Regulating Canada’s securities market: an examination of the investment dealers association’s enforcement practices from 1984 to June 2008

Date created: 
2012-06-15
Identifier: 
etd7265
Keywords: 
Investment fraud
Self-regulation
Misconduct funnel
Enforcement
Quasi-criminal offences
Aggravating and mitigating factors
Abstract: 

Every year, thousands of Canadians fall prey to investment fraud. Estimates for 2007 indicate that roughly one-in-twenty Canadians are victims of investment fraud at some point in their lives. Given the frequency of investment fraud in Canada, it is not surprising that losses to Canadians amount to billions of dollars as well as other harmful personal consequences. Financial and personal losses, along with diminishing public confidence in capital markets, led to calls for stricter enforcement. This dissertation examines the enforcement practices of the Investment Dealers Association of Canada (IDA), the national self-regulatory organization responsible for policing investment dealers and Member firms that trade in the debt and equity markets. Data from 1984-2008 were collected from three sources – the IDA Enforcement and Annual Reports, the IDA’s tribunal cases, and appeal cases of the IDA’s decisions to the Alberta, British Columbia, and Ontario securities commissions. The findings from the study show that while the IDA processed a significant number of complaints in the case assessment stage, the number shrank considerably as the complaints made their way through to the investigation and internal prosecution stages of the disciplinary system. The top two offences dealt with by formal disciplinary proceedings were unsuitable investment and inappropriate discretionary trading. The majority of investors had limited investment knowledge, and many were encouraged to borrow money to invest. Results also show that the IDA’s by-law enforcement was often inadequate and did not send a sufficiently strong deterrent message to market participants. The majority of cases were disposed of via settlement agreements rather than hearings, and the fines imposed were often not proportionate to the offence(s). Between 2002 and 2007, the IDA collected less than 50% of the fines it levied. Harsher fines were imposed by hearing panels that were chaired by a public member. When determining penalties, more weight was given to mitigating rather than aggravating factors. Regulatory reforms should focus on greater transparency, stricter enforcement, and more attention to aggravating factors when assigning penalties. Fraud awareness programs should not be a one size fits all approach and must be tailored to different subsets of investors.

Document type: 
Thesis
Rights: 
Copyright remains with the author. The author granted permission for the file to be printed and for the text to be copied and pasted.
File(s): 
Senior supervisor: 
Joan Brockman
Department: 
Arts & Social Sciences: School of Criminology
Thesis type: 
(Thesis/Dissertation) Ph.D.
Statistics: