Regulators in your pocket

[admin]

An insider speaks out
`We have people who steal from investors and nothing happens,' says former OTTP chief
executive
December 03, 2007
TYLER HAMILTON TORONTO STAR
BUSINESS REPORTER
Claude Lamoureux, the retired chief executive of the Ontario Teachers' Pension Plan, has been
stalwart in the fight for better corporate governance, as well as a vocal critic of Canada's track
record on investigating, prosecuting and convicting white-collar crooks.
In a frank interview with the Toronto Star, Lamoureux holds no punches. There's been too much
talk about what's wrong with securities law enforcement in Canada and not enough action, he
says, arguing that the Ontario government has done little to achieve real change that will protect
investors.
His recommendation? Heed the advice of Osgoode Hall law professor Marilyn Pilkington and
former Supreme Court of Canada justice Peter Cory, whose report for the recent task force to
modernize securities legislation has fallen on deaf ears.
The Star: There's been a lot of focus recently on the small number of securities fraud convictions
in Canada compared with the United States. What's your view on this?
Lamoureux: To me, it demonstrates we take this very lightly. We've spent $120 million (on the
Integrated Market Enforcement Team) and have nothing to show for it. The crime in all of this is
our legislators. The legislators should pass laws that make it easier to convict people who steal
from investors. We can talk all we want, though we just had an election in Ontario and the
Pilkington-Cory report is out. Did we hear one word about this? There was not one word about
this report that cost $8 million.
The Star: Who needs to spearhead this change in Ontario?
Lamoureux: I think it should be the attorney-general, or it should be the party. We can talk
about health and we can talk about education, but (market fraud) is very important because it
touches everybody in the province. We have people who steal from investors and nothing
happens.
The Star: The Pilkington-Cory report, among its many recommendations, argues that authorities
need better tools to crack down on white-collar fraud. It also points out the need for judges that
specialize in securities law and related crimes. Do you agree with those recommendations?
Lamoureux: When a judge one day hears a divorce in court and the next day has to look at an
insider-trading case, it's tough to understand that's a crime. There's nobody hurt. Nobody is
crying. It's just a group of investors who lost some money.
TheStar.com - Business - An insider speaks out Page 1 of 2
http://www.thestar.com/printArticle/281877 12/3/2007
The Star: The Ontario Teachers' Pension Plan has been quite active in suing companies, as well
as leading class-action lawsuits, but many of these legal actions have taken place south of the
border. Is this a statement on the Canadian system?
Lamoureux: We've sued a few corporations, Nortel being one of them, in the U. S. Why?
Because our lawyers say it doesn't make sense to waste our time in Canada. I don't make this
up. Our lawyers essentially tell us, you want to have a chance of winning and getting something
done? Go to the U.S.
The Star: What, in your view, explains this?
Lamoureux: Maybe we have too many people who say this is just a job; I don't care whether I
win or lose. Maybe there's not enough pride in the job. But at the same time, if the law is too
tough, the level of proof is too tough ... Maybe we get what we deserve.
The Star: So how do we go about improving the situation?
Lamoureux: The problem is that our legislative process is caught in the 19th century. What is
being done of the serious work that needs to be done? There's a lot of time being wasted. To me,
you go to Cory and Pilkington, and you start with their report. Implementing this will go a long
way to getting us on the map.
TheStar.com - Business - An insider speaks out Page 2 of 2
http://www.thestar.com/printArticle/281877 12/3/2007

[admin]

From: Diane Urquhart [mailto:urquhart@rogers.com]
Sent: Wednesday, December 19, 2007 9:59 AM
To: Cecil Clarke (justmin@gov.ns.ca); cbentley.mpp@liberal.ola.org; Dave Chomiak (minjus@leg.gov.mb.ca); Don Morgan (Don.Morgan@saskparty.com); Gerard Greenan (gnpalmer@edu.pe.ca); Jacques Dupuis (ministre@justice.gouv.qc.ca); Jerome Kennedy (JeromeKennedy@gov.nl.ca); Rob Nicholson (NichoR@parl.gc.ca) ; Ron Stevens (calgary.glenmore@assembly.ab.ca); Thomas Burke, Q.C. (T.J.Burke@gnb.ca); Wally Oppal (wally.oppal.mla@leg.bc.ca)

Subject: Federal Provincial Justice Minister Securities Enforcement Working Group Report Not Being Released to the Public


Ron Stevens Alberta Attorney General & Minister of Justice, Alberta PC MPP
Wally Oppal British Columbia Attorney General, British Columbia Liberal MPP
Rob Nicholson Federal Attorney General & Minister of Justice, Federal Conservative MP
Dave Chomiak Manitoba Attorney General & Minister of Justice, Manitoba NDP MPP
Thomas Burke New Brunswick Attorney General & Minister of Justice, New Brunswick Liberal MPP
Jerome Kennedy Newfoundland & Labrador Attorney General & Minister of Justice, Newfoundland & Labrador PC MPP
Cecil Clarke Nova Scotia Attorney General and Minister of Justice, Nova Scotia PC MPP
Chris Bentley Ontario Attorney General, Ontario Liberal MPP
Gerard Greenan Prince Edward Island Attorney General, Prince Edward Island Liberal MPP
Jacques Dupuis Quebec Minister of Justice, Quebec Liberal MPP
Don Morgan Saskatchewan Attorney General & Minister of Justice, Saskatchewan Party MPP


