Securities Commissions assist predatory behaviours

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OSC Investor Advisory Committee

Postby Dell » Sun Nov 27, 2005 7:33 pm

Have they announced who is sitting on this committee yet?
Posts: 18
Joined: Sat Nov 26, 2005 8:45 am

Postby admin » Sat Nov 26, 2005 2:37 pm

RCMP to follow up on alleged tainted investigations at ASC

Saturday, November 26, 2005 Posted at 1:23 AM EST

Globe and Mail Update

An RCMP-led investigative team will review the controversy surrounding allegations of tainted investigations at the Alberta Securities Commission.
RCMP Inspector George Pemberton, who heads the Vancouver-based Integrated Market Enforcement Team (IMET), said yesterday he has been asked to review matters at the ASC after receiving a letter from Alberta Liberal Leader Kevin Taft requesting an investigation. He said the RCMP is obligated to follow up on any credible complaint.

“We are reviewing whether there is any justification for an investigation,” he said.

IMET is an RCMP-led unit charged with investigating white-collar crimes.

Mr. Taft wrote a letter to the RCMP earlier this month requesting a review of 11 sensitive investigations conducted by the ASC. The ASC has been dogged this year by accusations it had created a “two-tier” regulatory system in which cases were dropped when they involved powerful or well-connected people.
“We're very pleased,” Mr. Taft said yesterday. “We are feeling affirmed that the RCMP is taking our complaint seriously.”

Mr. Taft said yesterday he wrote to the RCMP following the release of a report in late October by Alberta Auditor-General Fred Dunn. Mr. Dunn reviewed 82 ASC case files, including 11 sensitive cases that had been flagged by employees or members of the public, and said he did not find sufficient evidence to warrant reopening the cases.

Mr. Taft said he is especially pleased that the file has been transferred out of the province to the IMET group in Vancouver. The Calgary-based IMET team normally works closely with the ASC on investigative matters.

“That's an important thing to be done because there needs to be genuine arm's length on this investigation,” Mr. Taft said.

Insp. Pemberton said IMET will only try to determine whether there had been any criminal activity surrounding the ASC's investigation of infractions, and would not investigate or lay charges in the specific cases that were reviewed by the ASC.

A spokeswoman for Alberta Finance Minister Shirley McClellan played down the IMET review yesterday, saying the RCMP is obligated to consider all complaints it receives.

“They have a responsibility when they have a complaint to investigate it, and they are doing it in this case,” Tracy Balash said.

Mr. Dunn's report said there was no evidence to justify reopening investigations, but criticized instances of poor documentation.
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Location: Canada

Postby Guest » Fri Nov 18, 2005 10:44 pm

from Globe and Mail

John Petch, head of enforcement at the ASC bought shares in a public company on the same day that he authorized an ASC look into the corporation.

Alberta auditor general calls it (rightly) a flagrant violation of internal policy.

ASC, however calls it an internal personal matter.

This is not the first time the ASC has asked for (or assumed) a different set of rules when applying the rules to it's own behavior, than the rules the rest of society has to live with.

Are we dealing with an organization that perhaps feels it is "above the law"?

It appears so, and the appearance keeps supporting the many voices in the press asking "who is watching the watchers?"

Postby admin » Fri Nov 18, 2005 12:37 pm

??is a con-artist, he proved it at SC where his firm underwrote many scams including two for the mob. Who knows how many investor suicides he has caused, and the billions lost. He is a violent and dangerous psychopath who will offend again and again.

admin has deleted one of this guests posts, and allowed one to remain. The one that alleged that someone was a "con artist, and a violent and dangerous offender" is:

1. defamitory
2. immature
3. of no value to anyone

I ask that people wishing to post bile and garbage do it elsewhere. We are attempting to limit this forum to items of a more factual nature than simple hate slurs. If you are unhappy with the system and you want to contribute to fixing it, your comments are welcome here.
Thanks for understanding.
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Posts: 3020
Joined: Fri May 06, 2005 9:05 am
Location: Canada

Postby Guest » Thu Nov 17, 2005 11:30 am

Nov 17, 2005

to: Fred Dunn, Alberta Auditor General\

I am writing to inquire about my earlier complaints to the ASC. They have received so little attention of any value that they should almost be turned into complaints "about" the ASC".

