Ottawa announces new capital market police force

(November 28, 2003) In an effort to tackle high-level capital market fraud, federal Solicitor General Wayne Easter has announced the launch of Canada’s first integrated market enforcement teams, run by the RCMP.

RCMP officers will work with lawyers and other experts in Canada’s financial centres, investigating cases of serious securities fraud and market irregularities, such as illegal insider trading. The first two teams, announced today, will be based in Toronto.

“These teams are advancing our existing system of policing financial markets at a more targeted and focused level,” Easter said at a news conference. “[They] will help catch corporate criminals who may have previously evaded the law. They will also be a serious deterrent to those even thinking about such criminal acts in the first place.”

Easter says the teams, each consisting of 10 people, will also help boost investor confidence. “What has happened in corporate America affects us north of the border as well,” he says. “We’ve seen it happen after Enron and other scandals. Many Canadian investors, in fact, are still feeling the losses.”

The RCMP won’t comment on specific cases the teams might be looking at. Chief superintendent Peter German says the intent is not to take on a great number of cases but to concentrate on those “key cases that would impact investor confidence.”

The teams will work closely with other federal and provincial agencies, as well as the country’s various securities regulators. Charlie Macfarlane, executive director of the Ontario Securities Commission (OSC), points out that the RCMP has had a physical presence at the OSC’s Toronto office for the past three years.

“The joint RCMP-OSC intelligence unit has proved to be of great value,” Macfarlane said today. “This approach will significantly expand the RCMP’s presence in our capital markets. It will also streamline investigations by applying teams of investigators to single large cases.”

Critics note that market fraud cases often get bogged down in the courts, often due to a lack of understanding at the judiciary level of the issues involved. Macfarlane concedes that’s a problem and admits that not enough people have been punished for market fraud in the past.

“Maybe there isn’t as much understanding of these complex cases in the courts,” he says. “The more cases that get brought forward, the more likely it is that you’re going to see people spending time behind bars as a result of violating those laws.”

Ottawa wants to increase maximum prison sentences for fraud and has proposed making illegal insider trading a specific offence under the Criminal Code. However, the bill containing the provisions was not passed before the House of Commons adjourned. Easter expects the legislation will be brought back when parliament resumes sitting in January, but he insists the new laws do not have to be in place for the enforcement teams to do their job effectively.

The market enforcement teams were first announced in this year’s federal budget, along with a $150 million funding commitment from Ottawa. A third team will be launched in Vancouver next week, Easter says, with Montreal and Calgary to follow in 2004. There will be nine teams in place by 2006.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com