Alberta has a bill in its legislature that would, among other things, enhance the enforcement provisions of its securities laws. If enacted, it would signal a trend among provinces toward greater focus on this area of securities regulation.
Bill 62 would add the following provision to Alberta’s Securities Act (the Act):
Aiding, abetting and counselling
212.1 No person or company shall do or omit to do anything that the person or company knows or reasonably ought to know aids, abets or counsels any other person or company to contravene Alberta securities laws.
A breach of this provision could lead to a range of potential enforcement outcomes. Technically, a contravention would be punishable by imprisonment and/or a fine of up to CA$5 million. This sort of “quasi-criminal” enforcement of securities laws tends to be reserved for serious violations that are provable beyond a reasonable doubt.
The Alberta Securities Commission also has a general “public interest” sanction power (under section 199 of the Act), which is more frequently wielded in enforcement actions. This provides for, among other remedies, fines of up to CA$1m per contravention, enforceable via court order.
Background and context
The government’s public statements as to their intention regarding this provision have been vague, as have legislative debates. It therefore makes sense to consider other jurisdictions’ approaches to such a rule.
British Columbia enacted a near-identical provision in its securities legislation in 2020 (s. 168.01), and Quebec’s Securities Act has a similar rule (section 208). Ontario does not have an aiding-and-abetting prohibition, though its Capital Markets Modernization Taskforce has recommended adopting one, in an effort to:
harmonize and modernize the [Ontario Securities Commission’s] enforcement tools and permit [its] Enforcement Staff to prosecute a greater breadth of securities law misconduct to increase protection of investors and instill confidence in Ontario’s capital markets. (Recommendation 66)
There have been no enforcement actions to date under the British Columbia rule.
The United States Securities Exchange Act contains an aiding-and-abetting provision (section 15(e)), which has been subject to several enforcement actions. Although the words of the statute are not identical to the proposed Alberta rule, it is worthwhile considering the requirements of a civil enforcement action under the US provision. In order to bring such an action successfully, the regulator must prove:
(1) the existence of a securities law violation by the primary (as opposed to the aiding and abetting) party; (2) “knowledge” of this violation on the part of the aider and abettor; and (3) “substantial assistance” by the aider and abettor in the achievement of the primary violation.
When Canadian courts assess a rule of securities law for the first time, they often look to any applicable US jurisprudence. The above requirements suggest there could be significant hurdles to any enforcement of the proposed Alberta aiding-and-abetting rule (and the existing rule in British Columbia). This could include having to establish a “primary” violation of securities law by the person being aided, abetted or counselled, as well as substantial assistance toward that violation on the part of the person doing aiding, abetting or counselling.
Other features of Bill 62
Bill 62 contains other securities-related provisions, including as to the regulation of “information processors” relating to the trading of securities. It also provides for an update to the Business Corporations Act regarding the powers of the Alberta Securities Commission to make certain (in essence) exemption orders.