Bonnie Lysyk Targets Financial Fraud with Proactive Strategies

The Ontario Securities Commission (OSC) is ramping up its efforts to combat financial fraud under the leadership of Bonnie Lysyk, who assumed the role of executive vice president of enforcement in October 2024. With a focus on preemptive measures, Lysyk aims to disrupt fraudulent activities before they can take root, particularly those that exploit online platforms.

In a recent interview, Lysyk emphasized the need for a shift in enforcement tactics. “Fraud, particularly online harm – that is calling for a different type of action from enforcement versus investigation,” she stated. Currently, the OSC is addressing fraudulent activities on a case-by-case basis, engaging hosting platforms to take down fake investment websites. The long-term goal is to implement an automatic online fraud detection system that would ensure entities accepting investment money are registered with securities commissions across Canada.

Lysyk pointed out that while some platforms, like Google, utilize algorithms to detect fraudulent sites, many others have yet to adopt similar measures. This inconsistency hampers the OSC’s ability to efficiently combat fraud.

Beyond tackling online fraud, Lysyk is also prioritizing market manipulation and insider trading. The OSC faces a significant challenge, receiving approximately 2,000 new cases annually while only being able to actively manage between 120 and 150 cases. “We have a lot more cases coming in than we have the ability to handle,” Lysyk explained, underlining the importance of effective triage to focus on the most severe cases.

Improving the OSC’s collections rate is another critical aspect of Lysyk’s agenda. The current rate stands at a mere 4.5 percent, meaning only $4.50 is collected for every $100 in penalties. Lysyk’s primary goal remains the protection of investors, ensuring they do not lose any money to fraudulent schemes.

Earlier this year, the OSC took part in Operation Avalanche, coordinated by the British Columbia Securities Commission. This initiative aimed to prevent fraud before it occurred by proactively warning potential victims of cryptocurrency scams. “We identified people’s wallets that had been compromised,” Lysyk explained, highlighting the proactive outreach to affected individuals.

When it comes to cases where victims have already lost money, the initial decision on how to handle the case is crucial. Lysyk noted that if funds are no longer available for restitution, pursuing criminal charges might be more effective than going through the tribunal route, which could yield no assets for recovery.

Despite challenges, the OSC continues to address cases that may not lead to financial recovery, as these actions send a strong message and provide closure for victims. Lysyk pointed out that settlement agreements often yield higher recovery rates compared to disgorgement orders, suggesting this could be a viable path for increasing collections.

In an effort to deter potential wrongdoers, Lysyk’s team is also engaging in “door knocks,” where members of the Royal Canadian Mounted Police (RCMP) accompany OSC staff to issue warnings to parties suspected of fraudulent activities. This tactic is designed to dissuade individuals from continuing illicit practices without necessitating a formal investigation.

Additionally, Lysyk’s strategy includes enhancing the OSC’s global partnerships through its membership in the International Organization of Securities Commissions. This collaboration is essential for obtaining information from other countries, facilitating access to phone records and bank details, and conducting interviews on behalf of the OSC.

To further her goals, Lysyk intends to seek new investigatory tools from the province. While specifics remain under wraps, she plans to allocate more resources toward preventing financial crimes from occurring in the first place. “Disruption will likely play a larger role into the future,” Lysyk stated, indicating her commitment to evolving the OSC’s approach to enforcement in a rapidly changing financial landscape.