The 小蓝视频 Securities Commission (小蓝视频SC) and U.S. Securities and Exchange Commission (SEC) are heading in opposite directions when it comes to their respective administrative powers.
This month for the first time, the 小蓝视频SC used a new enforcement tool to fine a Langley asset manager $12,000.
Capstone Asset Management Inc. agreed to the fine without a hearing after 小蓝视频SC executive director Peter Brady determined the firm’s level of insurance was inadequate.
The commission was granted the ability to fine market participants without a hearing in 2020, as part of sweeping reforms aimed to hasten the regulatory process as well as collect on unpaid penalties.
“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,” stated Brady.
Meanwhile, south of the border, the Supreme Court of the United States recently ruled that the SEC had overstepped its constitutional boundary by holding administrative hearings for relatively minor civil securities fraud allegations. The court ruled the SEC must provide anyone facing such an allegation with the right to a jury trial in federal court.
So, administrative powers have expanded north of the border to a degree that would be deemed excessive south of the border, based on U.S. law.
University of British Columbia business law professor Cristie Ford said that while these changes have unique circumstances, they generally point to broader root causes that shape securities enforcement.
“It’s a different system there [in the U.S.], partly because administrative tribunals in Canada rest on firmer constitutional foundations than they do in the United States,” said Ford.
“The Americans have a very clear doctrine of separation of powers. There’s the executive, the judiciary and the legislature. And they have this idea of checks and balances so that each branch of government can only do what it’s empowered to do,” said Ford.
In the U.S., the executive power of the SEC to use administrative law judges grew following the Dodd Frank Wall Street Reform and Consumer Protection Act in 2010, set off by the banking crisis.
But the use of administrative law judges by the SEC was quickly challenged by accused businessman George Jarksey, whose argument for the right to a jury trial was accepted by the U.S. Supreme Court.
“While incursions on old rights may begin in cases against the unpopular, they rarely end there. The authority the government seeks (and the dissent would award) in this case—to penalize citizens without a jury, without an independent judge, and under procedures foreign to our courts—certainly contains no such limits. That is why the Constitution built ‘high walls and clear distinctions’ to safeguard individual liberty,” wrote Associate Justice Neil Gorsuch.
Three dissenting judges wrote that the decision upends the longstanding separation of powers, with Associate Justice Sonia Sotomayor noting Jarksey’s initial case was an evidentiary hearing and still subject to judicial review.
Ford says the effort to roll back administrative power in the U.S. under a right-of-centre Supreme Court, and efforts to strengthen similar powers in 小蓝视频 under a left-of-centre government, can be viewed as political.
“There is sort of a tendency on the more left/liberal side of the political spectrum to like administrative agencies, to want to create them, to want to fund them and to want to empower them. There has been more skepticism about them on the right,” she said.
Ford also noted 小蓝视频’s administrative regime can be viewed in response to a lack of criminal prosecutions for fraud, for myriad reasons.
“We don’t have a national securities regulator. And so what that means is that a lot of securities regulation and enforcement investigations are fractured from one province to the next. And that’s not an ideal state of affairs,” Ford said.