Please help me to understand what my options are when a complaint to the ASC is brushed aside and Security Act violations as I perceive them are ignored by this regulator.

Am I able under the Freedom of Information Act to view my files?
Am I able to ask another impartial body to investigate?
Am I to simply accept the standard ASC answer of "see no evil".
Is there civil recourse against the ASC for regulatory failure of any kind?

I am sorry to continue with this, but my complaint so far has been simply not been satisfactory dealt with. I am not the only one who made complaints in the recent past, and found them to be not handled properly.

I look forward to hearing from you in regards to this, and I thank you for your time and efforts towards improvement of the system.

Best Regards
Larry Elford
Lethbridge, Alberta

Postby Guest » Thu Nov 17, 2005 11:18 am

Auditor steps up pressure on ASC
No serious action taken on breach: Dunn

Kelly Cryderman
Calgary Herald

Thursday, November 17, 2005

CREDIT: Herald Archive, Canadian Press
Alberta Auditor General Fred Dunn: "There are significant areas for improvement."

The Alberta Securities Commission has taken no serious action to address a breach of conduct where a high-level staffer bought and sold shares of a company being investigated by the commission, says provincial Auditor General Fred Dunn.

Dunn appeared before the legislature's public accounts committee Wednesday to discuss a recently released probe into the ASC.

Dunn later told reporters he highlighted the case of John Petch, director of enforcement, in his report "because this, in our opinion, was a very serious breach not noticed by them, and then even when we raised it, no serious action taken."

Petch made a "significant gain" on the transaction, Dunn said.

"Now, was that a result of just the market moving, the performance of the organization? That we can't say," Dunn said. "But we do know the buy and the sell. And he sold for more than he bought. . . . Unequivocally, this is a serious breach of their code of conduct."

The Canadian Press was unable to reach Petch for comment on Wednesday.

This is the latest in a number of controversies to dog the provincial securities regulator.

Last week, it was disclosed that commission chairman William Rice had been fined $1,000 by the Ontario Securities Commission for being two months late in disclosing trades he made in the shares of Tesco Corp., a well-drilling company he also chaired until early this month.

Petch's case appeared in Dunn's October report on the Alberta Securities Commission's Enforcement System. Despite his concerns, in his report Dunn wrote that an internal ASC investigation into the matter reached reasonable conclusions and evidence on the file was adequately recorded.

According to the report, Petch signed an investigation order to look into insider trading allegations in regards to an unnamed public company on March 10, 2004.

On the same day, Petch bought shares of the same public company and submitted a report to the executive director of the securities watchdog stating that fact the day after.

Petch told the auditor general's office that "notwithstanding the preparation of a file inventory by his staff he was unaware that the public company was under investigation by his staff." He said the purchase and sale transactions were done on the advice of his broker.

"Accordingly, the director (Petch) concluded that although he violated the employees' policy, he did not take advantage of confidential information and was not in a conflict of interest," the auditor general wrote.

The ASC, Dunn noted, has no ongoing process in place to make sure employees follow the policy.

Siobhan Vinish, director of communications for the ASC, said Rice has already publicly declared the commission will take all of the recommendations of the auditor general very seriously. She said the ASC will "implement them where they're appropriate."

In the case of Petch, "they did not identify any activity influenced by a conflict of interest. It was a breach of an internal policy which was investigated thoroughly."

The auditor general said the internal commission investigation was closed "for lack of evidence."

Finance Minister Shirley McClellan, who is responsible for the ASC, said she is confident the commission is putting procedures in place to prevent this from happening again.

"It wasn't deliberate or intentional," McClellan said.

However, she also said she's concerned that their processes to ensure this doesn't happen did not work in the past.

"I can assure you if it happens -- somebody doesn't follow the process -- they will be dealt with," McClellan said, noting that would be something to discuss with the securities commission. The minister also said she has the power to fire staff.

