September 2024

This month’s newsletter discusses a Supreme Court of Canada decision about what happens to financial penalties designed to protect investors when fraudsters declare bankruptcy. Their decision has mixed implications and is raising concerns for investor protection. We also highlight a new survey from the British Columbia Securities Commission (BCSC) on do-it-yourself (DIY) investors. In our What’s New section, be sure to explore valuable video resources from the Ontario Securities Commission (OSC) on investor behavioural biases, as well as the BCSC Masterclass on Women and Investing.

Can Fraudsters Avoid Paying Financial Penalties Designed to Protect Investors?

Many people believe that fraudsters should not be allowed to use bankruptcy as a way to escape financial penalties intended to protect investors. However, a recent Supreme Court of Canada (SCC) decision may permit this in the case of administrative fines imposed by securities regulators.

The case involved a 2014 BCSC decision against Thalbinder Singh Poonian and Shailu Poonian for running a predatory and highly deceptive “pump-and-dump” scheme that targeted unsophisticated investors. This scheme illegally manipulated a public company’s share price using fake names, multiple accounts, and trades with relatives, friends, and acquaintances.

As a result, the Poonians harmed other investors and profited from the illegal scheme. The BCSC imposed two sets of financial penalties and ordered them to pay:

• $13.5 million in administrative penalties to deter future violations.

• $5.6 million in illegal profits.

After declaring bankruptcy, the Poonians tried to have both financial penalties set aside. The BCSC opposed this move, and the case reached the SCC. 

What happened next?

The SCC delivered a mixed ruling as described below:

The case hinged on interpreting one section of the Bankruptcy and Insolvency Act. The section is intended to ensure that people who cheat or swindle others cannot use bankruptcy to escape paying their debts or liabilities that “resulted from” a fraud.

All SCC justices agreed that the $5.6 million in illegal profits were a result of the fraudulent scheme and would have to be paid after the Poonians are discharged from bankruptcy. However, the majority ruled that the Poonians would not have to pay the $13.5 million in administrative penalties because they did “not result directly from the fraudulent scheme.”

Unfortunately, the majority’s decision weakens the ability of Canadian securities regulators to deter illegal activities that harm investors.

Administrative penalties are crucial for discouraging individuals who break the law. If fraudsters can avoid these penalties through bankruptcy, their deterrent effect is diminished, leading to: 

The BCSC urged the federal government to amend bankruptcy laws to clarify that bankruptcy proceedings will not erase administrative penalties. This is a vital investor protection issue because approximately $80 million in administrative fines imposed by the BCSC have already been set aside through bankruptcies. FAIR Canada fully agrees that the federal government needs to close this “escape hatch” for fraudsters.

What can you do?

If you’re concerned about the SCC’s decision, write to your Member of Parliament to express support for amending the Bankruptcy and Insolvency Act as advocated by the BCSC.

BCSC Survey Sheds Light on Do-It-Yourself Investing

Do-it-yourself (DIY) investing has taken Canada by storm. Between 2018 and 2022, the number of DIY investment accounts nearly doubled, rising from 5.7 million to 10.8 million. During that period, the value of these accounts increased from $422 billion to almost $697 billion.

Last month, the BCSC released a comprehensive survey report on Canadian adults with focused samples of DIY investors and British Columbians. The report provides valuable insights into the DIY investing space, comparing DIY investors and those who use an advisor. It also examines where DIY investors get their financial information, the role of social media, and the diversity within this group.

The BCSC report helps us to develop a firmer grasp of the growing DIY investing trend. Not surprisingly, regulators are eager to better

understand this area to shape future policies.

The research found that DIY investors differ from advised investors in their reasons for investing. While most investors—whether advised or DIY—invested for retirement or long-term savings, those with DIY investments were more likely to invest for fun, extra income, or the potential for high returns.

The report also highlighted interesting findings about how DIY investors use social media. They were more likely than advised investors to rely on social media for information and to trust the content they found. Among social media platforms, YouTube was the most popular source of financial information.

Exciting New Research From FAIR Canada on the Horizon

The BCSC report helps us to develop a firmer grasp of the growing DIY investing trend. Not surprisingly, regulators are eager to better understand this area to shape future policies.

FAIR Canada is also keenly interested in learning more about this topic and sharing key investor insights as part of our policy advocacy for Canadian financial consumers.

We have been conducting our own research into DIY investing, with a deeper focus on the differences between investors who are solely DIY and those who have DIY accounts but also work with advisors.

Our research also covers subjects such as derivatives trading and using leverage and margin. Additionally, we’ve developed four different DIY investor profiles that offer a way to understand investors’ attitudes and behaviours.

This work not only helps shed more light on DIY investing, but also challenges existing regulatory frameworks designed with advised investors in mind. The research raises important policy questions, such as how we can help DIY investors make better decisions without professional advice.

Stay tuned for FAIR Canada’s DIY Investor Survey report, which is coming out in October!  

What’s New

Behavioural Biases Video Series

The Ontario Securities Commission produced a video series titled What are behavioural biases? that explores how certain thinking habits can influence investment decisions, potentially leading to choices that may not be in the investor’s best interest. The video explains that behavioural biases are mental shortcuts or tendencies that simplify decision-making. While these biases can make investing easier, they can also result in poor financial choices. By recognizing and understanding these biases, investors can make more informed and rational decisions about their money. To watch this and other videos in the series, visit GetSmarterAboutMoney.ca.

Read various articles about “How to counteract your biases to make better decisions.”

Women and Investing Masterclass

Ready to take control of your financial future? Join the British Columbia Securities Commission’s online Women and Investing Masterclass. In just 40 minutes, you will gain unbiased, expert insights to help you build your knowledge and confidence to manage your investments successfully. Do not miss this empowering opportunity! Check it out here.



Throughout the year, FAIR Canada submits many comment letters on various important policy and regulatory matters that have an impact on investors. Read more about our investor advocacy work.

We’d Love to Hear From You!

Do you have feedback on our newsletter or suggestions for topics you’d like us to write about? Your input is valuable and will help us improve our newsletter content for loyal subscribers like you. Please email us at info@faircanada.ca with your comments and/or suggestions.

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To learn more about our advocacy for investors, visit FAIRCanada.ca