White Collar Crime in Canada Less Criminal......

White-collar criminals need own court: study
'Meaningful reform'
Theresa Tedesco, Chief Business Correspondent
June 15, 2005
Securities regulators should place greater emphasis on restitution for aggrieved investors and Canada should create specialized criminal courts specifically for white-collar crimes, concludes a study on capital market enforcement.According to the study, How Effective is Capital Market Enforcement in Canada?, the role of regulators needs to be re-evaluated because of a "disconnect" that exists between how they view their mandate and what investors expect."Securities regulators have historically interpreted their mandate as forward-looking and deterrence based," said associate law professor Poonam Puri during a presentation at the Joseph L. Rotman School of Management in Toronto yesterday. "On the other hand, individual investors who have lost their savings due to the misconduct of regulated market participants are most concerned about being compensated or made whole."


JEFF CHRISTENSEN / REUTERS
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To bridge the gap, Prof. Puri recommended re-evaluating the role of securities regulators. "Moving forward, perhaps the securities regulator should act more as a facilitator or catalyst to assist investors in receiving compensation," she told the gathering of 200 investigators, lawyers and regulators.Among the findings in her discussion paper, Prof. Puri, who teaches at Osgoode Law School in Toronto, said securities regulators in Canada have historically been reluctant to pursue quasi-criminal sanctions through the courts - and that in turn has partially contributed to the lack of expertise among judges in dealing with white-collar cases.She referred to existing studies that indicate judges have historically imposed "disappointingly light" punishment on white-collar criminal offenders. According to Prof. Puri, these miscreants were less likely to be imprisoned, received lower average sentences and served less time than offenders involved in more traditional crimes.Although Prof. Puri argued many reasons explain the discrepancy, she suggested the main cause for this leniency is the lack of expertise among most Canadian judges to determine whether an offence adversely affects investor confidence or the stability of the Canadian economy."The Canadian judiciary needs to recognize not only the magnitude and impact of corporate misconduct on large segments of the population, but also the broader ramifications of corporate crime on the Canadian economy," she concluded.To that end, Prof. Puri advocated a two-pronged approach: "meaningful reform" for judges to help them better understand white-collar crimes, which should result in tougher financial penalties and imprisonment; and the creation of specialized criminal courts to deal exclusively with corporate and white-collar crime, similar to those that deal with young offenders and family law matters.Although Prof. Puri did not explicitly recommend the creation of a national securities regulator, she suggested the significant differences in enforcement trends among Canada's 13 provincial and territorial securities commissions "may have an adverse effect on enforcement."For example, Ontario is focused on registrant-related misconduct and prosecuting insider trading, while British Columbia has made it a priority to clamp down on the distribution of securities without a prospectus.At the same time, she said the commissions differ on how they dole out punishment at sentencing. To wit, Alberta does not take into account the personal circumstances of the person or company being disciplined, while regulators in Ontario, New Brunswick, Saskatchewan and Manitoba do make it a factor.As a result, the differences among the multiple provincial regulators "may lead to sub-optimal enforcement actions being taken on the whole, in contrast to a national or consolidated regulator, which would be more likely to act in the national interest," she said.As well, Prof. Puri said a national or consolidated regulator would enhance enforcement effectiveness in Canada because it would allow policies and priorities to be created at a national level and reduce costs to regulators and market participants.Not surprisingly, her paper reiterated the widely held view that when compared with their U.S. counterparts, Canadian regulators do not engage in enough enforcement activity and are less effective when they do.To support her assertion, Prof. Puri cited statistics that showed Canadian securities devote a smaller percentage of their total budget to enforcement than their U.S. counterparts. For example, the enforcement costs at the Securities & Exchange Commission represent 29% of the total budget. That compares with a range of 13% to 19% at each of the four major Canadian provincial securities commissions.As well, Prof. Puri found financial penalties are 10 times higher in the United States than the average Canadian fine.Furthermore, many of the high-profile white-collar cases in the U.S. have been pursued by attorneys general, such as Eliot Spitzer in New York - not the SEC. In Canada, Crown prosecutors have not embarked on a sweeping crackdown on corporate and white-collar crime.