Liberal Leader Kevin Taft said McClellan continues to downplay the serious problems at the securities commission. He said there is no political will to get to the bottom of what is happening.

"Billions of dollars are traded, billions of dollars are invested, lots of people's pension money, RRSP money is all in this -- and so there's a lot at stake here," Taft said.

In general, Dunn said the securities commission made only a "poor effort" with respect to record-keeping, especially in regards to files that were particularly sensitive -- the cases in which some staff had stepped forward to allege that senior officials protected friends and condoned unprofessional behaviour.

"There are significant areas for improvement," Dunn said, calling it a "wake-up call" for the commission.

However, Dunn did not find evidence that would have given him the basis for reopening any ASC investigations.

- - -

ASC Chronology

- Feb. 2, 2004: A complaint of insider trading was received by the case assessment branch involving the wife of a principal of a public company.

- March 2, 2004: The case assessment manager, who assigned the file to himself, enters the details into a file inventory report prepared for John Petch, the director of enforcement.

- March 10, 2004: Petch signs an investigation order, which directs staff to investigate the insider trading allegations.

- March 11, 2004: Petch submits a declaration report to the Alberta Securities Commission's executive director stating that on March 10 he bought shares of the same public company.

- June 21, 2004: Petch sells all shares of the public company, "realizing a significant gain," says the auditor general's report.

- Sept. 1, 2004: Investigation closes for lack of evidence.

This story features a factbox "ASC chronology".

© The Calgary Herald 2005

Postby Guest » Tue Nov 08, 2005 8:20 am

Wilson's withdrawal raises conflict issues
Investor advocates question wisdom of business boss at OSC

Wojtek Dabrowski
Financial Post

Tuesday, November 08, 2005

Ontario Securities Commission chairman David Wilson's withdrawal from the investigation into Royal Group Technologies Ltd. highlights the potential for conflicts of interest faced by business people who move into securities regulation, investor advocates say.

"I would expect that we would have a chair of the securities commission that would not have to recuse himself from anything," Stan Buell, president of the Small Investors Protection Association, said in an interview. "Why do you want somebody who has to handicap themselves by saying, 'I'm here, but I can't look at this and I can't look at that?' "

Mr. Wilson, previously chief executive of Scotia Capital Inc. and vice-chairman of its parent, Bank of Nova Scotia, started his term as OSC chairman on Nov. 1. Scotia Capital was a key underwriter for Royal Group between 1996 and 2002. Scotiabank also handled accounts for related companies, court documents show. The RCMP, which is also investigating Woodbridge, Ont.-based Royal Group, raided Scotiabank in February to collect materials related to its probe.

On Saturday, the Financial Post reported that Mr. Wilson has recused himself from OSC's Royal Group probe. Also, he has removed himself from "any consideration of regulatory action specifically involving Scotiabank or any of its subsidiaries," an OSC spokeswoman said.

"The banks ... dominate the Canadian financial industry," said investor advocate Diane Urquhart. "If [Mr. Wilson has] recused himself from Scotia Capital, then what will he do when a specific equity offering has an allegation of fraud? What will he do if a whole product group has an allegation of improper design and misrepresentation?"

Mr. Wilson is the first non-lawyer to head the OSC in decades. The OSC says he negotiated a government-approved conflict of interest protocol months before the start of his term.

And while investor advocates believe his investment-banker past may prove problematic in the future, corporate executives and governance experts say his extensive experience on Bay Street outweighs the potential for conflict of interest.

"I think it's better to have somebody experienced and understanding of the business and [with] some potential conflicts than someone who just doesn't have that kind of experience," said the chief executive of a large publicly traded company based in Toronto. "If he's willing to knock 90% off his pay to go and do this, he's obviously doing it because he thinks he can have a positive impact."

David Beatty, managing director of the Canadian Coalition for Good Governance, also said departing from OSC's tradition of appointing chairmen with legal backgrounds in lieu of an investment banker isn't a bad idea.

