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The new guidelines determine disciplinary sanctions on factors including precedents, harm to the market and financial gain by the violator. Aggravating factors, such as prior warnings and intent, will also be taken into consideration. The most serious offences, such as insider trading and manipulation, could result in fines of up to $1 million. Firms that do not cooperate with investigations will also face potentially significant fines, or other sanctions. Firms that do cooperate with investigations will be rewarded.
"Strong compliance is good for business, investor confidence depends on it," said Tom Atkinson, President & CEO of RS. "Of course, our ultimate goal is to deter trading rule violations. But if misconduct does occur, the severity of the sanctions must match the significance of the violation."
Atkinson said the philosophy of RS is to first be an educator, placing emphasis on deterrence. He said that he believes this proactive approach will raise the integrity of the market.
Atkinson said the new guidelines, combined with RS' Universal Market Integrity Rules (UMIR), give Canada a set of national trading rules and sanctions for its marketplaces. The UMIR were introduced earlier this year to enable marketplaces to compete on an equal standing; they ensure that market regulation does not become a commodity to be traded between marketplaces.
"We want to bring some predictability to the penalty process," Atkinson said. "We'll be continuing the process of standardizing the regulation of equity trading across Canada."
The new guidelines, benchmarked against sanctions imposed for similar violations by market regulators across North America, will assist RS staff and respondents in the negotiation of settlements. They will also help RS hearing panels in the review and approval of settlement agreements and the imposition of fair and consistent sanctions in contested disciplinary proceedings.
"We believe that sanctions imposed by RS hearing panels must be consistent and fair," said Atkinson. "These new principles and guidelines will help determine the appropriate fine, or other sanction, depending on the facts of the case."
Atkinson said the new guidelines will help deter fraudulent and manipulative trading practices, promote just and equitable principles of trade, and encourage open and fair business practices and standards in the Canadian securities industry.
The Sanction Principles and Guidelines were developed by RS legal counsel together with members of a special industry committee, including Eric Young, Senior Vice-President & Global Head of Compliance, CIBC World Markets, New York; Brian Bassett, Vice-President and Branch Manager, Dundee Securities Corporation, Vancouver; Richard Rousseau, Western Canada Regional Manager, Vice-President, and Director, National Bank Financial, Vancouver; and Joseph Oliver, President & CEO, Investment Dealers Association of Canada.
RS is the independent national regulation services provider for Canadian equity markets, including the TSX and TSX Venture Exchanges. It has been recognized by the Securities Commissions of Ontario, Quebec, British Columbia, Alberta and Manitoba to regulate the trading of securities on these markets by participant firms and their trading and sales staff.
