Disgraceful - Alberta's Stand on Securities Regulation

Diogenes's picture

I'm mad, mad at the politicians in my home province of Alberta.

There are a number of blogs on this site that have touched on the need for a single national securities regulator in Canada.

By constitution, Canadian securities regulation is a provincial jurisdiction. So we have 13 different securities regulators! Only one other country in the world (out of 191 tallied) has this curious, provincial arrangement.

Securities regulation in Canada

Prosecution of white collar crime and securities fraud in Canada is a bit of joke. It's not hard to understand why.

Our most famous white collar criminal, Conrad Black, serves his sentence in an American prison for deeds similar to what he had practised and mastered in Canada over many years. Any legal action against him in Canada was brushed away without much trouble, like the chalk lines on his finely tailored suits.

John Felderhoff of Bre-X manages his ignominious seclusion from his Bermuda estate. He does feel very badly about the billions that investors lost; but how was he to know?.

The RCMP have finally charged Frank Dunn, the former CEO and creative accountant of bankrupt Nortel, with fraud; more than 15 months after the US Securities Exchange Commission filed a similar civil claim.

So while white collar criminals have few issues with Canada, investors have a few issues with white collar crime in Canada. Securities regulation, financial governance, and investor protection in Canada is broken.

Yet this week, the Alberta government has stated that Alberta will vigorously challenge the establishment of a national securities regulator because it is infringes on provincial jurisdiction.

Alberta's Minister of Finance Iris Evans said [1]

"We will continue to oppose, through all available avenues, including legal action if necessary, any move toward establishing a single national regulator…"

And this appeared in the Globe and Mail [2] a couple of days later…

TORONTO - Alberta Premier Ed Stelmach says he has no intention of wading into the controversy over the federal government's plans to create a national securities regulator…

On his list of 50 priorities, who polices the buying and selling of stocks and bonds ranks 49th, Mr. Stelmach told reporters yesterday after a luncheon speech in Toronto to the C.D. Howe Institute. The topic should not even be on the agenda ...

Mr. Stelmach said there hasn't been a scandal in the Canadian markets that would justify having government focus its energy on overhauling the securities system instead of the economy.

I'm not privy to your list of priorities sir, but number 49 out of 50? Get with the program Ed.

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Dear Premier Stelmach,

Alberta Premier Ed Stelmach

Sir, your comments concern me. I am not sure what your definition of scandal is, or what newspapers you read, or even what planet you are from, but your world view is quite different from mine.

I know Bre-X happened a long time ago and maybe is best forgotten; and that Conrad Black is yesterday's news; but Nortel just filed for bankruptcy and your own government has recently provided a substantial loan guarantee to help resolve the made-in-Canada ABCP fiasco.

Please tell me how maintaining the status quo and using a provincial "passport" system of securities regulation will improve investor protection and enforcement?

Alberta retail investors, and many others across Canada, were saddled with worthless ABCP paper that was AAA rated by a national ratings agency. It was sold by a BC securities firm without prospectus. Our chartered banks served as sponsors, trusts and insurers on the debt.

When $32 billion of short term AAA notes default (and freezing that much for that long is a default), all of our regulators and government authorities choose to sit on their hands and watch a private sector solution called the Pan Canadian Committee do the work. All normal legal remedies and avenues of redress are suspended in this time.

Now look at the results! Our current 'passport' system of security regulation and investor protection became a pass-the-buck system for ducking responsibility.

The reason you and others have given for retaining control of securities regulation focus on catering to the special needs of Alberta's businesses and ignore the urgency for investor protection and prudent national oversight.

You might see provincial securities regulation as a champion for small business but many of us, even in Alberta, view the current system as totally ineffective where it counts: governance and investor protection. The ABCP crisis has proven that.

It will take much more to convince us that you are acting in the best interests of the electorate. The current system is ripe for abuse as an enclave for patronage appointments, a system that better serves its political masters than the citizens it is supposed to protect.

Although I have never seen a job advertisement for a provincial securities regulator, given what I have learned over the last 17 months about what they do, here is how I would write the job description:

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Jobs you never see advertised:

Provincial/Regional Securities Regulator

A less than demanding job with no real work required as there are plenty of others willing to do the heavy lifting. Most duties are served as a cheerleader for business and the financial establishment; and to support new financial "innovations". There is an occasional need to listen to retail investors whine about naughty stock brokers and self-serving investment advisors. In almost all cases it is considered best practise to pass the buck.

You levy a nice fee every time you stamp a 'passport'; this vested authority will also provide for many excellent free lunches. Though this may annoy big national and international companies, they have the money and they do this all the time around the world anyway, so they're used to it.

You will be paid a nice six-figure salary for doing this, though the risk of being fired if something screws up is a remote possibility. Elections also happen, and we all know how fickle and vindictive voters and new political masters can be. Prepare to pack your bags with every regime change.

Required skills include: rubber-stamping; passing the buck; and not caring about any jurisdiction but your own. Artful denial of certain knowledge and hazy recall of selected events is a definite plus.

Selected candidates will have a proven track record in finance, either as political bagman (bagperson) or as a significant political party patron.

Alberta is an equal opportunist employer; bleeding heart liberals need not apply.

A single national regulator may not have saved everyone from all that has happened in recent months but a single authority, a national regulator, with a strong and respectable enforcement arm, would have achieved a better, faster, and less costly outcome.

I doubt many ABCP retail investors will have much trust in the system as it stands, even when they do get their money back. Without trust, Mr Stelmach, you don't have investment, no matter how convenient or understanding the regulators are.

A passport system for securities regulation will NOT protect investors, and it will not improve investment. Trust and confidence in the system must first be restored.

head up arse

Your 10 year plan for dealing with Alberta's homeless problem and the 20 year plan for dealing with Alberta's CO2 emissions are excuses for doing nothing, not plans. What visionary timeline do you have for improving securities regulation and governance?

Leadership is dealing with the issues of today. We are not interested in promises of a second coming.

In conclusion Mr. Stelmach, If you are satisfied with the outcome of the ABCP debacle, and you truly feel that maintaining the the status quo is the right course of action, then I will respect that opinion and never vote for you or your party again.

Diogenes van Sinope


3. Calgary Herald "Slick sales job can't hide real motives"   by Charles Frank, Reuters January 18, 2009