"Recent Criminal and Quasi-Criminal Developments in Securities Litigation" for the Continuing Legal Education Society

April 2005

Securities Litigation 2005

Recent Criminal And Quasi Criminal Developments in Securities Litigation

Written by H Roderick Anderson and Steve Vorbrodt of Harper Grey LLP for the Continuing Legal Education Society, April 2005

The authors gratefully acknowledge the assistance of Thomas Manson of Joesephson & Company and Renee Reichelt formerly of Harper Grey LLP

Introduction

The purpose of this paper is not to provide an in depth analysis of the law in this area but to raise a number of practical considerations for counsel acting in securities related matters which may have the potential to result in criminal or quasi-criminal proceedings against the client in Canada or elsewhere. This paper will canvass the following topical areas related to this area of the law:

(1) The evolving enforcement landscape;

(2) The recent amendments to the Criminal Code; and

(3) The consideration of various practical issues related to criminal or quasi-criminal investigations by Canadian authorities or authorities from other jurisdictions such as the United States of America.

The Historical Perspective of Enforcement Agencies in Securities Related Litigation

Since 1967, most criminal investigations were conducted by the Commercial Crime Squad of the Royal Canadian Mounted Police (“RCMP”). From then until the late 1990s, most of the criminal prosecutions brought were the result of investigations conducted by that unit of the RCMP. Prior to 1987, the Securities Commission, the Investment Dealers Association of Canada (“IDA”) and Investigative Services of the Vancouver Stock Exchange (“VSE”) were relatively inactive in terms of providing potential cases to the RCMP for investigation.

With the proclamation of the then new Securities Act in 1986 and the appointment of the current Chairman of the Commission, Mr. Douglas Hyndman, the Commission became more proactive in terms of pursuing perpetrators of violations of the Securities Act. The result of the same was that the Commission actively pursued investigations and prosecutions of those who had breached the Securities Act. By 1990, because of the enhanced enforcement regime of the British Columbia Securities Commission (“BCSC”), more potential criminal investigations were brought to the attention of the RCMP. Further, the new enforcement regime caused the other self-regulatory agencies, and most particularly, the VSE to became more active in the pursuit of the wrongdoing by stockbrokers. That, in turn, created a further conduit for potential investigations to be referred to the RCMP.

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