, and pension funds in the country. In recent years the OSC has placed emphasis on the need for more comprehensive anti-fraud and law enforcement strategies.
In a prepared speech to the Toronto Region Board of Trade on March 27, 2014, the OSC’s chair, Howard Weston, commented that while the regulator “continues to take an aggressive approach to insider illegal trading”, he argued the OSC is “missing a key tool that would assist in more effectively enforcing prohibitions against insider trading”.
Mr. Weston commented that wiretapping powers would allow the OSC to obtain direct evidence of the intention to engage in illegal tipping and insider trading. He said the OSC is currently in consultation with the Royal Canadian Mounted Police, the Ontario Provincial Police, and Ontario’s Attorney General regarding the necessary legislative and procedural amendments to have these offences included among those where wiretapping is permissible.
These new powers, however, would not be wielded directly by the OSC’s administration. Instead, they would be used by the recently created Joint Serious Offences Team (JSOT). Formed in May, 2013, the JSOT is comprised of OSC staff members, former Crown prosecutors, and police officers. The specialized unit is presently tasked with using search warrants and undercover surveillance to investigate criminal activities in the securities markets that could then proceed to court as criminal offences.
At its inception, the JSOT engaged 20 staff members, eight of whom were given special constable status by the Ontario Provincial Police. The JSOT unit operates within the OSC, but on a different floor and uses a computer network cut off from the regulator’s main server to preserve proper chains of evidence and the confidentiality of sources. It has also been tasked to work closely with the OPP’s Anti-Rackets Branch, the RCMP’s Financial Crime Program, and the Attorney General to bring more criminal cases before the Ontario Provincial Courts. The JSOT’s mandate arises out of provisions in both the Ontario Securities Act and the federal Criminal Code.
To date, the JSOT’s efforts have resulted in 20 search warrants having been executed, with charges laid in seven cases. The OSC maintains that the power to wiretap suspects engaged in white collar crime will facilitate the prosecution of criminal charges, given the need for proof that suspects engaged in illicit trades based on information not available to the public. The same argument is raised with respect to combatting the crime of “tipping”, as proof of conversations between suspected parties – and the passing of illegal tips – may lead to a greater success rate at trial.
In other securities enforcement news, this past year saw more jail time for those convicted under the OSC’s criminal investigations. The OSC’s annual enforcement report, released March 21, 2014, shows the regulator was successful in four separate provincial court convictions in 2013, with sentences totalling 63 months of imprisonment. This rate is up from 2012 where the OSC secured convictions against two defendants totalling 21 months in jail.