Three out of four government reports released in the past few weeks on the RCMP and securities criminal justice have been made public and are provided here for your convenience. There was another report submitted to Federal Minister of Justice and Attorney General Rob Nicholson and to the Provincial Justice Ministers on about November 13, 2007, that was prepared by the Federal Provincial Justice Ministers Securities Enforcement Working Group. David Wilson, Chairman of the Ontario Securities Commission and Co-Chair of this Working Group, discusses the Working Group's report in his attached speech at the Dialogue with the OSC Conference 2007. The Federal Provincial Justice Ministers Securities Enforcement Working Group report is not being released to the public. What are the Federal and Provincial Justice Ministers trying to hide from Canadians, who have become informed about Canada's Third World Securities Enforcement by the December 1-8, 2007 Toronto Star Series and hundreds of critical media articles before this?

On December 18, 2007, David Wilson gave this answer to Ken Kivenko's request for a copy of this report on December 16, 2007 (Ken Kivenko's e-mail communications with David Wilson are shown below). :

"The federal and provincial Ministers of Justice/Attorneys-General, at their November meeting, decided not to authorize the publication of the Working Group's report at this time. Therefore, I am not able to forward you a copy of the confidential report."



Justice Ministers review capital markets enforcement

Initiative a top priority for OSC Chair

OSC Chair David Wilson has been named co-Chair of a working group

that will make recommendations to Canadas justice ministers on

improving the enforcement regime for the capital markets. His fellow

co-Chair is Louis Dionne, Director of Criminal and Penal Prosecutions

for the Quebec Department of Justice.

The federal, provincial and territorial ministers responsible for justice

agreed in October 2006 to establish a working group involving

representatives from police, securities regulators, Crown prosecutors

and criminal law policy officials. The Working Group on Securities

Fraud Enforcement is reviewing ways to improve enforcement

initiatives against securities fraud and other commercial crime

in Canada.

This is certainly one of my top priorities as OSC Chair to contribute

to the success of this initiative, said Mr. Wilson.

The working group intends to present a final report to the ministers

responsible for justice in the fall of 2007.


Diane Urquhart
Independent Analyst

[admin]

What a totally meaningless "show trial" decision aimed at impressing the masses with a big number that will most likely never be collected and that the BCSC knew beforehand, would likely never be collected. Why did they not make it $10 or $25million? Same thing.

Why did the BCSC not go after the actual brokerage firm that was the actual member firm? Oh, is it because then the clients might actually get their money back from the offending firm that, through a no doubt lack of supervision, allowed this situation to occur and not be caught and corrected in the first place? Did the Commission ever investigate this from a corporate perspective as to the firm with whom these clients held their contracts?

Why does the financial services industry in Canada not follow the other securites industry, that is the Brinks guard industry. Have you ever heard of a business client being told that the stolen money is not going to be recovered because the offending guards have run away and spent all the money but don't worry, be assured in knowing that the tough minded regulators have fined the runaway guards $6 million and banned them for life from driving another Brinks truck?

No one would think for a moment that this would be a possibility. Brinks with whom the contract was established would pay up immediately. So why is it the reality in the Canadian securities industry???

Would the fact that there is a total lack of consumer protection in this area be part of the reason? Would another reason be that our statutory based securities commissions have somehow abdicated their statutory based duties by having delegated their duties and responsibilities to the industry created and controlled associations who "protect the public interest" but from an industry perspective? Just because the IDA's Statement of Values says it is transparent, does anyone want to guess just how opaque that transparency actually is?

I am still awaiting the decision of the IDA to release all of its market timing files to an independent investigator for an independent assessment. What do you think our chances are at this ever occurring? That is transparency.

How many more abuses are we going to incur from the industry before an elected representative actually stands up and takes action to protect the citizen who actually votes in this country!

Time will tell. But until leadership is shown, we will continue to have meaningless paper tiger $6 million dollar press releases designed to reassure the masses while those that have been screwed by the industry inaction continue to try to cope with the losses they have sustained. Losses which could have been avoided if the industry, like the Brinks company and the Brinks industry, showed some leadership or was forced to protect the interests of individual Canadians.

Jim


(Advocate Comment........I have to agree with much that Jim says, and point out that after reading parts of the decision

"The administrative sanctions are the most frequently used sanctions and are grouped together in s. 127 as “Orders in the public interest”. Such orders are not punitive . . . . Rather, the purpose of an order under s. 127 is to restrain future conduct that is likely to be prejudicial to the public interest in fair and efficient capital markets."

(to me this reads like "dont worry, we don't punish in any meaningful way")

It appears Jim, that regulators and self regulators in Canada have created an entire system where white collar fraud and crime actually pays, and pays very well. They are involved, at times complicit, and always ready willing and able to ensure that criminals will not be brought to justice in this area where the crimes are always measured in 7, 8 or 9 figures. Sadly, they are allowing the credibility of an entire industry be spent, and ruiined for the short term gains of today.)

[admin]

http://www.financialpost.com/analysis/s ... 4a22-9d82-
acc18e2aa70f&k=84959

MFDA no match for Berkshire

Barry Critchley, Financial Post Published: Saturday, December 22, 2007
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NP Network Blogs

The next time there is some less-than-satisfactory activity in the world of
mutual funds, send in the men.

