SROs lack enforcement muscle, says IDA boss

(January 30, 2004) Canada’s self-regulatory organizations (SROs) should be given enhanced enforcement powers, such as the right to treat disciplinary decisions as court orders, says IDA president Joe Oliver.

Effective enforcement of disciplinary orders is critical to a credible regulatory regime, Oliver said on Thursday, January 29, at an SRO conference in Toronto. “There is justifiable skepticism with a process that imposes well-publicized and substantial monetary penalties, but provides no effective means to enforce the penalties.”

Alberta is currently the only Canadian jurisdiction that permits the IDA to file its disciplinary decisions as orders of the court.

SRO investigations are often hampered by the unwillingness of third parties to provide documents or testify at hearings, Oliver added, meaning that cases are sometimes dropped due to lack of evidence. Despite requests from the IDA, the new uniform securities legislation project contains no provisions for compelling witnesses and documents for investigations, Oliver said.

“No one has raised any objections in principle to these requests for SRO powers and protections,” he said. “For some reason, we can’t seem to get Canadian Securities Administrators’ support and so we will be asking the provincial ministers to include these powers in the Uniform Legislative Act.”

The IDA is also looking for tougher enforcement measures at the federal level. Oliver says he has written to the new federal justice minister, Irwin Cotler, asking for quick passage of a bill that amends the Criminal Code to include illegal insider trading.

However, Oliver says the bill needs to be updated to permit wiretapping, given the nature of illegal insider trading.

And he says the justice minister needs to take another look at the parole system, often viewed as soft on market-related crime. “Anecdotal evidence suggests that white-collar criminals prefer to operate in Canada due to the perception that we are not serious about keeping the convicted incarcerated, even when the courts have imposed long sentences.”

“We can’t let Canada get a reputation as a haven for white-collar crime,” Oliver stated.

Enforcement will also be a priority in 2004 for the mutual fund industry’s SRO. MFDA president Larry Waite, who also spoke at Thursday’s SRO conference, says enforcement will be the association’s largest growth area this year, “with the hiring of additional investigative and litigation staff.”

Waite says the MFDA expects to have its disciplinary and hearing processes in place by the spring.

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