Industry Regulation

In Canada financial institutions are regulated at either the federal or provincial level, or a combination of both. Banks and federally incorporated insurance companies are regulated at the federal level. However securities dealers and provincially incorporated companies are regulated at the provincial level.

In the new millenium there are initiatives to streamline regulation of financial services in Canada. The establishment of the Financial Consumer Agency of Canada (FCAC) with a responsibility for enforcing many of the federal laws that protect consumers in their dealings with financial institutions is a step in that direction.

The Canadian Securities Administrators (CSA) is a forum for the securities regulators of Canada's provinces and territories to coordinate and harmonize regulation of the Canadian capital markets. Although the provincial authorities still regulate the securities industry, the CSA may be seen as another move towards federal regulation. The CSA now provides an alphabetical list of disciplined persons on their website.

In the United States the Securities and Exchange Commission (SEC) is the primary overseer and regulator of the U.S. securities markets. The SEC also works closely with many other institutions, including Congress, other federal departments and agencies, the self-regulatory organizations (e.g. the stock exchanges), state securities regulators, and various private sector organizations.

The National Association of Securities Dealers (NASD) in the United States is the largest securities industry self-regulatory organization in the world. The NASD develops rules and regulations, conducts regulatory reviews of members business activities, disciplines violators, provides arbitrations and mediation services and regulates securities markets for the benefit and protection of the investor.

In the U.S.A., Eliot Spitzer became New York’s 63rd Attorney General on January 1, 1999. Since that time, he has advanced initiatives to make New York a national leader in investor protection, environmental stewardship, labor rights, personal privacy, public safety and criminal law enforcement. Spitzer’s investigations of conflicts of interest on Wall Street have been the catalyst for dramatic reform in the nation’s financial services industry. His prosecutions of sophisticated white collar crimes have resulted in some of the nation’s largest fraud recoveries. Additional information is available on the website of the Attorney General’s Office.

Here in Canada our regulatory structure has been subject to much criticism in recent times. Since much of the regulatory responsibility for companies that sell financial products has been delegated to self regulatory organizations there would appear to be an inherent conflict of interest.

Government has taken an initiative to establish a national securities regulator but has encountered opposition and strong industry pushback. Nevertheless the effort continues and the 2013 budget includes provision for extending the mandate for the Canadian Securities Transition Office (CSTO).

SIPA believes that Canadian investors need a strong federal regulatory organization with a mandate to enforce rules and regulations for all sellers of financial products. The regulator needs a mandate that empowers the regulator to carry out extensive audits when considered appropriate; and to order violators to disgorge profit, pay restitution to victims, and to pay punitive damages.