An investment firm has paid $12,000 to the B.C. Securities Commission (BCSC) under a new enforcement mechanism in which financial penalties may be imposed without a hearing before a panel of commissioners.
This penalty stems from authority granted to the BCSC in 2020 through amendments to the Securities Act. These amendments allow the executive director of the BCSC to directly impose administrative penalties for violations of investment market rules. The BCSC remains the only securities regulator in Canada with this power.
Peter Brady, the executive director of the BCSC, levied the $12,000 penalty on Capstone Asset Management Inc. The Langley-based firm, registered under the Securities Act as an investment fund manager, exempt market dealer, and portfolio manager, was penalized for failing to maintain the required level of insurance and for lacking adequate compliance policies and procedures related to insurance.
Capstone Asset Management's underinsurance during the relevant period followed a previous finding by BCSC staff in 2018, which also noted the firm’s non-compliance with insurance requirements. Despite these compliance issues, no clients were harmed.
Brady justified the penalty, stating that the combined violations warranted a $12,000 penalty. Capstone Asset Management Inc. did not dispute the findings and promptly paid the penalty.
"The purpose of Administrative Penalties Imposed by Notice is to address violations of investment rules that typically won't be serious enough to warrant a full-blown enforcement hearing," said Brady. "They help the BCSC encourage compliance with a wide range of industry rules that protect investors or make investment markets work efficiently."
This new enforcement tool is designed to streamline the process of penalizing firms for less severe infractions, promoting adherence to industry regulations without the need for protracted hearings. By enabling the executive director to impose penalties directly, the BCSC aims to ensure quicker and more efficient resolution of compliance issues.