Canada is Tough on Corporate Crime
August 22nd, 2017
Financial regulators on the federal and provincial levels have recourse to tough enforcement laws and strong penalties when it comes to white-collar crimes.
Ontario, for example, imposes five-year prison terms prison terms for violations of the Ontario Securities Act. In addition, the province’s securities commission can impose fines of as much as $1 million for each securities violation and the courts can issue $5 million fines.
The broader federal Criminal Code gives investigators strong powers to probe and prosecute capital markets fraud. The law’s provisions are aimed at bolstering corporate accountability and transparency and help maintain investor confidence in the Canadian markets.
Key provisions of the law include:
- Making it a criminal offence to engage in insider trading, or using privileged corporate information for financial gain.
- Protecting whistle-blowers who report unlawful corporate conduct.
- Imposing tough maximum sentences and other penalties for white-collar offences.
The federal law applies regardless where the crime is committed and, has a broad definition of insider information and puts the burden of proof on the Crown. Here’s a more detailed look at critical elements of the Criminal Code:
Insider Trading: People are considered guilty of this crime if they buy or sell securities while having inside corporate information that they obtained:
- By being a shareholder.
- In the course of a business or professional relationship.
- During a proposed take-over, merger or similar combination.
- Because they are employees of a business.
- While dealing with someone who had inside information
The law describes “inside information” as any data that hasn’t been generally disclosed to the public and could be expected to affect the market price or value of a company’s securities.
Tipping: Individuals commit a crime if they reveal inside information to others knowing there’s a risk that the other person will either use the information illegally or convey it to someone else who may use it illegally.
Whistle-blowing: Protection for whistle-blowers is also found in other Canadian laws, but the Criminal Code specifically prohibits employers from:
- Disciplining, taking adverse actions against or threatening an employee to keep that individual from providing information to law enforcement agencies about a perceived illegal corporate act.
- Retaliating because the employee has already blown the whistle.
The information covered by the law could include privileged information and information the employee unlawfully steals in order to disclose it to law enforcement officials. With the increasing criminal liability, publicly traded corporations need to take steps to ensure that they meet the governance rules. Take time to review or establish effective policies, standards and procedures that are likely to reduce the likelihood of offences. The threat of prison time is not the only factor that should influence policies. There is also a stigma attached to corporate crimes that can hurt reputations and damage future profits.