The Supreme Court’s Gift To White Collar Criminals

Ottawa's plan to establish a national securities regulator has been rejected by the Supreme Court of Canada.

The high court had to determine whether Ottawa's initiative to establish a federal regulator is constitutionally legal. It decided the proposed legislation is unconstitutional because it would be treading on provincial jurisdiction. The federal government's aim to replace Canada's hodgepodge of 13 provincial and territorial regulators with a single, national regulator was widely supported by business groups.

With the ruling, Canada will remain without a single national regulator to govern companies that want to sell stocks, issue bonds or other financial products to the public.

"We continue to believe that a single, Canadian regulator would offer improved investor protection and enhance the ability of law enforcement and prosecutors to achieve better criminal enforcement outcomes across Canada," said Terry Campbell, president of the Canadian Bankers Association (CBA), in a statement. "It would also eliminate the fragmentation and duplication that currently exists with the provincial securities systems."

What the ruling means for investors

In an earlier conversation with Yahoo! Canada on the subject, prominent forensic accountant Al Rosen, founder of litigation and investigative accountants Rosen & Associates Limited in Toronto, says Canada, in general, rarely investigates and prosecutes financial meltdowns effectively.

In light of the high court's ruling today, Rosen says if he was a white-collar criminal "it's the best Christmas present I could ask for."

Though he hadn't gone through the details of the ruling as of yet, Rosen's reaction to the news is consistent with what he's been preaching for many moons: Canada needs to do more to protect investors. "This is not an acceptable answer for investors or the country," he says.

Alberta and Quebec were the two main provincial holdouts to Ottawa's plan. Rosen says over the last 25 to 30 years, those two provinces have also produced the lion's share of trouble.

"Alberta and Quebec has generated most of the problematic, serious cases," he says. "You can't keep doing what Alberta and Quebec are doing in not prosecuting . . . the only other thing they can do now is try to get more prosecutions through the national police force."

But like the Royal Canadian Mounted Police (RCMP), Rosen says the Supreme Court bench lacks the experience to effectively deal with investor fraud. "There's not enough Supreme Court justices who understand the business issues," he says.

Ultimately, today's ruling is a loss for confidence in Canadian markets, he adds.

"It sends the message (to the rest of the world) that we don't understand that we have serious problems in the country. We can't keep bragging about our wonderful economic system," he says. "People in other countries may regard Canada as a problem investment country. White-collar criminals though will look at this and just drool."