Canada's Decentralized Regulatory System Failing Investors

"While we are not advocates of mimicking the American system of over detailed regulation, legalistic enforcement and a tick box mentality, we have consistently advocated a strong, principled made-in-Canada system," says Professor Steve Salterio, who led the research at Queen's School of Business. "Unfortunately, what we have is a made-in-Canada mess." .... Key findings: - Among the study's sample of companies that are solely listed on the TSX, almost one in 10 (nine per cent) do not disclose anything about internal control design responsibility in their Management Discussion and Analysis, including large firms like Loblaw Companies, Power Corp, Power Financial and The Score Media. - Among the 91 per cent that do, just over half (54 per cent) actually provide an opinion on the effectiveness of their own controls design, and fewer than half of the TSX-listed companies in the sample (46 percent) evaluated their safeguards as being effective. - Queen's School of Business researchers discovered that less than one third (29 percent) of the sample's Venture Exchange-listed companies provide an opinion on their own financial controls, and of those, just 45 per cent (or 13 per cent overall) evaluate their controls as being effective. .... The Queen's School of Business study also concludes that instead of internal control evaluations and their disclosures acting as a deterrent to corporate malfeasance and informing investors about investment risks, because of the voluntary nature of disclosure, baseline compliance has become an example of good corporate citizenship. .... The solution, says Prof. Salterio and his colleagues at Queen's School of Business, is a National Securities Regulator with proper powers to investigate and penalize errant companies, auditors (and audit firms), lawyers and other participants involved in accounting disclosure. In the meantime, he calls upon the provincial government in Ontario to appoint a blue ribbon commission to investigate and report quickly what are the impediments to the Ontario Securities Commission becoming a more effective regulator. "Currently, the OSC is just not up to the standards set by other countries regulators," says Professor Salterio. http://www.newswire.ca/en/releases/archive/October2007/30/c9412.html

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