On April 26, 2023, the British Columbia Securities Commission (the “Commission”) launched its newest enforcement tool called the Administrative Penalties Imposed by Notice (APIN). APIN, much like a traffic ticket, allows the Commission to impose monetary penalties for less serious violations of market rules, such as failing to file disclosure documents or investment suitability issues, without holding a hearing.
Prior to APIN, the Commission had limited means to respond to misconduct without a full investigation and hearing before a panel of commissioners. With the introduction of APIN, it is evident Commission hearings will now be geared towards serious misconduct where the public interest warrants larger sanctions and/or market bans.
The APIN program will work as follows:
Issuing a Notice
- Commission staff who believe they have detected a violation of the Securities Act can submit a report to the Executive Director which sets out the relevant facts, aggravating/mitigating factors, and recommend a penalty.
- If the Executive Director believes a violation occurred and a monetary penalty is warranted, a written notice (the “Notice”) will be delivered to the person or entity specifying each violation, the applicable penalty, and the date upon which the Notice shall be paid.
- If an entity such as a company or investment fund has committed a contravention, the Notice will be delivered to the applicable director, officer, agent, or fund manager that permit or acquiesced in the contravention.
Receiving a Notice
- If you receive a Notice, you must either pay the penalty by the due date or request to dispute the Notice within the 30 day period specified by the Notice.
- If you pay the penalty, fail to pay the penalty by the due date, or fail to dispute the Notice within the allowable time, you will be deemed to have committed the contravention.
Disputing a Notice
- Written notice must be provided to the Executive Director requesting an opportunity to heard to dispute the Notice and must include the particulars of the dispute.
After Hearing a Dispute
- Once a dispute is heard, the Executive Director will confirm by order each contravention in the Notice which is upheld.
- For each confirmed contravention, the Executive Director may confirm the penalty, impose a lesser penalty, or revoke the penalty.
- If a penalty is confirmed, or reduced, the Executive Director will specify the date on or before which the penalty must be paid.
Right to Appeal
- A person has a right under section 165 of the Securities Act to seek a hearing and review by the Commission of the Executive Director’s decision.
Range of Penalties
The maximum penalty is $100,000 per violation for individuals for individuals and $500,000 per violation for entities such as companies. The penalty imposed will depend on the specific facts and circumstances of each contravention.
Publication and Enforcement
APIN will have serious consequences for persons named in each Notice and must be carefully considered. First, unless successfully disputed, Notices will be published on the Commission’s website and accessible by the public. Second, penalties that go unpaid will be subject to the Commissions strengthened collections powers which includes preventing the renewal of driver’s licenses. Lastly, subsequent Notices issued to same persons will undoubtedly result in higher penalties.
The powers granted to the Commission under the APIN process will undoubtedly be subject to a number of tests to ensure respondents are afforded natural justice and a fair hearing.
Conclusion
Although many people choose to dispute traffic tickets on their own, Notices under APIN attract significantly higher penalties, are public, and are subject to the Commission’s strengthened collections enforcement procedures. In addition, penalties will undoubtedly become progressively worse with subsequent contraventions. This can have a profound impact on market participants, particularly those who receive more than one Notice. As such, if you receive a Notice, you should consider retaining counsel to review your Notice and advise on whether a dispute or challenge is warranted.
If you have received a Notice, or for more information about APIN, please contact Patrick J. Sullivan or Dennis Whincup.