Investors Scrutinizing the Regulators

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Securities Regulation In CanadA


Fox Guarding the Hen House

   

 

 

Stephen L. Harris

( Doctoral Thesis) March, 1995

The Political Economy of the Liberalization of Entry and Ownership in the

Canadian Investment Dealer Industry

 

"... [T]he theoretical justification for regulation is to protect the public interest on the one hand, but on the other hand private interests are equated with the public interest. Thus, private interests can seek the sponsorship of the state to support their own interests. ...

"In the context of the investment dealer industry... the demand for public support of the industry, in the form of entry barriers and [fixed] commission regulations, can be seen to be argued from the perspective of destructive competition, concentration of power, efficient capital markets, [and] absence of foreign intervention -- all of which were categorized as being in the public interest. In reality, however, it will be shown that these demands had little to do with the public interest and more to [do] with the industry's private rent-seeking objectives." (at p. 37)

 

So what is the LEGAL NATURE of the  IDA?

Well, it really depends on three things:

1)

WHO you ask.

2)

WHY you ask.

3)

WHEN you ask.

 

What the IDA says to the Press:

 

Brian Awad ex-IDA Legal Counsel

"The IDA is a private organization and can set its own rules."

"...the IDA is not an arm of the government.  We are not acting as an agency or a delegate of the securities commission."


IDA called on constitutional grounds

09 May 1999

 

Paul C. Bourque

IDA SVP., Member Regulation

"First, let's get the facts straight. The only legislative power the provincial governments "delegate" to the IDA is registration of brokers -- and even that is only delegated in B.C., Alberta and Ontario. The provincial governments do not "delegate" securities industry compliance and enforcement."


Penalties needed

03 November 2004

 

What the IDA says to its Members

 

Investment Dealers Association of Canada

IDA By-Law 20.30

(1) The Association may hold hearings, as set out under this By-law, in order to ensure compliance with and enforcement of Association By-laws, Regulations, Rulings and Policies and federal or provincial statutes, regulations, rulings or policies relating to trading or advising in respect of securities or commodities.


IDA By-Law 20.30

01 October 2004

 

What the IDA says to the Government:

 

Joseph Oliver, ex - President of IDA

Evidence before the

Senate Standing Committee on Banking, Trade and Commerce


"The IDA is Canada's only national entity with delegated responsibility for securities regulation and investor protection." - Joe Oliver

02 November 1998

 

What the IDA says to the Superior Court:

(when challenged by an investor)

 

Investment Dealers Association of Canada

The IDA is merely, 'an unincorporated voluntary Association of Canadian Securities Dealers governed by a constitution, bylaws and regulations which deal with the conduct, management and control of the Association's affairs.


Factum of the Responding Parties, Investors Dealers Association of Canada, Terrance K. Salman, G.F. Kym Anthony, and Joseph J. Oliver

Christopher Morgis et al., vs. Thomson Kernaghan and Co. Ltd

Page 5, para. 12

 

What the Court has said

 

The Investment Dealers' Association is a body recognized by the Ontario Securities Commission, and through which members exercise self-imposed "policing" powers over one another. Not all investment dealers are members of the Investment Dealers' Association, but supervisory regulations exist for all investment dealers, whether or not they belong to the Investment Dealers' Association. If they do not belong, regulatory supervision emanates directly from the Ontario Securities Commission. For all practical purposes the scope of the authority is identical, whether it is exercised by the Investment Dealers' Association or the Ontario Securities Commission.

R. v. Holmes

[1972] O.J. No. 1230, para 6.

 

What the IDA says on their Web Site:

 

Investment Dealers

Association of Canada

"The securities commissions delegate certain aspects of securities regulation to the Investment Dealers Association of Canada..."

IDA Web Site

 


 

What the OSC says:

 

 Securities Commission

"The objective is to validate reliance on the SRO for the functions which we have delegated to it."


"The recognition process is an important one. It helps set clear standards which must be met by the SRO prior to exercising its delegated authority"

Oversight of Self-Regulatory Organizations,

OSC Dialogue, by Toni Ferrari

03 November 1998

 

What the OSC advises investors who file a complaint:

 

 Securities Commission

The OSC has recognized the Investment Dealers Association ("IDA") as a self regulatory organization (1995, 18 O.S.C.B. 5293). As such, the IDA has the authority and the jurisdiction over its members to enforce Ontario securities law as well as IDA rules, regulations and by-laws.

As there are no provisions to circumvent this process, the OSC is unable to consider your request for a regulatory review of your matter.

OSC letter to Ms. Pamela Reeve

25 August 2004

 


 

What the Ontario Information Privacy Commission says:

 

Order P-30

21 December 1998

"...an organization which, in the view of the institution (OSC), qualified as an "agency as described in clause 14(2)(a) (of the Freedom of Information and Protection of Privacy Act, 1987)." "

...

"The O.S.C. has informally delegated its complaint investigation function with respect to investment dealers to the I.D.A."

...

"...all investigation reports and disciplinary decisions of the I.D.A. and T.S.E. are filed with the O.S.C. so that the O.S.C. can review them to ensure that the matters were properly dealt with even though there is no statutory requirement that this be done."

...

"In the circumstances of this appeal, the I.D.A. was simply acting as agent for the O.S.C."

 

Order P-548

07 October 1993

"It is clear to me that, if the O.S.C. had itself performed the investigation into the appellant's complaint and produced a report, the report would fall squarely within the parameters of subsection 14(2)(a). In the circumstances of this appeal, the I.D.A. was simply acting as agent for the O.S.C.,..."

 

 


 

What the Canadian Securities Administrators say:

 

Canadian Securities Administrators

Uniform Securities Regulation Proposal

Self-regulation

S.43, pg.18

"The CSA (Canadian Securities Administrators) agree that SROs and their staff should have the same statutory immunity that securities regulatory authorities enjoy when they exercise powers delegated to them by securities regulatory authorities. Such an immunity would be provided for under the USL."

 


See also: OSC/IDA Scandal