Investor advocacy groups say the Canadian Securities Administrators is making misleading statements and being "willfully blind" to problems in the capital markets after the organization responded this week to an investigation by The Globe and Mail.
Ken Kivenko, a prominent investor-rights advocate who assists victims of financial crimes, described the response as "not constructive, not designed to solve problems.
"The first concept you need if you're going to solve a problem is to admit you have a problem. They're either willfully blind to the problem or they're just not engaged with investors enough to find out."
His comments came after the CSA, an umbrella organization for Canada's 13 securities regulators, issued a news release this week saying its enforcement efforts were mischaracterized in The Globe's recent investigative series "Easy Money." The articles revealed a number of deficiencies in Canada's oversight of the capital markets – including a high recidivism rate among white-collar criminals that suggests deterrence efforts by regulators are not working; gaps in information-sharing between regulators that are being exploited; and that more than $1.1-billion in fines doled out by regulators has gone unpaid.
In response, the CSA issued a nine-point list of items on Wednesday that it said were mischaracterized in the Globe's reporting. However, several of its claims contain inaccurate information or involve statements The Globe did not make in its reporting.
Among the CSA's complaints is the suggestion that the Globe articles did not address an enforcement tool known as a reciprocal order and did not look at the RCMP's Integrated Market Enforcement Teams, known as IMETs. However, both of those were discussed in the articles.
The CSA also said it was wrong for The Globe to say it looked at 30 years of data in its analysis of capital markets case files. However, the database analyzed in the investigation stretches back to 1987. Though not all regulators' records go back that far, the data set did indeed span three decades.
Investor advocate Stan Buell, president of the Small Investor Protection Association (SIPA), which helps consumers fight market scams and wrongdoing by financial advisers, said the CSA is trying to cloud the issues and distract from the problems.
"They're just totally misleading the public," Mr. Buell said.
Shortly after the CSA's news release was issued on Wednesday, The Globe sought to contact the author of the statement in order to discuss the organization's claims. CSA secretary-general Kim Lachapelle said such a conversation would not be possible.
"As a nationally distributed body it would probably be more efficient if you could share your concerns with us by e-mail. Alternatively, I would be happy to have a call and relay the extent of your concerns to our members for a response."
On Thursday, Ms. Lachapelle followed up to say the news release was prepared by several people, not a single author.
Mr. Kivenko, who is a former member of the Ontario Securities Commission's investor advisory panel, said his experience with the CSA has been similar. "They're hard to find. Even who these people are is hard to find out," he said.
Among its claims, the CSA said The Globe was wrong to use a well-known statement by former Bank of Canada governor David Dodge in which he said "there is a widely held perception that Canadian authorities aren't tough enough in punishing fraud and enforcing insider-trading and other rules," because the quote is from 2004 and Mr. Dodge said efforts by the regulators to improve are encouraging.
The Globe investigation showed that many of the problems Mr. Dodge was concerned about back then still affect the capital markets today, including an inability to crack down on serial fraudsters and hold them to account.
Ms. Lachapelle said the CSA issued its statement out of concern about "the cumulative impact of the Globe pieces on the Canadian capital markets and confidence in those markets."
The organization made no mention of the impact that crimes such as stock manipulation, insider trading and financial fraud have on investors' confidence in the markets – a point several academics raised in the Globe articles.
The CSA statement also appears to ask for more help from police, saying, "More law enforcement resources are always welcome." Asked by The Globe to elaborate, Ms. Lachapelle said on Friday: "Given the increased demand and complexity in enforcement, we would always welcome more resources to supplement our current efforts."
The Globe investigation found that the total dollar amount of unpaid securities fines issued by regulators across Canada has risen more than 22 per cent in two years.
Mr. Buell said he objects to statements such as the one the CSA made two years ago – that more than $138-million in fines and penalties were issued by regulators in 2015 – because it neglects to mention that the vast majority of those were never collected or enforced.
"Headline-grabbing fines mislead the public into thinking regulators are doing their job in protecting investors. The reality is they are not collected," Mr. Buell said.
He said the issues raised by The Globe's investigation require a closer look by provincial and federal governments.
"How can a government elected by the people fail the electorate by allowing this nonsense to continue?"