Question

The Ontario Securities Commission (OSC) has approved a settlement with Tammy, the former president, CFO, and CEO of a brokerage firm. Tammy failed to ensure that the terms of a loan guaranteed by the company were properly disclosed to the Investment Dealers Association of Canada (IDAC). She also did not supervise the actions of Mark, the firm's ex-chairman, in a number of transactions. Mark has since been banned for life from being an officer or director of any Canadian company and must pay $100,000 in a settlement with regulators in the United States due to a securities fraud conviction. Tammy was permanently prohibited from being registered under the Ontario securities law and from acting "as an officer or director of any registrant in the Province". She may not act as a director or CFO of a reporting issuer for 5-years, and can never re-apply to the IDA anywhere in Canada. In your opinion, is it fair or reasonable that a penalty should include a lifetime ban on acting as a Director of any Canadian corporation?

Answer 1

A penalty can include a lifetime ban under the following circumstances:

• When the proof of the fraud can be unmistakably presented without any doubt. There should not be any element of doubt so that the person can be given the benefit of not having committed the fraud. The chain of events should be clearly laid out to establish that the commission of the crime was pre planned and done meticulously and was not just an error or mistake committed in the spur of the moment.
• When the fraud has consequences that are far reaching and involve cheating other people who had acted in good faith. Other people should never suffer due to the greed or nefarious activities of people. Whenever this happens, the public loses its confidence in the overall system prevalent in the country and it would take huge effort, time and money to restore this confidence back in the system.

Under the above circumstances, life time bans are definitely reasonable.