That's because investment bankers "know how the system works and I think any potential ... conflict which would deny them access to certain cases is more than offset by their understanding of the business and their business-like attitude towards running the commission," he said.

Mr. Wilson's experience at running a large, diverse organization will also be invaluable to the OSC, said Glorianne Stromberg, a former OSC commissioner. However, Mr. Wilson will have to ensure that qualified officials around him are able to take up any cases he has to recuse himself from.

© National Post 2005

Postby Guest » Mon Nov 07, 2005 9:16 am

legal advice has suggested that suing the ASC for regulatory failure might be one option, although a difficult one, for those people who have made complaint without satisfaction. This way, files would have to be re-opened and perhaps studied to see if any real process was followed by the ASC.

Another option might be to re-submit each persons complaint, and ask the ASC to re-visit the issue, and re-examine the complaint with an eye to more of a process.

Third option might be to find way to request copies of exactly how your file was handled under the Freedom of Information Act.

Finally, if you feel you received the brush off, it might be worth consideration to submit your complaint to the politicians one level above the ASC and or to the media, asking that the complaint be given the sort of due dilligence that you feel it deserves.

I will be pursuing more than one of the above avenues in order to assure myself that complaints made to the ASC in the past, when the auditor general report suggests that little may have been done propely at this agency.............that these complaints now receive a proper investigation.
How that is possible, given the same staff as previously, I am not sure, but I am open to suggestions.

Postby Guest » Sat Nov 05, 2005 11:04 pm

from F Post article friday Nov 4, page FP4


"Structure has led to a malfuntioning of the commission.

"this month could see the start of a fundamental restucturing........which could split the regulators adjudicative role from its other functions"

"...........potential bias exists exists at the commission because OSC staff investigate and prosecute complaints, while a panel of OSC commissioners adjudicates them - all under one roof."

Adding this to the IDA voting recently for similar reforms and it appears that (without credit to them) that investor advocates are having some slow effect toward positive change within the industry. A lot of people have spoken out in recent years and continue to speak out, and the combined effect is starting to show. Good job.

Postby Guest » Tue Nov 01, 2005 11:03 pm

ASC has much tidying up to doThere is little vindication in report for auditor general

Calgary Herald
October 30, 2005

The provincial finance minister and the Alberta Securities Commission both claim Thursday's auditor general's report on the ASC is an endorsement of their past decisions. As any investor who does due diligence and reads reports for a living will discover, it is nothing of the sort.The 46-page report does not give the ASC a clean bill of health. On the most serious allegation -- that of interference with case files -- Auditor General Fred Dunn explicitly notes: "We did not examine the case files with the objective to determine if we agreed with the conclusions reached on a file. Rather, our objective was to determine if an appropriate process was followed and if adequate evidence and information was gathered to support the conclusions reached."Given that objective -- a look at the process -- the public and investors will never know whether Dunn would have agreed with a conclusion in a particular file.They must instead be assuaged by his statement that explanations offered by the former ASC chair and executive director were reasonable, and that in Dunn's opinion, "There is not sufficient evidence to recommend to management that any case file we examined be re-opened."The ASC's claim that there are no "apparent or significant flaws" identified in the systems is pure spin, given that the auditor general made multiple recommendations. They include:- Ensure the results of enforcement activities are independently reviewed and appropriate segregation of duties exists in the enforcement system.- Review and clarify its policies and guidelines for enforcement activities.- Measure the performance of its enforcement program.- (Ensure) the Human Resources Committee monitors the development of a process to identify, investigate, report, and act on employee issues and concerns.- Establish a process to assess the adequacy of the enforcement system's internal controls.- Improve the recording of its inquiries, discussions and analysis to support decisions made on case files.Dunn recommends that "all steps taken in an enforcement action should be documented and retained in the case file, including the rationale for all key decisions and actions."Of 82 case files reviewed, he notes, "There was a general lack of information in the files to support key decisions." He found several cases in which the reason to close a case file was not adequately recorded, eight in which the rationale "was not adequately recorded," and seven files "which did not contain sufficient evidence to allow us to fully follow the sequence of events and reasons for key decisions including the decision to close the file." Dunn also found "the most sensitive or potentially high-profile cases to be the most poorly documented. . . . Senior staff and members tended to provide their views verbally."None of this is very reassuring for the companies who fall under the jurisdiction of the ASC. Nor will it reassure the public that commission employees were fairly treated. On the issue of enforcement, Dunn identified serious gaps in the ASC's segregation of duties, of review, measurement, reporting, and recording and documentation. This finding suggests if the whistleblowers had not acted, Dunn's report would not now exist.And that brings up the performance of Finance Minister Shirley McClellan on this affair. After encouraging ASC staff to come forward, she stood by while employee after employee was fired or forced out of the ASC. Yet, it is those employees who have now been vindicated.© The Calgary Herald 2005

