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Alberta will recognize securities sanctions by others
By Jeff Buckstein
July 17 2015 issue

Most new orders and settlement agreements made by other provincial and territorial securities regulators across Canada, covering sanctions like cease trade orders and director and officer bans, will automatically take effect and be reciprocated in Alberta under a new section of the Securities Act (Alberta) that went into force on July 1.

“That order or agreement will come into effect without notice to the person or company and without a hearing. The order will have effect as if it were made by the Alberta Securities Commission, with only such modifications as the circumstances require. If the original order or agreement is varied, amended or revoked, that change will also apply in Alberta,” said the Alberta Securities Commission (ASC) in a press release announcing this measure.

This is an historic first for any provincial or territorial securities commission.

“No other Canadian securities commission has implemented this type of reciprocal enforcement of orders issued by other securities commissions in Canada, or also foreign securities commissions,” said Shara Roy, a partner with Lenczner Slaght Royce Smith Griffin LLP in Toronto.

The ASC has long opposed the concept of having a national regulator in Canada, and while this move might raise the spectre of a possible changing position, the ASC and legal experts say that is not the case.

“I don’t think that there’s much more to be read into it in terms of providing any greater opportunity for discussions on a national regulator,” said Greg Temelini, a partner and securities litigator with Wright Temelini LLP in Toronto.

“Alberta and Quebec in particular have made their feelings well known about a national regulator. They’re not interested in it, and I wouldn’t think that this development tells us anything or gives us any reason to suggest that they’ve changed their mind. All it is really is a way for them to piggyback on the work of other commissions and get the benefit of the work that other commissions have done in bringing cases or imposing sanctions,” he added.

John Blair, a Calgary-based partner with Borden Ladner Gervais LLP, said that while this move signals closer co-operation between jurisdictional regulators, he doesn’t view it as any kind of precursor to Alberta’s support for a national securities commission.

“In fact, it could be read as being just the opposite in that one argument for having a national securities regulator would be the fact that the bans and other penalties are only valid in one jurisdiction. This would take away that argument for having a national securities regulator to say, ‘there’s really no need for one…because now we have these automatic reciprocation orders,’ ” said Blair, who is also BLG’s national practice group leader for commercial litigation.

“This is a step towards inter-provincial enforcement without moving towards a national regulator,” agreed Roy.

Temelini said the Alberta initiative represents a significant step because allowing orders in other jurisdictions to have an immediate effect in Alberta without the ASC having to do anything is an expedient administrative move.

Blair outlined the mechanics of the previous process.

The ASC needed to bring an application on notice to the person to say that they would like to reciprocate the findings of another jurisdiction into Alberta. Then, in a hearing, they would have to show to a panel of the ASC why they believed that whatever action had been taken out of province should be reciprocated in Alberta. This would mainly involve a consideration of how Alberta investors are affected.

“In other words, someone who’s banned from being a director in Ontario for some kind of malfeasance — why should that person have a similar ban in Alberta? So they would have to prove and show that,” said Blair.

“Normally those applications would be granted, but it would take a little bit of time to set them up and argue them. There’s obviously a cost effect in that. The odd one would fail, although the threshold was not very high. So this eliminates all that and just says they can automatically reciprocate without having to prove any danger to Alberta investors, and without having to notify the person in question,” he added.

However, noted Blair, the significance of this move really depends on the case, and the person or company involved.

“If person X is banned, say by the Ontario Securities Commission or the British Columbia Securities Commission — maybe they’ve only done anything in Ontario and the fact that they’re banned by the Alberta Securities Commission from being a director or an officer might mean nothing whatsoever. In other cases, if the offending activity or person extends into the different jurisdictions, then it might have more of an effect,” said Blair.

Temelini questioned whether the legitimacy of this law might be challenged by an individual or company with no ties to Alberta, who finds that they have an order against them in the province.

Roy believes this is possible. “I think what would be challenged would be the fact that there was no notice. And then a subsequent challenge might be that there was no hearing,” she said.

Roy also pointed out that this new legislation in Alberta would not apply to the enforcement of no-contest settlements, such as what the Ontario Securities Commission recently introduced.

Blair said this was not a political move, tied in any way to Alberta’s historic change to an NDP government last May after 44 years of Progressive Conservative rule in the province. He noted that while the bill proclaiming new section 198.1 of the province’s Securities Act took effect after the new government under Premier Rachel Notley had been sworn into office, the bill proposing these changes had been introduced last year by the previous government.

Nor do experts think that this ASC initiative is related to Alberta’s economic woes since its economy began to feel the severe negative effects of a precipitous drop in the price of oil over the past year.

Click here to see this article in our digital edition (available to subscribers).