It's clear the Mutual Fund Dealers Association of Canada-- the body that
regulates the distribution side of the fund business --is not up to the
task.

The MFDA -- set up a few years back at the request of the Canadian
Securities Administrators -- was given a golden opportunity to ask some
serious questions of Berkshire Investment Group, but didn't. For those who
haven't followed the story, the MFDA investigated Berkshire to determine
whether it had conducted reasonable supervisory investigations of the
activities of Ian Thow, a senior vice-president in its Victoria office. More
than $30-million of misappropriation claims have been filed against Thow,
who has been living in the United States for the past 2½ years. About 10
days back, Berkshire and the MFDA reached a settlement that called for
Berkshire to pay $500,000.

The British Columbia Security Exchange showed it is made of sterner stuff
yesterday when it fined Thow $6-million and banned him permanently from the
industry. Earlier, the BCSC said the case "represents one of the most
callous and audacious frauds this province has seen."

The $500,000 MFDA settlement is chump change given that Berkshire knew for
more than eight months about Thow's activities. We know that because the
point was made in

the settlement agreement. In September, 2004, Berkshire was told about an
investment that one of Thow's clients was supposed to have made in the
National Commercial Bank of Jamaica, a bank owned by AIC/Michael Lee-Chin.
But Berkshire chose not to notify the co-branch manager. In fact, it didn't
do much to either reign in or get a handle on Thow's extra cirricular
activities. From that September to April, 2005, Thow obtained a further
$5.8-million, of which $4.3-million was from clients. Over the next six
weeks, another $500,000 arrived. Those monies have been lost.

Thow engaged in considerable outside activities. He was buying fancy houses,
owning and leasing airplanes, flying guests to fishing camps and to Jamaica,
hosting Lee-Chin at a meet-the-billionaire session, and making large
donations to local charities. And he was doing it all on the salary of a
financial planner, whose regular book of business wasn't expanding that
quickly. Indeed, if Berkshire had been half on the ball, it would have asked
the key question:Where is the money coming from? In short, how can Thow do
all those things on what we are paying him at Berkshire? Readers can make up
their own minds as to why Berkshire adopted a hands-off approach.

But just because Berkshire didn't do any probing, there's no reason why the
MFDA, which has spent more than two years on the matter, should have ignored
the issue. As the head of enforcement at the Ontario Securities Commission
would note, it's just not the Canadian way. Apparently sending in the clowns
is the Canadian way.

bcritchley@nationalpost.com

[admin]

Off the Record

Good luck to you, Mr. Hockin

BARRY CRITCHLEY, NATIONAL POST



Wednesday, March 5, 2008


Tom Hockin, chairman, Ottawa’s Single Securities Regulator Panel.



Dear Tom: Greetings and good luck on your new assignment.



Before you start, here is an example of what’s wrong with the regulatory process. Here’s a potted history:



May, 2007: OBSI, an independent dispute-resolution service that investigates disputes for customers of more than 600 financial services, made a ruling against Financial Architects Investments, a mutual fund dealer.



OBSI, which provides a free service and has been around since 1996, announced FAI “has refused to honour a recommendation for compensation” to a former client. (OBSI recommended a compensation of about $80,000. FAI’s refusal was the first time an OBSI recommendation had been rejected.)



OBSI said the client (aged 76 when she signed on with a RRIF worth $142,000) “was badly served by FAI. She deserves compensation for unsuitable investments and a risky strategy that failed to provide her with needed income in her retirement.”



When FAI’s work with the client was finished, “all the funds in the account were equity-based, and none paid regular distributions. This meant units of potentially high-volatility funds had to be redeemed to meet the client’s income and RRIF requirements regardless of their declining net asset value,” said OBSI.



“Leading a widow in her late 70s living on a limited income into a portfolio containing 60% high-risk DSC mutual funds is simply unacceptable.”



How good was FAI’s strategy? The widow’s RRIF withdrawals fell to less than $5,000 in 2003 versus more than $10,000 in 2000.



Jan. 30, 2008. FAI announced it intends to resign from the MFDA, the national self-regulatory organization for the distribution side of the mutual-fund industry.



FAI is in the process of being acquired by GP Wealth Management Corp., also a MFDA member. Chand Misir, FAI’s president, said, “We are transferring our assets to GP Capital and all our advisors. It’s done, we are just going through the exercise of having the transfer take place.”



Given FAI’s non-compliance with OBSI’s recommendation, why would the MFDA agree to transfer the licence without demanding compensation?



Larry Waite, MFDA president, said, “We have a process to approve mergers and acquisitions. That is taking place now. With respect to OBSI, we don’t enforce [their] settlements.”

Shaun Devlin, MFDA’s vice-president of enforcement, said the MFDA “can take regulatory action if a member fails to meet its obligation to handle client’s complaints fairly and promptly.” Devlin said the MFDA has never, to date, “taken formal disciplinary proceedings in complaint handling matters.”

Tom, one doesn’t have to be a former federal Cabinet minister to realize something is wrong here. To mangle Lincoln’s quote about democracy, there is too much by the industry for the industry and not enough by the industry for the investors. Thanks to the efforts of FAI, the former client is still out a great deal of cash — and nothing is happening. As well, too many regulators are involved, none of which has either the power or the willingness to bring the matter to a conclusion. Inertia shouldn’t be the defining characteristic of securities regulation and action.



Good luck, Barry



bcritchley@nationalpost.com

[admin]

Good day. I hope you are enjoying your summer. May I suggest that you take a moment and read Saturday's Globe and Mail expose on ABCP in Canada. ABCP is – for those of you who have already forgotten and for those of you who wish to forget - the acronym for Asset-Backed Commercial Paper. The many investors who were caught by Bay street’s antics are quoted here.

How ordinary investors got sold on ABCP
http://www.reportonbusiness.com/servlet ... iness/home

http://investorvoice.ca/ABCP/ABCP_index.htm

http://investorvoice.ca/PI/3572.htm


Also in Friday & Saturday's New York Times were articles on this same topic as it plays out in the U.S.,

Citigroup Agrees to Buy Back Securities for $7 Billion

http://investorvoice.ca/ABCP/ABCP_NYT_07Aug08.htm

“Citigroup announced an agreement on Thursday to buy back more than $7 billion of auction-rate securities from investors to settle claims that it misled clients about the dangers of the investments.”
…
“Our goal is simple: to get investors back their money, and that’s exactly what this deal does,” Mr. Cuomo said.

2 Banks Buying Back $17 Billion in Securities

http://investorvoice.ca/ABCP/ABCP_NYT_08Aug08.htm

Two major Wall Street firms on Thursday offered to buy back more than $17 billion of troubled auction-rate securities that they had marketed as being as safe and liquid as cash, moving quickly to contain the legal fallout from the credit crisis.

Citigroup will buy back $7.3 billion of the securities and pay $100 million in fines as part of a settlement with state and federal regulators announced on Thursday morning.

Hours later, Merrill Lynch, without entering into a settlement, offered to buy back $10 billion of similar securities that it had sold to thousands of individuals. Neither firm agreed to reimburse institutional investors.

UBS to Spend $19.4 Billion to Buy Back Securities

http://www.nytimes.com/2008/08/09/busin ... ref=slogin

BOSTON (AP) — The Swiss bank UBS has reached a $19.4 billion agreement to buy back bonds in the biggest settlement yet over claims that banks misled investors to buy auction-rate securities, the Massachusetts secretary of state’s office said Friday.

The agreement has been reached between UBS Financial Services and the Securities and Exchange Commission and regulators in several states, including Massachusetts and New York.


Further, on Monday the Globe and Mail will also provide for a special focus on the Canadian regulators which I think should also interest you given that our Canadian politicians and regulators have done nothing to protect the public here in Canada and have done everything to protect the well-heeled banks and brokerage firms. In fact, they have done great harm to Canadians with their well-crafted spins, false assurances, and illusions of sincere concern. In fact, at the fall 2008 Investor Forum in Toronto, the CEO of the “independent” OBSI (Ombudsman for Banking Services and Investments) told the assembled group how he personally lost sleep thinking about the losses sustained by investors. One could not expect a better performance from an industry created, funded and controlled agency charged with looking after the “public” interest. But the OBSI is not alone, other similar industry created, funded and controlled agencies such as the MFDA (Mutual Fund Dealers Association) and the IDA (Investment Dealers Association), now rebranded as IIROC (Investment Industry Regulatory Organization of Canada) have been put in place for years to create the illusion of “protecting” the public interest.

It would appear that not only are the regulators captured by the banks/dealers but so are our governments, federal and provincial. In effect, Canadian politicians and regulators act no better than pimp protectors! Feigned concern is uttered periodically and “Expert Panels” composed of industry insiders are created from time to time to mollify the public in the hope that the public’s perception that there is a problem will dissipate…until the next crisis which will then be on someone else’s watch.

You have noted no doubt that it was a state government body that has played a lead role in the US to correct these abuses. The NY officials have not buried their heads in the sand saying that they can do nothing because there are 50+ states and it is someone else’s responsibility and that they cannot do anything for a variety of reasons. Instead, working with other state and federal governments, they have done their jobs. So why in Canada can the OSC and the responsible Ontario and federal government ministers get away with doing nothing in the equivalent Canadian context? Is it maybe that in Canada, the counterpart government bodies consider it their role to protect the banks and brokerage firms and not the Canadian public?

By copy of this email to members of the US Securities and Exchange Commission and the offices of the Attorney General of New York and Massachusetts, I would encourage you to be very watchful about what goes on in Canada’s financial sector. Canadians are being abused and nothing is being done about it. If Americans invest in Canada, they should know that we have only the illusion of investor protection. In reality, we have absolutely no investor protection. If anyone reports alleged wrongdoing to one of these Canadian regulators, one is immediately betrayed; in fact the betrayals take place in less than three hours. I should know. I have the email documentation as proof.

To the Canadian recipients of this email, enjoy your summer. You are well paid to protect the banks and brokerage firms and the status quo.

At least admit it so that Canadians and Americans will know that your deep concerns and crocodile tears are a charade!

Jim

[admin]

..........."there has been $40 billion in compensation ordered in the USA on tainted investment paper, yet there is no cry whatsoever from our regulatory or self regulatory agencies in Canada. Why?

Personally, I connect this failure at least partially to the fact that these very same regulatory agents were "in on the act" by granting legal exemptions to firms who wish to sell less than attractive (or less than legal) investments.

