Securities regulator lawsuit is 'very unusual'
The head of a national investor advocacy group says lawsuits like the one filed this week against the New Brunswick Securities Commission are "very unusual."
Earlier this week, 54 investors, mainly from northwestern New Brunswick, launched a lawsuit seeking $5.6 million against the provincial securities regulator after they lost millions in an alleged ponzi scheme.
Ermanno Pascutto, the executive director of the Foundation for Advancement of Investor Rights in Toronto, said these lawsuits are difficult to win.
"You have to prove that the regulator was not acting in good faith," he said.
"Even if the regulator has done a poor job in the sense that they got wind of a fraud going on and they didn't do a very good job investigating it and meanwhile, you know, many, many more people were defrauded before they moved to close it down…You really have to find that they wanted to let people be defrauded," Pascutto said.
The lawsuit alleges the commission didn't act soon enough and didn't warn the investors.
Pascutto said he supports the federal government's plan to consolidate the 13 provincial commissions into one, national regulator.
Pascutto said the current system is too complicated with 13 provincial securities commissions, plus local police forces, and banking and insurance regulators involved.
"Generally what happens is, it's like hot potato because the buck doesn't stop anywhere," he said.
The provincial government contends the federal government shouldn't be given extra powers that weren't agreed to as part of the Constitution.
Pete Mockler, the Fredericton-based lawyer who is behind the lawsuit against the securities commission, said this situation proves there is a need for better oversight over financial companies. "This case would be a very good illustration of perhaps the need for a more diligent kind of oversight of these things," Mockler said.
Canada is the only country in the G20 that does not have a national securities regulator.
The provinces and territories administer the securities industry in Canada independently, although jurisdictions co-operate so that companies can file documentation approved by one province in all areas under what is called the "passport" arrangement.
Ottawa has argued the present approach is cumbersome, costly and not effective in detecting and enforcing fraud.