B.C. reduces insider-reporting penalty to $60,000, distinguishing fees from sanctions

The British Columbia Securities Commission’s executive director has reduced a proposed insider-reporting penalty against Michael Derek Townsend from $70,000 to $60,000, while confirming that he breached reporting requirements. The September 15, 2026 order, 2026 BCSECCOM 312, explains why late filing fees cannot simply be counted as part of a disciplinary penalty.

Executive director Peter J. Brady ordered payment by November 16, 2026. Townsend had challenged the amount through an opportunity to be heard under the Securities Act, asking that the penalty be revoked or reduced to between $35,000 and $40,000. The decision grants only a $10,000 reduction; it does not cancel the contravention or order a refund.

Reports for 528 transactions were late

The original June 15 notice, 2026 BCSECCOM 198, concerned transactions between October 2020 and June 2024 in four reporting issuers for which Townsend served as a director. It identified 739 transactions changing his beneficial ownership of, or control or direction over, securities. Reports for 528 were not filed within the required five days.

The late-reported transactions had a combined reported value of about $1.57 million. That is the value of transactions, not investor losses or a finding of illegal trading profits. The breach concerned reporting under section 3.3 of National Instrument 55-104, rather than a finding that Townsend traded on undisclosed material information.

The notice recorded that Townsend filed reports late for 305 transactions on his own. After staff notified him of discrepancies in March 2025, he filed reports for a further 223 transactions over the following eight weeks. The later order accepted that the failures were inadvertent, that he had not benefited financially from them and that he had paid the applicable late fees.

Townsend argued that the proposed sanction overstated the seriousness of inadvertent failures and gave too much weight to a 2007 settlement. He relied on the absence of concealment, financial benefit or specific investor harm, his payment of $15,650 in late filing fees, and personal circumstances. Staff maintained that $70,000 was appropriate, emphasizing repeat non-compliance and the need for deterrence.

An old settlement still mattered

Brady accepted that the earlier conduct was more serious in nature and that approximately 13 years passed after the settlement without a contravention. But Townsend remained an experienced senior executive who had already been sanctioned for the same type of reporting failure. The 2007 resolution involved a $40,000 payment, late fees and market restrictions, not merely a warning.

The current conduct involved more transactions and a longer period than the earlier matter. Brady concluded that the age of the settlement did not erase its relevance and rejected the suggestion that it had been given disproportionate weight. At the same time, he recognized that inadvertence, voluntary filings and the absence of financial benefit made the present conduct less serious than deliberate concealment.

The absence of an identified investor loss did not make the breach harmless. Brady explained that late reporting primarily harms market integrity by leaving investors without a complete picture of insiders’ trading. It is unusual to identify harm to a particular investor from this type of reporting contravention.

Late fees are not penalties

The decision draws a distinction between paying a legal filing obligation and receiving credit against an enforcement sanction. Late filing fees help cover the costs of administering the reporting system and the commission’s operations. They are not penalties imposed after an opportunity to be heard, and should not be mechanically added to or subtracted from a penalty.

Payment was still relevant to the overall assessment. Brady said it showed acceptance of responsibility and could reduce the need for specific deterrence. But complying with the obligation to pay was not a separate mitigating factor, and the $15,650 already paid did not become part of the $60,000 penalty. Conversely, unpaid fees could make conduct more serious without becoming an unpaid disciplinary penalty.

Comparable cases helped determine the amount. Brady found the Doroudian decision particularly relevant: it involved late insider reports over a longer period and more transactions, a $50,000 penalty and unpaid late fees, but no disciplinary history. Townsend’s prior settlement justified a higher penalty, though not necessarily one $20,000 higher.

The Penn precedent, which involved additional disclosure breaches and a $75,000 penalty, also remained relevant. Brady rejected a mechanical comparison based only on Penn’s former registration status, noting the responsibilities of a long-serving director who had previously been required to take a course on directors’ and officers’ duties. Moore, involving substantially fewer transactions over a shorter period, was less persuasive as a benchmark.

Balancing those comparisons with the nature and repetition of Townsend’s conduct, Brady found a $10,000 reduction in the public interest. The result preserves a substantial sanction for repeated reporting failures while recognizing that the initially proposed amount was too high.

The order expressly preserves Townsend’s right to seek a hearing and review by the commission under section 165 of the Act. The published reasons do not establish whether he has exercised that right or paid the penalty. They do not impose a new trading or director ban in this matter.