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  • Boom, Bust and Consolidation November 9, 2018
    The five largest bitumen-extractive corporations in Canada control 79.3 per cent of Canada’s productive capacity of bitumen. The Big Five—Suncor Energy, Canadian Natural Resources Limited (CNRL), Cenovus Energy, Imperial Oil and Husky Energy—collectively control 90 per cent of existing bitumen upgrading capacity and are positioned to dominate Canada’s future oil sands development. In a sense they […]
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  • A new Director for CCPA's BC Office: Message from Mary Childs, Board Chair October 24, 2018
    The CCPA-BC Board of Directors is delighted to share the news that Shannon Daub will be the next BC Director of the Canadian Centre for Policy Alternatives. Last spring, Seth Klein announced that, after 22 years, he would be stepping down as founding Director of the CCPA-BC at the end of 2018. The CCPA-BC’s board […]
    Canadian Centre for Policy Alternatives
  • Who Owns Canada’s Fossil-Fuel Sector? October 15, 2018
    The major investors in Canada’s fossil-fuel sector have high stakes in maintaining business as usual rather than addressing the industry’s serious climate issues, says a new Corporate Mapping Project study.  And as alarms ring over our continued dependence on natural gas, coal and oil, these investors have both an interest in the continued growth of […]
    Canadian Centre for Policy Alternatives
  • Pharmacare consensus principles released today September 24, 2018
    A diverse coalition representing health care providers, non-profit organizations, workers, seniors, patients and academics has come together to issue a statement of consensus principles for the establishment of National Pharmacare in Canada. Our coalition believes that National Pharmacare should be a seamless extension of the existing universal health care system in Canada, which covers medically […]
    Canadian Centre for Policy Alternatives
  • 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
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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)

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