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FAIR Canada Newsletter
February 2011 |
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A Decade of Financial Scandals: FAIR Canada calls for National Action Plan to Tackle Investment Fraud |
 FAIR Canada has issued a report entitled "A Decade of Financial Scandals" calling for government and regulatory action to improve prevention, detection and prosecution of financial fraud and to better compensate victims of investment frauds.
"The Canadian regulatory system is complex and fragmented. There are thirteen provincial and territorial securities regulators and two national SROs. In addition, there are many other provincial and federal regulators involved," said Ermanno Pascutto, Executive Director of FAIR Canada." "When it comes to investigation and prosecution of financial fraud, the complexity and fragmentation is far worse. With this bewildering array of regulators, investigation agencies and prosecutors, no one agency has ultimate responsibility for combating investment fraud."
"We make wide-ranging recommendations calling on the Federal and Provincial Governments and regulators to take coordinated action to combat financial fraud" said Mr. Pascutto. "Financial fraud has affected some 10% of Canadians and the system is simply not effective at protecting consumers, punishing fraudsters, or compensating victims."
FAIR Canada studied a cross-section of fifteen cases of financial scandals selected from across the country based on the high profile coverage they garnered, the number of investors affected and the significant amount of losses incurred. Findings from the review of the fifteen financial scams include...
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CTV's W5 Investigates an Unusual Financial Fraud
 Nick Djokich was a respected Calgary-based millionaire until he and other members of his church group were defrauded out of millions of dollars. Mr. Djokich turned to the police and regulators (RCMP, Sûreté du Québec and the AMF) to investigate the fraudsters and try to get the money back. He presented his evidence of a fraud involving persons in Alberta and Québec and a link to the Bahamas to the RCMP. Despite this being a multi-million dollar fraud crossing provincial and international lines, the RCMP said that it was not their responsibility. They referred Mr. Djokich to the Sûreté and AMF in Québec, who also failed to take any action. In frustration, the Calgary businessman turned to violence in a desperate attempt to get his and other churchgoers' money back. Here is a link to the W5 program about how a victim of fraud took matters into his own hands and is now serving a 20 year sentence in a U.S. prison.
Most prepetrators of financial fraud in Canada are not prosecuted and convicted. In the cases where they are prosecuted and convicted, they will generally spend a couple of months in prison. The sad irony is that while the Djokich case fraudsters got away scot free, a victim of fraud will spend more time in a U.S. prison than the combined prison time of all fifteen fraudsters who were convicted of other frauds in the many dozens of investment frauds in Canada in 2010 as a result of prosecutions brought by regulators. This statement is based on a CSA Enforcement Report for 2010 that was issued on February 22, 2011 and Canadian parole guidelines which provide automatic release for non-violent offenders after only one-sixth of the sentence is served.
FAIR Canada's Executive Director, Ermanno Pascutto is interviewed in Part 4 of the W5 episode entitled "Extreme Measures in the quest for justice" (which aired on February 19, 2011). Mr. Pascutto was not aware of the Djokich case at the time of his interview and his comments were made about the effectiveness of the Canadian system generally and not about this case.
A W5 program that is more representative of how financial scams leave victims devastated and the perpetrators free to drive expensive cars and live in mansions, watch "Golden Gate Funds leave a trail of lost investments."
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Investment Fraud a Daily Event in Canada
While the FAIR Canada report focuses on fifteen financial scandals over the past decade, one only needs to read the media routinely to see how these types of scandals happen on a daily basis. Here are a few that have come across our desks over the last couple of months:
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OSC Stepping Up Enforcement
There has been extensive media coverage of OSC Chair Howard Wetston's first public speech particularly regarding the OSC's plan to step up enforcement. In a luncheon speech February 23rd at the Canadian Club, Howard Wetston said, "Our goal is to bring forward meaningful cases that have a strong deterrent impact in order to protect investors and the markets."
We wish Mr. Wetston and the OSC success in their efforts to combat financial fraud in Ontario. The OSC can play an important role in tackling the national crisis of financial fraud in Canada.
Read Globe and Mail article On the hunt for illegal insider trading | Financial Post article OSC eyes immunity deals to step up enforcement. |
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