The recent decision of Re Oei, 2022 BCSECCOM 225 marks the B.C. Securities Commission’s (the “Commission”) first consideration of section 163.2 of the Securities Act RSBC 1996, c 418 (the “Act”), which sets out the Executive Director’s new power to revoke driving privileges in order to enforce contraventions of B.C.’s securities laws.
We previously wrote on the British Columbia Legislature’s introduction of over 100 significant and expansive changes to the Act through Bill 33, which you can find here. On March 27, 2020, these amendments to the Act came into force by way of order in council (see related documents here). As noted in our previous post, these amendments, brought as a response to increase protection of investors and limit white collar crime, substantially strengthen the powers of the Commission with respect to the enforcement of fines and penalties permitted under the Act and afford the Commission some of the strongest enforcement powers for a securities regulator in the country.
Prohibition on Driving Privileges
These amendments include increased methods for the Commission to recover penalties and fines imposed on wrongdoers. One such method, which is found under section 163.2 of the Act and can be used in conjunction with other methods, is a prohibition placed on a wrongdoer’s driving privileges in B.C. by way of notice to the Insurance Corporation of British Columbia (“ICBC“).
In particular, s. 163.2 provides a mechanism for withholding driver’s licenses, automobile insurance and number plates from individuals who fail to pay penalties imposed by the Commission or fail to pay back any amounts obtained through contraventions of the Act. For example, under section 163.2(1)(a) of the Act, the Commission may submit notice to ICBC to not issue or renew the wrongdoer’s driver’s license.
Procedural Rights for the Wrongdoer
Procedural rights to ensure that an individual has access to a fair process are entrenched in the new amendments. For example, before driving privileges are revoked under the Act, the Commission must provide notice to the wrongdoer, who then has a window of opportunity to either remedy the default or come forward and work out an alternative payment plan with the Commission.
Withdrawing the Notice to ICBC
The new amendments also stipulate a way to withdraw a notice to ICBC if one of the following requirements are met:
- If the notice was based on significant error;
- If the person has entered into a payment arrangement that is satisfactory to the Commission; or
- If it can be established that the order to ICBC will significantly reduce the person’s ability to pay the fine/penalty and the person has entered into a satisfactory alternative arrangement with the Commission.
If any of these circumstances are established and the Commission refuses to withdraw the notice, the individual may apply to court for a hearing and review of the prohibition under section 165 of the Act.
Wrongdoer may seek a hearing and review
A person directly affected by a decision of the Commission, including to suspend driving privileges under the Act, may apply under section 165 of the Act for a hearing and review of that decision by a panel of the Commission.
This was the case in Re Oei, where the applicant Paul Se Hui Oei (the “Applicant“) applied to review the decision of the Executive Director of the Commission to submit notice to ICBC to not issue or renew the Applicant’s driver’s license.
By way of brief background, the Commission had previously found that the Applicant and companies within his control committed fraud pursuant to section 57(b) of the Act . The Commission ordered the Applicant to pay to the Commission $3,087,977.41 under section 161(1)(g) of the Act and an administrative penalty of $4,500,000 under section 162 of the Act.
The Applicant defaulted on the payment order, and the Commission notified the Applicant that it would be sending notice to ICBC under section 162 of the Act to not issue or renew the Applicant’s driver’s license. The Applicant disputed the proposed notice to ICBC in writing to the Executive Director, wherein he submitted:
(1) He required his driver’s license in order to act as emergency driver for his father-in-law and daughter;
(2) He was on the edge of bankruptcy and had no ability to pay the payment order; and
(3) He questioned the authority of the Commission under s. 162, on the basis that it had not been approved by the Supreme Court of Canada.
After a response was delivered by the Commission, the Executive Director decided to issue the notice to ICBC, including for the following reasons:
(1) the Applicant had given no information as to why he was the only one who could provide emergency driving services to his father-in-law;
(2) the Applicant had given no evidence of his inability to pay the amounts outstanding in the payment order; and
(3) court approval was not required before forwarding the notice to ICBC.
Upon review, the Commission ultimately denied the Applicant’s application and upheld the notice to ICBC. In making its determination, the Commission considered, among other things, the following:
(1) The Applicant had committed the most serious misconduct under the Act, had made no attempt to pay any part of the payment order or make a payment arrangement, and showed no remorse or responsibility for his role in the fraud;
(2) The necessary conditions under s. 163.2 had been met, including that the Applicant was in default of the payment order, the amount owing was more than $3,000, and the Commission provided the necessary notice of at least 30 days before sending notice to ICBC;
(3) The Applicant did not meet any exception under s. 163.3 by establishing a lack of a driver’s license would substantially reduce his ability to repay the amounts under the payment order. In this respect, the Commission found that while an applicant’s need to be available to provide medical assistance to a family member is a factor to consider, the Applicant’s claim to be an emergency driver for his father-in-law was not persuasive, given that a 911 call would work more efficiently in the circumstances where the Applicant had to drive first to the father-in-law’s home, then to the hospital. With respect to the Applicant’s daughter, the Commission was provided with no evidence as to such a specific need and gave it no credence; and
(4) There were no compelling public interest reasons to not give effective to the notice under s. 163.2. On the contrary, the Commission held it was in the public interest to give effect to the provision, given that the Legislature provided such powers for this precise circumstance.
Takeaways
While the new powers allowing for prohibitions on driving privileges are available and more likely to be used by the Commission, the provision raises some concerns for those who have been fined pursuant to the Act. For example, while the Commission’s fines can carry over and be enforced in other jurisdictions in Canada, it is unclear whether the power to prohibit driving privileges under the Act would also extend to and be enforced in other jurisdictions as well.
Further, it remains to be seen how effective this new power will be. It is posited that the Commission’s low collection rates are not due to ineffective enforcement measures, but rather from the impecuniosity of the wrongdoers. Though the Commission’s arsenal has been greatly expanded, it will be interesting to see whether the message the amendments are intended to send will deter future violations of the Act, or, alternatively, if it will increase the number of infractions from wrongdoer’s breaching driving prohibitions.
Please see here for a copy of the decision in Re Oei, and contact Patrick Sullivan or Joseph Romanoski of our commercial litigation team for any questions related to the new amendments or in relation to any of your securities related needs.