legal exemptions handed out by crown corp

How to exempt yourself from the law………and win!
Lately the Ferguson (RCMP officer tried three times) case and the motorcycle riding Sikh fellow who wished to be exempt from the law on wearing a helmet, were in the news. Most people I suspect are not well informed on how to obtain an exemption to the law. None, in fact can imagine asking the police for an exemption to, lets say, drive from Lethbridge to Calgary at 200 kilometers per hour, no matter how important your trip is.

What I found amazing, however, is that any bank, investment dealer or investment sponsor, is able to approach our provincial securities commission and apply for an exemption to the law. Want to sell house brand funds to all your clients? Apply for an exemption to the laws that protect them from such predatory practices. Need to give commission kickbacks to get clients to move to certain products? Get an exemption from the laws against commission rebating. Have a poorly selling income trust or other new issue? Apply for exemptive relief from the law so that the firm can use (or abuse) client’s mutual fund assets, and dump the offensive product into their funds without their knowledge. Want to change the title of thousands of licensed “salespersons” and make them instantly appear as “advisors”? Apply for an exemption to the laws against misuse of registration and license. Viola! Solve nearly any little problem with some paperwork and an application to the securities regulator.

It has all been done, and according to the largest database in Canada on the topic, done thousands of times in recent years. I had no idea that something like this was even possible. I suspect that clients are even less well informed.

How, you ask? Because investments are handled by another set of laws, called the Securities Act, and the police are not always informed of criminal violations in this other area. I have seen forgery brushed aside as “not always forgery”, fraud dismissed, breach of trust ignored. The police are assuming, perhaps incorrectly, that your provincial securities commission has matters in hand. Or they are never even notified.

The site that contains the most comprehensive data on exemptions to the law is found at:
http://www.osc.gov.on.ca/Regulation/Orders/2008/ord_2008_index.jsp or you can just go to the OSC (Ontario Securities Commission) site and look at the section on “orders, rulings and decisions”. It includes exemptions passed in Alberta and other provinces.

All of these exemptions were granted without public input. No involvement of a judge, no public notice, and no consumer representation in the decision making process. If you browse, you just may find an investment you own that was sold to you without this disclosure. You may be entitled to know why.The various Securities Commissions refuse to answer how some of these exemptions are in the public interest. They feel they do not have to tell you. Some have been badly abused to hurt the interests of consumers. In Alberta, our provincial commission, a crown corporation, which is responsible to the legislature, recently spent over $1 million dollars on legal fees to try and avoid public audit by the Alberta government auditor. It was discovered that they had something to hide. Yet this practice continues to this day.As a consumer you will get more notice if your neighbor plans to build a garage too close to your property, than you will get if your financial firm chooses to dump certain investment products on you using a legal exemption. Because of hidden legal games such as this, Canada is damaging its reputation by allowing the manufacture and sale to the public of known “tainted” or bad products. Former Bank of Canada governor David Dodge was quoted as saying that Canada has a “WILD WEST” reputation globally on matters relating to investments. Legal exemptions and self-regulation are two root causes. They are part of a flawed foundation upon which our system is built. Some folks think they have been gouged by electrical industry de-regulation. Just try and imagine what goes on behind the curtains in the financial industry where they are allowed to self-regulate? This is just part of many reasons why Canadians suffer from “One Million Frauds”, (Globe and Mail Oct 3, 2007) with only one person convicted until the end of 2007 (Canadian Business editorial Aug 13/27 2007). It also may help explain why ex RCMP IMET commercial crime experts say that Canada is a “A Good Country for Crooks”, (Canadian Business Sept 24, 2007) The United States is coming to grips with sub prime mortgages, mortgage fraud, Enron, WorldCom, Tyco, etc., which are repeatedly costing the United States more than the entire 1929 market crash and resulting depression. Similar investments, frauds, crimes, and damages reside here in Canada. The difference is that in Canada we have effectively no enforcement. What possible agency would there be to bring enforcement action, when our own securities commission is assisting firms to skirt the law? This is the ultimate example of having foxes guarding the henhouse. It is the ultimate example of self-regulation turned into “self serving”.Please ask your local MLA to show me where I may be wrong on these matters by bringing about a Provincial Inquiry, to see if these claims have merit? I can assure you that a Provincial Inquiry will turn up issues that are costing Albertan’s billions.
Larry Elford
Lethbridge