Main menu:

History of RPE Thought

Posts by Tag

RSS New from the CCPA

  • Kate McInturff Fellowship in Gender Justice September 19, 2018
    The CCPA is pleased to announce the creation of the Kate McInturff Fellowship in Gender Justice.This Fellowship is created to honour the legacy of senior researcher Kate McInturff who passed away in July 2018. Kate was a feminist trailblazer in public policy and gender-based research and achieved national acclaim for researching, writing, and producing CCPA’s […]
    Canadian Centre for Policy Alternatives
  • The buck-a-beer challenge Ontario deserves September 6, 2018
    Ricardo Tranjan proposes an alternate plan to Doug Ford's buck-a-beer challenge in the Toronto Star.
    Canadian Centre for Policy Alternatives
  • Growing number of professionals face job insecurity, study finds September 6, 2018
    The Toronto Star's Sara Mojtehedzadeh discusses the findings of the CCPA Ontario's report, No Safe Harbour and gathers firsthand accounts from precariously employed professionals who live and work in Ontario.
    Canadian Centre for Policy Alternatives
  • Our Schools/Our Selves: The view from West Virginia September 4, 2018
    Our latests publication, Lesson Here, digs in to the West Viriginia teachers' strike.  Read the firsthand accounts of the work stoppage here.
    Canadian Centre for Policy Alternatives
  • What do the two largest mining disasters in Canada's and Brazil's history have in common? August 20, 2018
    Tailings dam spills at Mount Polley and Mariana: Chronicles of disasters foretold  explores the many parallels between the tailings dam spills at the Mount Polley mine in British Columbia, Canada, and the Samarco mine in Mariana, Minas Gerais, Brazil. The Mount Polley disaster took place in August 2014, when the dam holding toxic waste from […]
    Canadian Centre for Policy Alternatives
Progressive Bloggers

Meta

Recent Blog Posts

Posts by Author

Recent Blog Comments

The Progressive Economics Forum

Stock Market Swindles Galore

This past weekend (March 31st), Sino-Forest Corp. announced it was filing for bankruptcy protection. The Chinese-Canadian company, once the largest publicly-traded forestry firm on the TSX, collapsed under allegations it was nothing more than a sophisticated fraud and Ponzi scheme. Sino-Forest’s demise wiped out about $6-billion in shareholders’ value, making it a catastrophe on par with Bre-X Minerals back in the ’90s.

And yet the news of Sino-Forest’s bankruptcy was relegated to the inner pages of business sections, reflecting how the entire scandal is not being given its due, fading out of earshot. After the company was accused of being a fraud by the short-selling investment firm Muddy Waters LLC last summer, all hell broke loose. Sino-Forest’s top management resigned, its shares were halted from trading by the OSC,  and the RCMP opened a file. Sino-Forest condemned its critics and set up an internal committee to clear its name, only to concede it could not prove Muddy Waters was entirely mistaken in its allegations.

Yet there were no calls for inquiry to determine how did the company manage to raise so much money on the Canadian markets for more than 15 years. Where was the due diligence by its underwriters – the brokerage houses of our chartered banks? Is the OSC going to investigate them?

Sino-Forest is just the latest in a long line of stock market calamities that have plagued  Canada’s capital markets. Diane Urquhart, who spent 20 years working on Bay Street as a research analyst, and now works for investors’ groups, argues that Canadians lose as much as $20-billion a year to investment fraud. From Bre-X, Livent, Portus, Norshield, Crocus, Nortel, Norbourg, Sino-Forest, Conrad Black, ABCP and countless others, the scandals come thick and fast. And yet, year in and year out, there is little done to clean up the markets.

Canada is one of only two countries (the other being Bosnia-Hergovia) that belongs to the International Organization of Securities Commissions (IOSCO) that does not have a national securities regulator. Instead we have 13 provincial and territorial securities commissions. We prosecute stock market fraud cases at a rate of 10 times less than the US, and 20 times less in the case of insider trading violations. We levy smaller fines and have jailed only an estimated 20 investment fraud criminals over the past 25 years.

What it adds up is bad economics. As Utpal Bhattacharya, a well-regarded academic and expert on stock market regulation, has said, poor regulation means that corporations don’t invest in your country. Why would they when they don’t have any guarantee of getting their money back in the event they are robbed?

The Harper government has moved to set up a national securities regulator. But last year, the Supreme Court of Canada threw out the legislation the government had drafted to establish the agency, calling it unconstitutional. It was a terrible and blinkered decision by justices who clearly don’t understand our economy and markets.

And as long as this situation is allowed to fester, the Sino-Forest debacles will keep showing up.

(My  exposé of the crimes of Canada’s financial industry, “Thieves of Bay Street” is being published by Random House Canada and is now hitting bookstores and e-books.

My website for it is here:

http://thievesofbaystreet.ca/

You can read about it here:

http://www.randomhouse.ca/catalog/display.pperl?isbn=9780307359636

Or order it here:

http://www.amazon.ca/Thieves-Bay-Street-Brokerages-Canadians/dp/0307359638)

Enjoy and share:

Write a comment





Related articles