Financial services shake up urged

In hearings, the RCMP told the committee that the Integrated Market Enforcement Teams have seven active projects and 26 less-serious investigations underway. The total capitalization of the companies involved is about $55 billion, it said, and there is a fraud component to virtually all of the cases. However, the committee was also told that IMET managers may have to turn away some complaints

The Toronto Star
June 7, 2006

Financial services shake up urged
Senate committee urges reform. Raise enforcement, curb costly credit.
Tara Perkins

Many of Canada's financial services providers, ranging from hedge funds to big banks, would come under greater scrutiny if the Senate committee on banking gets its way.

The committee unveiled a 108-page report that it hopes will spur the government to make "major improvements" in Canada's financial service sector in order to protect consumers.

It includes 20 recommendations that hit nearly every area of the sector.

The federal government is asked to take a hard look at the payday loan industry, consumer privacy and hedge funds. The committee says more money needs to go to corporate fraud investigators, and the country needs to more effectively prosecute corporate corruption. It calls for a national securities regulator to be based in Ottawa. And it says Canadians need to start being taught about financial matters in grade school.

In addition, senators want Ottawa to study how financial institutions can provide better access to reasonably priced credit, or loans, for individuals and business.

"The strength of the Canadian economy is directly linked to both the health of — and confidence in — our capital markets and the prosperity of our small and medium-sized enterprises in Canada," said Senator Jerry Grafstein, who chaired the committee. "We must insure that they have ready access to credit at competitive rates if they are to survive in a very competitive world. This issue has been left too long on the back burner and our economy is suffering," he said.

"We expect the federal government to sit down with financial institutions immediately."

The Canadian Federation of Independent Business told the committee that it believes there has been an increase in the rejection rate of small business loan applications by big banks and other institutional lenders.

Grafstein said the committee went through months of hearings to prepare the report, which he describes as comprehensive. "There have been very excellent improvements made by the financial sector itself … they've made a valiant effort … but there's much to be done," he said.

Hedge funds are spurting up and there's little knowledge about them, he said.

"One situation of concern to the committee was the meteoric expansion of the payday loan industry where customers are being charged what many consider to be usurious rates," Grafstein said in a statement.

"… The federal government must address the issue of the payday loan industry on a priority basis. Canadians deserve better."

And the United States is essentially enforcing regulation in our markets, raising an issue of not only effectiveness but pride, reporters heard at a press conference in Ottawa yesterday where the report was unveiled.

In hearings, the RCMP told the committee that the Integrated Market Enforcement Teams have seven active projects and 26 less-serious investigations underway. The total capitalization of the companies involved is about $55 billion, it said, and there is a fraud component to virtually all of the cases.

However, the committee was also told that IMET managers may have to turn away some complaints.

"The committee believes that in some sense, criminal prosecution is the ultimate form of consumer protection," the report states.

One of the committee's major recommendations calls for the appointment of a Financial Services Ombudsperson to replace the existing Ombudsman for Banking Services and Investments, the General Insurance OmbudService and the Canadian Life and Health Insurance OmbudService.


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