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Date: April 30, 2024 Tue
Time: 12:16 am
Time: 12:16 am
Results for securities market
1 results foundAuthor: Hicks, David Title: Economic Sectors Vulnerable to Organized Crime: Securities Summary: This report offers a detailed and accessible study of the vulnerabilities to organized crime affecting the securities sector in Canada. Much of the focus is directly or indirectly placed on Toronto (Ontario) and Montreal (Quebec) given that these jurisdictions host and regulate the main Canadian stock and derivatives exchanges, respectively. Since 2002 the Criminal Code has provided an expansive definition of organized crime/criminal organizations that includes three or more persons involved in a group that has as one of its main purposes or activities the commission of serious offences. At the time of writing, we were unable to locate any securities-related cases where a Canadian court has issued a conviction for criminal organization charges although we are aware of one pending case. There are clearly ongoing difficulties in applying the label organized crime to the stereotypical groups (Type I), let alone the diversity of individuals and groups (Type II) that may facilitate or collude in securities-related misconduct and crime. The information reviewed shows that individuals who violate the Criminal Code are typically charged with fraud. The securities sector plays a key role in Canada's financial services industry and economy. The total market capitalization in 2010 amounted to $2.3 trillion or 4 per cent of total trading among the world stock exchanges. While the 2011 Supreme Court of Canada decision rejected the federal government move towards a national securities regulator, the sector is a complex and de-centralized model of provincial regulation and cooperative national harmonization of key features. In addition, 'national' self-regulatory organizations (SROs) that receive their mandate through provincial legislation play a critical role to regulate the member firms and their employees. The securities sector is vulnerable to organized crime for several reasons, not least that this is a hybrid zone with a focus on regulatory approaches and difficulties in applying crime labels. Potential wrong-doing can be difficult to identify and the interpretation of motivations and behaviour is not as clear as in other fields, such as interpersonal crimes. The securities sector is an area of low visibility that requires proactive enforcement and prevention, in part because victims may tend not to complain due to embarrassment or lack of knowledge, and industry participants may not want to report rule violations that would undermine confidence in their business. Organized crime involvement in capital market offences is possible at several levels in terms of the depth of its infiltration of the securities market. The securities sector may be a site for the laundering of proceeds of crime generated outside of the industry, for instance, drug money, or a site for fraud and related laundering of proceeds generated to varying degrees within or alongside the sector. Criminal organizations can establish real or paper-based companies and sell real or fictitious stocks outside the regulated market, or attempt to secure the cooperation of industry insiders through the threat of violence or in repayment of gambling debts. It is also possible that criminal organizations or their members may establish partial or direct beneficial ownership of brokerage houses and engage a broader and deeper exploitation of victims. Some schemes that occur in Canada include fraudulent high-yield investments, pyramid or Ponzi schemes, and illicit 'tax-free' investments. The 20 (N=20) interviewees expressed particular concerns about Canadian investor involvement with boiler-room operations and the regulatory light-touch segments of international markets such as pink sheets and Over-the-Counter Bulletin Board (OTCBB) in the United States, the Frankfurt Stock Exchange (FSE) in Germany, and domestic markets, such as exempt securities. Fundamentally, vulnerability is represented in the asymmetry between investors and (potentially fraudulent) market actors within or outside of the securities sector. The imbalance of information, knowledge and control in favour of market actors can be reduced through the scope and intensity of regulatory oversight. However, this can also result in push and pull factors for fraudulent behaviour to capitalize on variable standards across jurisdictions and national boundaries. Vulnerability is also a product of the convergence in the securities sector of a wide range of complementary and competing government, regulatory, industry and business, and investor interests. The essential profit-driven logic underlying commercial crimes is an apparently voluntary trade in (typically) legal goods and services combined with illegal (fraudulent) methods to manipulate market values to the disadvantage of victims. Enforcement data presented by regulatory authorities and the SROs illustrate their attempts to address these vulnerabilities. The volume of criminal charges in the securities sector remains limited in number but substantial in terms of estimated losses. Reducing the vulnerability to crime and organized crime in the securities sector can be achieved through systematic attention to the limitations and possibilities of market forces and control systems. There is an ongoing need for basic and enhanced public education for investors to better protect themselves and to promote a culture of lawful and ethical behavior. Control agencies should function as interdependent (rather than strictly independent) agents within a clear set of defined goals and a coordinated strategy is necessary to detect and deter violations and to reduce impact and harm by issuing proportionate sanctions. Stakeholders could consider research and policy development in the design and implementation of a national data collection and securities intelligence model. This could improve the separate and cumulative detection and deterrence of serious repeat offending in Canadian capital markets, and its potential utility as a vehicle for criminals and organized crime. Details: Ottawa: Public Safety Canada, 2012. 65p. Source: Internet Resource: Report No. 26: Accessed October 28, 2013 at: http://publications.gc.ca/collections/collection_2012/sp-ps/PS4-123-2012-eng.pdf Year: 2012 Country: Canada URL: http://publications.gc.ca/collections/collection_2012/sp-ps/PS4-123-2012-eng.pdf Shelf Number: 131494 Keywords: Financial CrimesOrganized Crime (Canada)Securities MarketWhite Collar Crimes |