I find it questionable that exemptions to our securities laws would be used to help firms sell unatractive investments, and even more questionable that our own regulatory agencies would be granting these exemptions. It has seemingly gotten us into the largest financial liquidation in Canadian history as a result of these failures.

Is this why there is no cry in Canada, for immediate compensation..........is it because the regulators were in on it from the beginning?"


Some might comment on the following:
Will each and every provincial government now be held legally and financially accountable for billion dollar losses, just like provincial regulators are being sued for $8 bil by farmers and ranchers for failure to act and prevent the BSE (Mad Cow) crisis? Is it a similar case of regulatory failure?

[admin]

Joe:

I don't know why you are wasting your time by sending us all these emails. We are in Canada Joe. All of the regulators are created, funded, contolled and owned by the industry. You don't have to worry about regulatory capture in Canada; the regulators were created by the industry so they did not have to be captured.

And with respect to the securities commissions, the industry solved that problem too by stacking the leadership full of industry partisans.

So the only way individual Canadians can attempt to protect themselves is to let the US authorities know what a total joke our system of regulation is in Canada.

The US and the UK are taking corrective action but remember you are in Canada.

Cheers. Jim.
Best wishes.
Jim MacDonald MBA

[admin]

Regulator on your tail? Just quit.


Ontario’s Taub case has added to the confusion over the status of former advisors



By Laura Bobak
September 2008



Many in the Ontario investment community were caught offguard this past summer when former advisor Stephen Taub sidestepped a raft of allegations related to securities offences.

The Divisional Court of Ontario agreed with Taub’s argument
that he could not be disciplined by his regulatory organization because he had resigned from its membership before discipline proceedings were launched.
Enforcement issues raised by the case, as well as similar situations in British Columbia, have become a headache for regulators and advisors concerned about protecting investors and the integrity of the financial services community.

Disciplinary hearings were launched against Taub in October 2005 by the Investment Dealers Association of Canada (now the Investment Industry Regulatory Organization of Canada). IIROC has the power to discipline its members under the Ontario Securities Act, which states that self-regulatory organizations have authority to “regulate the operations and the standards of practice and business conduct of its members.”

But Taub’s lawyer in Toronto, Robert Brush, successfully argued that by resigning from the IDA, Taub became a former member and thus moved outside its reach. “The current law in Ontario is: if you resign [from the IDA/IIROC], it no longer has jurisdiction over you,” Brush says. “That’s the bottom line.”

He adds that this remarkable result would also apply to former advisors who resign from the Mutual Fund Dealers Association of Canada, the other industry SRO. It does not apply, however, to dealer-firm members, since the MFDA’s rules state that member firms (but not their individual representatives) may not resign without the permission of the MFDA.

Reaction has been swift. IIROC and the Ontario Securities Commission announced shortly after the ruling that they will seek leave to appeal to the Ontario Court of Appeal.

The ruling in the Taub case has focused attention on similar cases underway in B.C. Because of similarities in regulatory structures in most provinces, other jurisdictions could be affected. Although IIROC is a national SRO, it applies its rules across the country in conjunction with local securities laws. While each province has its own securities legislation, this same loophole is present in most provinces: statutes typically refer to organization members and representatives, but they do not specifically state that former members can be disciplined after they have resigned from an SRO.

The exception is Alberta. That province changed its securities legislation around the same time that TSX Group Inc. acquired the Calgary-based Canadian Venture Exchange in 2001 and renamed it the TSX Venture Exchange. Alberta securities law now states that SRO authority extends to any former member, any former representative of a member and any former representative of a former member.

Saskatchewan recently altered its securities legislation to extend SRO jurisdiction to former members after a little noticed case in early 2006, in which the Saskatchewan Financial Services Commission held that it did not have jurisdiction over former IDA members. But that legislation has not yet been declared in force.

For now, regulators are awaiting the outcome of rulings from higher courts in Ontario and B.C. In addition to Taub, who faces discipline for a range of offences including failing to flag possibly “manipulative or deceptive” trades, Brush is representing Charles Dass, a former advisor in Vancouver. Dass resigned from Dundee Securities Corp. in July 2004 and his membership in the IDA expired. The IDA notified him in January 2005 that it would be launching an investigation into the circumstances of the resignation. The B.C. Securities Commission (like the OSC did in Taub’s case) upheld the IDA’s jurisdiction over Dass even though he is a former member. An appeal of that ruling was heard by the B.C. Court of Appeal in May and a decision is pending. (The allegations against Dass are sealed until the jurisdictional issue is resolved.)

Both the Taub and the Dass cases were discussed in a July 31 decision by an IIROC panel dealing with John Collias, an advisor with Gateway Securities Inc. in Vancouver. The IDA investigation against Collias began in September 2007; he retained his status with the IDA until April 2008. In granting an adjournment until the release of the Dass appeal decision, the IIROC panel stated: “The issue of the jurisdiction of IIROC is of seminal importance to IIROC, its members and the investing public. Having extant decisions reaching opposite conclusions [Taub and Dass] is a matter requiring rectification, and that process is underway.”

This doesn’t mean all cases are being adjourned; rather, they are being dealt with on a case-by-case basis, says Alex Popovic, vice president of enforcement with IIROC in Toronto. “If the matters are before a panel, we are obligated to hold public hearings and let the panel determine what to do with those matters,” he says. “It is a panel’s decision as to what it believes is the appropriate response.”

