Canadian securities regulators could get expanded powers to investigate wrongdoing across international borders under proposed changes to the co-operation agreement that governs global securities commissions.
The International Organization of Securities Commissions (IOSCO) has drafted reform recommendations that would allow members to work with their counterpart regulators in other countries to gather phone records and Internet search records needed in a securities investigation, and even compel people in other countries to attend hearings and provide testimony for a foreign regulator, said Ontario Securities Commission chair Maureen Jensen.
Ms. Jensen said IOSCO is moving beyond its role as an organization whose members share information to one that spurs members to be more active participants in other jurisdictions' investigations. The trend comes as regulators increasingly reach across borders to investigate complex, international crimes such as stock frauds.
"I think this is a huge step forward," Ms. Jensen said in an interview. "One of the key drivers is that everything is global. In the financial markets, there is no such thing as a local market."
Ms. Jensen said the proposed list of expanded powers would have helped the OSC in its investigation of forestry company Sino-Forest if they had been in place when the OSC was examining accounting and disclosure problems at the Hong Kong company after its problems came to light in 2011. The OSC faced hurdles gathering testimony and evidence in China, where all of Sino-Forest's operations were located and most of its senior staff were based.
IOSCO members co-operate with each other through a Multilateral Memorandum of Understanding, which lays out how they work together to provide information for investigations. The signatories to the MMOU have recently negotiated terms for a new "enhanced" MMOU that will expand the co-operation agreement for those who participate. The enhanced regime still requires approvals, and will be discussed at IOSCO's next board meeting in May.
"The point is that IOSCO is now moving beyond just, 'What information do you have and can you share it?' to also assisting in investigations," Ms. Jensen said.
While most of the 109 signatories to IOSCO's MMOU are national securities regulators, Canada does not have a single national regulator so its four largest provincial securities commissions – British Columbia, Alberta, Ontario and Quebec – are all signatories.
The current MMOU system, launched in 2002, is already widely used, with participants sending more than 3,000 requests for information under the program each year, including dozens involving the OSC.
If the enhanced MMOU is concluded, Ms. Jensen said it would help the OSC gather evidence in investigations in key markets such as the United States, Britain and Hong Kong. IOSCO members also include some countries with banking secrecy laws such as Switzerland and the British Virgin Islands.
Ms. Jensen said an enhanced MMOU agreement is not a guarantee that the OSC will be able to trace all money transferred offshore, and it is still complicated to recover victims' proceeds, especially when people use legal processes in other countries to protect their funds from seizure or hide funds in tax havens.
However, she said countries that operate outside the system will find little help investigating their own crimes without signing the IOSCO memorandum.
"They're not going to get any co-operation with any other jurisdiction if they don't," she said.