Postby Guest » Mon Oct 31, 2005 5:26 pm

Hello Premier Dalton McGuinty and Ontario Auditor General Jim McCarter :

The Auditor General of Alberta Fred Dunn has found severe deficiencies in the ASC enforcement operations in his audit released Thursday, October 27, 2005. The Leader of the Alberta Liberal Official Opposition, Dr. Kevin Taft, has called for an RCMP investigation on 11 sensitive securities investigation files, where the Alberta Auditor General has found very few documents and no documents detailing the rationale for verbal decisions made by senior ASC management. When can the Ontario investing public expect an announcement that the Auditor General of Ontario will conduct an audit on the integrity of OSC enforcement operations. Numerous associations and individuals have made written requests for the OSC enforcement audit. On Friday, October 28, 2005, the Financial Post editor called for the Auditor General of Ontario to audit the OSC enforcement operations. His editorial is in the attached media file "ASC Enforcement Media Week of October 24, 2005.doc". All these requests for an audit of OSC enforcement have been supported with evidence of anomalies similar to that provided by the 35 ASC whistleblowers and found in the Alberta Auditor General audit of ASC enforcement.

The OSC has no Ontario integrity commissioner responsible for monitoring the OSC's ethical conduct and we have not seen your government implement the recommendation for the OSC to report to the Ontario Standing Committee on Finance and Economic Affairs at least once a year. Put simply, the OSC has never held itself accountable to scrutiny by any third party on the competency and integrity of its handling of white collar crime complaints, investigations and prosecution actions. The ASC findings and the litany of recent complaints from Ontario court judges, the media, investor advocates and investor victims dealing with OSC enforcement should lead you to conclude that the Auditor General of Ontario should begin a Value for Money Audit of the OSC enforcement operations immediately.

The police forces of Ontario have public accountability for the thoroughness and fairness of their actions. Why are the OSC and the ASC exempt from public accountability for their enforcement of white collar crimes, which represents the theft of billions of dollars from the investing public.

Diane U
Guest The Fund OBSERVER

Postby Guest » Sun Oct 30, 2005 10:19 pm

The Wild West approach is not very reassuring for investors- a loud wake-up call to be sure. Several investor advocates felt the report fell short in a number of areas. Providing a culture that eliminates employee fear, invites openness and a professional workplace would be a start. Advocates are also questioning why there is a complete lack of evidence to support the closing of enforcement files, a lack of any written documentation when enforcement cases were taken to senior management, apparent conflicts- of- interest where policies were clearly broken and no disciplinary action was taken The AG has taken no evidence to mean no problem. Unfortunately that leaves investors with no answers .Lax enforcement may be leading to a national race to the bottom in order to attract more participants to provincial capital markets. Could that be the rationale for arguing against a national regulator? Source:

Postby Guest » Sun Oct 30, 2005 4:06 pm

Price says "while the audit of the commission's operations didn't find any serious problems at the regulatory body, they will follow its recommendations."

And the only complaints came from staff - malcontents, the lot of them :-) ??? I beg to differ.

They were among a chorus of complainants - one who has even sued the Commission. And any abused investor in Canada who has dealt with an SC or an SRO has a list of grievances - but there is no elephant in the living room because Fred and Shirley don't see it???