Meanwhile, the OSC is standing its ground.
“The commission is concerned that investor protection would be weakened if a registered representative could avoid the consequences of breaching SRO rules by resigning from his or her SRO-member firm,” says OSC executive director Peggy Dowdall-Logie. “An SRO’s ability to take disciplinary action against former members and former representatives of its member firms is fundamental to effective investor protection.”
At least one member of Ontario’s Divisional Court in the Taub case seemed to agree with that view. In a dissenting opinion, Justice James Carnwath wrote:
“The public would have less confidence in public markets where sanctions for misconduct could be avoided by a simple letter of resignation.”
At a time when the financial services community is striving to convince investors that its members are held to exacting standards, many advisors would agree. IE

[admin]

REGULATORY

BCSC chairman hits out at single regulator plan
JANET MCFARLAND

With files from reporter Richard Blackwell

October 30, 2008

The smooth functioning of Canada's regulatory system in the current global market turmoil is more evidence that the country does not need a single national securities regulator, British Columbia Securities Commission chairman Doug Hyndman said yesterday.

"If you look at the whole credit crisis, Canada has actually come off better than pretty much any country in the Western world," Mr. Hyndman said in an interview.

Mr. Hyndman was in Toronto yesterday to continue to pitch his view that moving from the provincial system to a national regulator would lead to worse regulation and law enforcement. He said those favouring a national regulator are idealizing its potential benefits.

"I think there are a lot of unrealistic assumptions about what would be accomplished by creating a single regulator," he said.

Finance Minister Jim Flaherty has set up an expert panel, headed by former federal cabinet minister Tom Hockin, to design a national regulator and bring forward proposed legislation for its creation. It is expected to report in December.

In a speech yesterday, Mr. Flaherty reiterated his call for Canada to move quickly toward a single regulator.

"Given the unprecedented turmoil in international financial markets, it is also a good time to move towards a single securities regulator that reflects regional interests and can quickly respond with a single voice to market developments," Mr. Flaherty said.

But Mr. Hyndman argued it is exactly the wrong time to change the regulatory system. He said he is concerned governments could embrace the idea as they struggle to "be seen to be doing something" about the crisis.

(advocate comments below)

“Canadian brokerage firms did little to review asset-backed commercial paper products before selling them to retail investors, according to a report by Canada's brokerage industry regulator.”*


The Investment Industry Regulatory Organization of Canada (IIROC) reported yesterday on a year-long compliance sweep of firms involved in selling non-bank ABCP to Canadian investors, laying out new guidelines to change the way investment firms review products before selling them to clients.


"There was very little understanding, generally speaking, of what this product really was all about," IIROC chief executive officer Susan Wolburgh Jenah said yesterday. She said brokerage firms reported they saw non-bank ABCP as little different from traditional commercial paper, even though IIROC concluded there were major risk differences.


The two items Ms. Wolburgh Jenah might have overlooked in this crisis, is that it was her signature on a legal exemption that allowed some of these commercial paper products to be sold in Canada. Researchers at www.investorvoice.ca and www.investoradvocates.ca have uncovered documents that Ms. Wolburgh Jenah seems to have forgotten. In her prior job as vice chair of the Ontario Securities Commission, she was the person who signed for permission for two major Canadian banks to go outside the Securities laws of her jurisdiction and to sell this product, despite its shortcomings. A public inquiry is being asked for by investoradocates.ca to ask why.


Larry Elford, founder and chair of investoradvocates.ca, a web "flogg" for approximately 1000 financial industry experts who claim that our financial system is broken is calling for a public inquiry into failures by our regulators to protect the public. The persons allowed to comment on his flogg, "must have industry expertise, and a demonstrated ability to see beyond the conflict of their own financial position". "We are comprised of socially responsible and ethical investment professionals who seem able to look beyond their present salary, and view the financial landscape with a larger perspective", says Mr. Elford.


"Our members have a tremendous issue with the head of a financial industry regulatory agency, placing blame on the shoulders of the industry, as she did in recent press, when her last job as vice chair of the Ontario Securities Commission allowed her to give these same firms permission to break our laws and sell this same tainted product". "It smacks of such conflict of interest and for what"? "So one can move from a $400,000 salary at the provincial regulator to a $750,000 position at the industry regulator"?"


Investoradvocates.ca is asking provincial and federal governments to step to the plate and establish a public inquiry into what he calls "a captured regulatory system", in Canada. While the federal government is moving towards a single national financial regulator, the old guard is not giving up easily. BCSC chairman Doug Hyndman spoke in Toronto this week against giving up provincial control over financial regulation. (Globe and Mail article thursday, Oct 30, 2008 by Janet Mcfarland) Mr. Elford says he will bring forth documents and testimony from experts to support allegations that the regulators in Canada are acting contrary to the public interest, while seeming to serve the financial needs of the industry. Some of the documents form the original wrongs by these regulators that allowed our current financial pandemic to enter Canadian investment markets, says Mr. Elford.


Cynics note that the salaries and benefits for Mr Hyndman and the top three executives at the BCSC for 2007 were close to $2 million, and that the crown corporation is funded by fees collected from industry participants.


