Why it's Better to Defraud Investors Than Say No to Mining-You will rarely be caught

All this is no surprise to Utpal Bhattacharya, a finance professor at the Indiana University's Kelley School of Business and author of a report comparing the enforcement records of the OSC and the U.S. Securities and Exchange Commission (SEC).

"We found the enforcement in Ontario was pathetic," said Bhattacharya. "Canada is a first-world country with second-world capital markets and third-world enforcement."

Many high-profile cases of stockmarket meltdown or corporate fraud in recent years have left investors fuming that authorities have either failed to hold people accountable or taken way too long to apply justice.

"I think delay is a big source of frustration for investors," said Poonam Puri, a law professor who teaches about white-collar crime at Osgoode Hall Law School.

This year, for example, many Canadians were frustrated that, after a decade of investigation and courtroom battles over Bre-X Minerals, nobody was held accountable for the world-infamous multi-billion-dollar gold fraud.

Many other cases have left Canadians scratching their heads, such as the 1990s meltdown of theatre-producer Livent Inc., the accounting fiasco of Nortel Networks, or the OSC's failure to pin stock-tipping charges on investment banker Andrew Rankin.

Critics say the OSC showed its light touch in the YBM Magnex stock-market scandal a few years ago. Despite FBI investigations linking YBM Magnex to the Russian Mob, the OSC in 2003 ruled "this case isn't about organized crime," and set light fines and penalties against a few company directors.

. . .

According to a Bloomberg News study prepared by Port Hope-based Measuredmarkets Inc., 33 of 52 large Canadian mergers last year showed signs of aberrant trading just before the mergers were publicly announced. That's a rate of 63 per cent. A comparative study in the U.S. found a rate of 41 per cent.

The findings don't prove illegal insider trading is widespread, says Measuredmarkets' Christopher Thomas, but "it raises a red flag."

. . .
Barbara Stymiest, chief operating officer at Royal Bank of Canada and former CEO of the Toronto Stock Exchange, called Canada's securities enforcement an "international embarrassment."

. . .

Adjusted to reflect the market size in each jurisdiction, the Indiana University report revealed that between 1995 and 2005, the SEC prosecuted 10 times more cases and, in the specific area of insider trading violations, 20 times more cases than the OSC.

As for financial penalties, "the SEC fines for insider trading per case are about 17 times more than the OSC fines," concluded the study, prepared last year for the Task Force To Modernize Securities Legislation in Canada.

WHY THE OSC SO RARELY GETS ITS MAN; More than 450 employees work at the Ontario Securities Commission. About 40% are paid more than $100,000 a year. Their dismal track record begs the question What on earth are they doing?; [MET Edition]
TYLER HAMILTON. Toronto Star. Toronto, Ont.: Dec 1, 2007. pg. A.1