I certainly do. And the hundreds of investors I have worked with over the last decade do, SIPA does, CARP does and the list goes on....but we are "just throwing things out there" according to Shirley - because Fred couldn't find a paper trail. Give me a break. Have we really come to this in Canada????

So I guess we can expect only minor changes because there are no serious problems. Yeah, that should do it - NOT!!!! Give me a call any time Shirley!
I'll bring you up to speed and connect you to any or all of the aforementioned....

Securities commission says it will act on audit's recommendations
Last updated Oct 28 2005 11:41 AM MDT
CBC News

The Alberta Securities Commission will immediately address the problems a provincial auditor found with its enforcement practices and conflict of interest guidelines, chairman Bill Price says.

Price says while the audit of the commission's operations didn't find any serious problems at the regulatory body, they will follow its recommendations.

"We will get at them promptly and we expect to be accountable for responding to those recommendations," said Price, appointed chairman in June, a few months after the commission began taking hits over allegations of unfair enforcement and improper conduct.

Auditor general Fred Dunn conducted an audit at the request of Finance Minister Shirley McClellan, which was released Thursday.

It found the ASC needs to tighten its enforcement practices and conflict of interest guidelines, but that there isn't enough evidence to support allegations of favouritism in investigations.

Thursday, the deputy premier said she hopes the auditor's report puts an end to speculation around the securities commission.

"I hope that we'll move on from this, but if there is something that happens, I hope it comes with backing," McClellan said. "That's all. I mean, it's easy to throw things out there.

"This is a very important part of our financial markets in this province, and Alberta is obviously a very large player in that, and my reason is to ensure there is no reason for allegations."

But the audit's release hasn't quelled calls from the opposition to make changes to how the ASC operates.

"As I read through this report, it strikes me as a real body blow to the credibility of that organization," Liberal Leader Kevin Taft said. "It confirms our fears that it's a deeply dysfunctional organization in which basic processes of the job are not being attended to."

NDP Leader Brian Mason says the commission should be scrapped, in favour of a national body.

"I think there is a consensus that is emerging among industry leaders that we need to end the patchwork regulation in Canada," Mason said. "It's the only advanced industrial country that has this kind of situation."

Premier Ralph Klein says the provinces have discussed the idea, but that it wouldn't be simple to implement.

"I know there is some dispute or some concerns amongst the provinces relative to the role Ontario will play in administering a national securities commission," he said.

While the auditor won't re-open any cases, it points out an instance where a senior official ordered an investigation into a company he had bought and sold shares in. The investigation found no wrongdoing.

It also outlines an example where the commission's director of enforcement didn't comply with existing conflict of interest policies, but the breach was never detected.

"There are serious weaknesses in the control systems at the securities commission," Merwan Saher, an assistant auditor, said. "The system needs much more discipline."

The audit also says conflict of interest policies aren't adequate and that commission member investment disclosures aren't monitored well enough.

Dunn's report says the ASC, which is responsible for governing publicly traded companies registered in the province, including major oil and gas companies and WestJet, needs to improve the enforcement, conflict of interest and governance systems. MINOR things like that :-)

The ASC has been under fire since March, after the National Post reported concerns from anonymous employees about unfair enforcement and improper conduct.

Finance Minister Shirley McClellan had asked auditor Fred Dunn to investigate the commission's operations. The ASC then took Dunn to court in an effort to limit his access to its files, citing privacy concerns.

McClellan said earlier that another report into the allegations showed enforcement policies are being applied consistently and fairly. ... es20051028

Postby Guest » Sat Oct 29, 2005 9:35 pm

RCMP urged to look into ASC cases
The RCMP has been urged to investigate a handful of sensitive and "potentially high-profile" enforcement cases at the Alberta Securities Commission that were singled out by the province's auditor general.

Saturday, Oct 29 Financial Post

Postby Guest » Sat Oct 29, 2005 2:54 pm


RCMP urged to look into ASC cases
11 under question

Theresa Tedesco
Financial Post

Saturday, October 29, 2005

1 | 2 | NEXT >>

CREDIT: Bruce Edwards, Canwest News Service
Alberta Auditor General Fred Dunn: Province's Liberal Opposition leader wants probe into "potentially high-profile" enforcement cases singled out by his office.

The RCMP has been urged to investigate a handful of sensitive and "potentially high-profile" enforcement cases at the Alberta Securities Commission that were singled out by the province's auditor general.

In a letter to the RCMP's Integrated Market Enforcement Team (IMET) in Calgary yesterday, the police were asked to probe why 11 enforcement cases reviewed by Fred Dunn, Alberta's Auditor General, were found to be improperly and insufficiently documented.

The missive, sent by Kevin Taft, Alberta's Liberal Opposition leader, asked the RCMP to further probe Mr. Dunn's findings and "finish" the Auditor General's special investigation.

"There is a myriad of concerns raised in the Auditor General's report including the lack of proper documentation to adequately dismiss enforcement concerns on sensitive and high-profile cases," Mr. Taft's letter stated.

"It is my concern that these cases were not properly handled and that the possibility for fraud or inappropriate interference is high."

Mr. Taft's letter refers to the conclusions in a 48-page report by Mr. Dunn's office into the enforcement practices of the provincial securities regulator. The long-awaited findings, released two days ago, severely criticized the governance procedures at Canada's fourth-largest securities commission.

During his three-month examination, Mr. Dunn reviewed 82 cases and found that "there was a general lack of information in the files to support key decisions.'' Many of the cases inspected were flagged by former and current employees who have alleged the ASC's senior management interfered in enforcement cases.

The commission's board of directors and senior executives vehemently denied the allegations.

Mr. Dunn's examination revealed that "information in the files supporting decisions tended to diminish at higher levels" and that "we found the most sensitive or potentially high-profile cases to be the most poorly documented."

In the end, Mr. Dunn's report concluded that the ASC's "enforcement system needs more discipline." However, he concluded that "there is not sufficient evidence to recommend to management that any case file we examined be reopened."

A spokesman for the auditor general, who was not available for comment, described the deficiencies as "serious lapses," and called the report a "wake-up call" for the securities commission.

"We view these deficiencies as serious weaknesses in the control systems," said Merwan Saher. "Better recording of the rationale for decisions is not a documentary matter. That isn't just some missing paperwork. A good system within itself has to have evidence that the correct decisions are being made."

Mr. Saher said the auditor general's mandate was never to determine whether the right decisions were made to close or pursue enforcement matters.

"We were not setting ourselves up to be a fresh decision-making body. We were looking at the evidence in the files to see if the evidence and the accompanying system supported the conclusions that were made. We couldn't do that,'' he said. Instead, he said, the auditor general was forced to rely on interviews with current and former ASC staff to make the recommendation that no case files be reopened.

RCMP urged to look into ASC cases
"That should never have happened. That isn't the way you demonstrate the integrity of the system," Mr. Saher said.

William Rice, chairman of the ASC, said the auditor general's findings were confirmation that there are "no apparent or significant flaws" in the ASC's internal procedures to warrant "questioning of integrity.''

Alberta' Finance Minister Shirley McClellan told reporters that "there's nothing in the report that says there is lousy enforcement [at the ASC].''

The auditor general's office began its examination in July after weeks of legal wrangling with the ASC, which was beleaguered by accusations from more than a quarter of its 120 employees that it had lax enforcement practices and its senior executives and management engaged in favouritism and condoned a sexualized work environment. The ASC spent $1.2-million in legal fees fighting the allegations and the auditor general's inspection but lost its legal challenge when an Alberta court ordered the regulator to co-operate with Mr. Dunn.

During his inspection, Mr. Dunn found that the ASC's Enforcement Director breached conflict of interest guidelines when he purchased stock in a company that was under investigation for illegal insider trading and did not report it in writing.

Although the auditor general did not probe human resource management and practices, he concluded that the ASC's human resource committee did "little work'' to review policies and ensure strategies are in place to deal with problems.

© National Post 2005


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