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http://www.theglobeandmail.com/servlet/ ... iness/home<http://www.theglobeandmail.com/servlet/story/RTGAM.20081017.wiiroc1017/CommentStory/Business/home>

Regulator says brokers failed on ABCP, sets new guidelines

JANET MCFARLAND

Globe and Mail

[admin]

Subject: ABCP financial crisis. Partial financial causes explained by Lethbridge Herald editorial.






LETHBRIDGE HERALD EDITORIAL
At least the irony is rich


Written by editor
Sunday, 16 November 2008


If individual investors weren’t so worried about the state of their finances, they’d be better able to appreciate the rich irony behind the process that left millions of their dollars in limbo.
Since August 2007, $35 billion invested in asset-backed commercial paper have been frozen, $300 million held by some 2,500 individual investors. When most of these investors put their money in ABCP, few realized the risk they were running in the complex instruments that were a mixed bag of debt obligations, including residential mortgages.
Many put their money in what they thought were low-risk investments. They didn’t know what they were getting. They trusted their investment advisers who now admit they didn’t know what they were selling. As such, they didn’t know the paper wasn’t suited to small investors unable to afford such risk.
So the irony? The Investment Industry Regulatory Organization of Canada, which as the name implies is the self-regulating body, spent six months investigating where the process went wrong. In releasing the results of that investigation, the organization’s president, Susan Wolburgh Jenah, said the findings came as a bit of a shock.
“We were really surprised to learn, as we went through this exercise, that notwithstanding the label ‘asset-backed commercial paper,’ there really are very significant differences between third-party (ABCP) and the bank-sponsored ABCP programs which had previously existed.”
Yet, as former investment adviser Larry Elford of Lethbridge points out in his ongoing campaign for change in the investment industry, it was Wolburgh Jenah herself in 2006 who signed off on legal exemptions that gave dealers, such as those at banks, permission to ignore existing disclosure laws designed to protect investors. At the time, Wolburgh Jenah was vice-chairman of the Ontario Securities Commission.
The exemption granted to Bank of Montreal and others relieved the financial institution of the prospectus requirement. Rather than having to provide investors a full prospectus that would have spelled out specifically what the investment entailed, the exemption stated it was “sufficient” that the short-term debt instrument had a solid credit rating from a recognized agent.
It had that, all right. Literally one rating from one agency. Two other agencies refused to rate asset-backed commercial paper.
Flash forward a couple years and a lot of uproar over how an industry that’s trusted to look out for clients’ interests could help move a risky, complex product into the wrong investors’ hands, and suddenly Wolburgh Jenah is wearing a different hat and singing a different tune, calling for more transparency which would have helped retail clients and investment professionals know what they were dealing with.
The lack of transparency, said the organization’s report, was that investors and brokers relied too heavily on the positive rating the agency DBRS gave to third-party asset-backed commercial paper. Funny how that happened.
“In layman’s terms, you don’t have to follow the law,” says Elford, who has taken his case for a broken investment industry to a Parliamentary committee.
A final insult to individual investors who were assured their money was all but guaranteed in ABCP, the regulatory’s report concluded there is no need for more rules to regulate this system that so clearly failed investors.
Fair enough. What’s needed is enforcement, not exemptions to duck rules meant to prevent the $35-billion mess still slowly wending its way through deal making and leaving so many people’s money in a frozen wasteland. The irony is rich. The payback from these investments won’t be.


You can access it at the following URL:
http://www.lethbridgeherald.com/index.p ... &Itemid=56

[admin]

Involving Consumers in Securities Regulation

Prepared for the Taskforce to Modernize Securities Regulation

in Canada

by Julia Black Professor of Law

London School of Economics and Political Science


23 June 2006

This report was prompted by awareness that retail investors often do not have the same economic incentives or opportunities as institutional investors to monitor public companies and their management. They also lack effective communication channels with regulators, making it more difficult for their views and/or interests to be given proper weight in the consideration of different regulatory options. This report examines how securities regulators in Canada and the UK currently involve retail investors and determine their interests in designing regulation.

see report at www.investorvoice.ca
http://investorvoice.ca/CSR/CSR_index.htm

[admin]

Accommodating Power: The “Common Sense” of Regulators

Laureen Snider
Department of Sociology
Queen’s University


April 19, 2008

Enforcement, litigation and sanctions are thorny issues among regulatory staff, who recognize implicitly (not usually explicitly) the contradictions with their compliance mission. Those who spend their working lives cultivating good relations with business find their networks threatened when “stakeholders” are investigated or sanctioned. (p.10)

...

Outside crackdown periods, regulators are not free to define all rule-breakers as offenders, or to investigate all serious breaches of securities law. Pushback and resistance from dominant economic parties, at all levels, in diverse institutional, political and social arenas, is simply too strong. (p.14)

...

“A system of governance is most effective when governed subjects voluntarily adopt and internalize its norms, values and ambitions as their own”
Rose, 1989: 50


The OSC seems not to have been captured by the sector it regulates but handed over to them”
Andrews, 2006: 86

http://investorvoice.ca/CSR/CSR_index.htm

[admin]

Patchwork regulators flawed set-up, Flaherty says

Paul Vieira in Ottawa and Barbara Shecter in Toronto, Financial Post

Published: Thursday, November 20, 2008

Jim Flaherty, the Finance Minister, said yesterday Ottawa is forging ahead with "willing" provinces to create a national securities regulator because Canada's patchwork system remains flawed in the global context.

