Cooperating with investigations leads to lower fines

If you ever find yourself the subject or witness in a BCFSA investigation, here’s an important tip: it’s better (and a lot more affordable) to talk with BCFSA instead of avoiding, confusing, or evading our inquiries and investigations. This includes giving us non-answers, attempting to frustrate the investigation, or outright blocking our investigation. The purpose and importance of our investigations is to prevent harm to consumers and to uphold public trust. Our investigations make sure that people and institutions in the finance and real estate sectors are operating reliably, fairly, and honestly.

We’ve seen this play out numerous times: when a licensee cooperates with their financial sector regulator (that’s us), any penalties issued will be lower. Cooperating with a regulator is always viewed favourably and means less time is spent by the regulator incurring investigation expense costs, which, if the matter goes to a hearing, will be required to be paid by the licensee under investigation.

Cooperation is not just smart to do, it’s mandatory. Licensees are required by law to cooperate with BCFSA when we reach out with an inquiry or investigation. Failure to cooperate attracts its own penalties and can be seen as an aggravating circumstance.

Three ways a licensee benefits from cooperating with BCFSA  

1. You avoid non-compliance penalties. Licensees can be penalized for avoiding or refusing to talk with BCFSA. During the investigation, a licensee can receive an Administrative Penalty for failure to cooperate or promptly respond to an inquiry by BCFSA. So, cooperation rewards the licensee by eliminating that upfront expense. When you’re compliant, BCFSA won’t levy penalties for non-compliance. Failing to cooperate can also lead to more significant and formal enforcement, including licence cancellations and significant penalty hearings.
2. Cooperation can lead to lighter penalties. When a licensee fully cooperates with an investigation, BCFSA investigators will include that information in the record. Historically, cooperation (or non-cooperation) with an investigation is considered a relevant factor in the determination of an appropriate remedy/outcome. For example, if the licensee has violated the Real Estate Services Rules (“Rules”) in a moderate way, but has been forthcoming and cooperative with the investigation, we may issue an Administrative Penalty, instead of issuing a Notice of Discipline Hearing. An Administrative Penalty is less severe and has a lower maximum penalty than if the case escalates to a formal hearing, where the maximum penalties are $250,000 for an individual, and $500,000 for a corporation.
3. A faster fix of non-cooperation = lower penalties
   
   Here are two examples of people cooperating and not cooperating:

• Person A receives an inquiry from BCFSA concerning a potential advertising breach and immediately comes into compliance. They receive a $1,000 penalty for the brief period of advertising non-compliance. 
• Person B receives the same inquiry and fully ignores BCFSA’s demands for information. Person B will not only face the same penalty for advertising non-compliance, but also a base non-cooperation penalty of $1,000 with daily penalty amounts up to $1,000/day for continued non-cooperation with an investigation. If this were Person B’s second time ignoring or refusing to respond to BCFSA, Person B can face a base penalty of $5,000, with the same eligibility for additional daily penalties.  

Talking and sharing is the law

If a matter proceeds to a Notice of Discipline Hearing, early and fulsome cooperation typically means fewer fees for investigators, auditors, and lawyers, and ultimately lower enforcement expenses for you to pay. Cooperation begins with the need for a timely response to an inquiry. Section 21 of the Rules states that a “licensee must respond promptly to any inquiry addressed to the licensee by the superintendent.” The licensee must respond in writing (unless the superintendent allows otherwise) “no later than the date set by the superintendent.”

As well, under Section 37(4) of the Real Estate Services Act (“RESA”), a person “must not withhold, destroy, conceal or refuse to provide any information or thing reasonably required for the purposes of an investigation under this section.” So, your chance of receiving a penalty is higher when you don’t provide a fulsome response to investigators.

Investigation penalties add up fast

For a clear idea of how investigation costs can add up, see Possible Outcomes to a BCFSA Investigation on our website at Discipline Procedures | BCFSA. In the section Enforcement Expenses, you can see the rate BCFSA charges for hours of work by investigators, auditors, and lawyers. If a licensee is ordered to pay investigative costs, they are charged:

• $100/hour for each BCFSA investigator
• $150/hour for an auditor regularly employed by BCFSA, and $400/hour for non-BCFSA auditors
• $150/hour for a BCFSA lawyer and $400/hour for non-BCFSA lawyers

Learn more about when and how penalties are issued at Administrative Penalties Under the Real Estate Services Act | BCFSA.