"[T]he flaw we have in our system is that we still have 13 securities regulators. So we are going to go ahead and create a Canadian securities regulator," Mr. Flaherty said following the Throne speech. "We are going to do this with our willing partners -- which include some of the provinces. Those who choose not to [work with Ottawa] will not join."

The Financial Post reported this week that the financial crisis has helped the federal government to gather support for a new national securities regulator from all the provinces except Quebec. Proponents say a single national body, which has been 40 years in the making, would reduce costs and bureaucracy

Supporters say it would also bolster Canada's international reputation.

"If we can't put this together now in these kinds of circumstances, then I don't know when Canada will be able to do it," said Nancy Hughes Anthony, president and chief executive of the Canadian Bankers Association. "There are clear signals that we have to sharpen up our regulatory system for all financial institutions and all financial products."

More specific details on how the single securities watchdog will operate are to emerge in January, when an advisory panel headed by Tom Hockin, a former Cabinet minister in Brian Mulroney's government, tables its report laying out a legislative framework.

Sources told the Post the scheme Ottawa envisages would allow Quebec, a longtime opponent of a single national securities regulator, to maintain a separate and independent stock market watchdog.

Yesterday, Christian Paradis, the chief political minister for Quebec in the Conservative government, said joining the national securities regulator would be voluntary.

"We have to be clear this is not obligatory for anyone," said Mr. Paradis, who is the Minister of Public Works. "Nothing will be imposed on any province-- in any way, shape or form."

Sources who have closely tracked the recent moves toward a national regulator say the federal government was wary of forcing Quebec to cooperate

because the province is in the midst of a provincial election campaign. These people say Ottawa did not want to create a separatist backlash in the province, which could cost Liberal Premier Jean Charest.

"That's exactly right," said longtime advocate Stephen Jarislowsky, adding that the creation of a national regulator will put pressure on Quebec to, ultimately, support it.

In time, "there will be less companies that will register in Quebec. They'll just die on the vine and eventually they'll join it," said Mr. Jarislowsky, who is chairman of Montreal-based Jarislowsky Fraser Ltd., one of Canada's largest independent investment management firms.

Ms. Hughes Anthony of the bankers' association agreed that a successful national regulator could find support from provinces that don't initially join. "Perhaps you have to put the model in place and have the willing participants work with it to show the others that it doesn't hurt," she said.

Over the four decades it has taken to get this close to a national securities regulator, certain provinces have at various times supported the move. But the most consistent opposition has been from British Columbia, Alberta and Quebec.

However, last week, B. C. Premier Gordon Campbell's comments in a broadcast interview suggested a more conciliatory tone. He referred to "unprecedented times" that require "new thinking caps for the new world."

[admin]

National securities regulator coming: Flaherty
November 19, 2008 07:33 PM
Julian Beltrame
THE CANADIAN PRESS

OTTAWA–Finance Minister Jim Flaherty insisted today that Canada will create a national securities regulator even if some provinces remain opposed.

The finance minister made the blunt pronouncement Wednesday in answering questions about a reference in the throne speech to the government's long-standing commitment.

Asked about Quebec's continued opposition, Flaherty replied in no uncertain terms that a Canadian regulator will be established after the Tom Hockin committee delivers a final report and a model for draft legislation.

"This is a time of international economic volatility, instability. Canada's system is held out and looked as a model around the world but the flaw we have in our system is the fact that we still have 13 securities regulators," Flaherty said.

"We are going to go ahead and create a Canadian securities regulator, we're going to do this with our willing partners. Those willing partners include, of course, some of the provinces."

Flaherty has advocated the idea since becoming finance minister in January 2006, with limited success. But the global financial crisis has given greater impetus and urgency to the proposal since global leaders have talked about the need for co-ordinated action.

Ontario has been the staunchest supporter of a single national securities regulator while some have been more resistant to the idea.

Flaherty said Wednesday that more than one province is on board now and "I hope we will be able to have quite a few provinces." He didn't name any provinces who might have changed their position.

Alberta Premier Ed Stelmach continued to voice concern Wednesday.

"My concern is for the junior oil and gas companies ... just the whole increase in the whole regulatory burden to raise cash in Ontario, in a place where they don't understand what drives the Alberta economy," Stelmach said in Edmonton.

British Columbia Primer Gordon Campbell has said recently he is more open to the idea, citing the need for "new thinking" in the midst of the financial markets crisis.

The Canadian Bankers Association said it supports the federal move, saying a common regulator will enhance efficiency and increase confidence in Canadian capital markets at a critical time.

"When international securities regulators sit down to deal with this economic turmoil, Canada needs a single voice at the table," said CBA president Nancy Hughes Anthony. "Our fragmented regulatory system is out of step with the rest of the world, and it's time that we moved into the 21st century."

Canada's big banks own all of the country's biggest investment houses, which make them major players in the country's stock and bond markets as well as the mutual fund industry.

Federal officials have said previously they have detected greater comfort with the concept among some provinces as a result of the financial crisis that has plunged the world into a recession.



(advocate comments........"just so long as the same intitutionalized predators are not allowed to take over control and running of the federal securities commission.............")