Securities • Issues & Advocacy

GOVERNMENT OF CANADA ANNOUNCES NEW MEASURES TO DETER CAPITAL MARKETS FRAUD

Ottawa, June 12, 2003 - The Honourable Wayne Easter, Solicitor General of Canada, the Honourable Martin Cauchon, Minister of Justice and Attorney General of Canada, and the Honourable John Manley, Deputy Prime Minister and Minister of Finance, today announced new measures to strengthen enforcement and legislation against serious capital markets fraud. The Government of Canada will spend up to $120 million over the next five years. These measures were outlined in Budget 2003.

As a means to better coordinate and strengthen enforcement against capital markets fraud, Minister Easter announced today the creation of six Integrated Market Enforcement Teams (IMETs) made up of RCMP investigators, federal lawyers and other investigative experts dedicated solely to capital markets fraud cases. These highly skilled teams will enhance efforts to track down corporate criminals, and deter future occurrences of these crimes. The integrated, coordinated approach being taken - the defining feature of the IMETs - will help strengthen enforcement action in Canada.

The IMETs announced today will be located in Toronto, Vancouver, Montreal and Calgary. Two teams in Toronto and one in Vancouver will be established by March 31, 2004, with the remaining teams to be created within the following year. "The Government of Canada takes corporate fraud seriously and we are committed to deterring criminal activity in Canada's capital markets," said Minister Easter. "We are already working with the provinces, regulators, law enforcement and industry to ensure the integrity of Canada's financial markets. These dedicated, RCMP-led teams will make certain that this work not only continues, but is strengthened."

"Capital markets fraud hurts everyone. It can have a devastating impact on the investments and retirement savings of all Canadians, and can threaten the integrity of our financial markets," said Minister Cauchon. "The message here is clear: The Government of Canada will not tolerate capital markets fraud."

Proposed legislative amendments, introduced by Minister Cauchon in the House of Commons today, would tackle capital markets fraud by:

creating a new Criminal Code offence of improper insider trading that would target employees of corporations and others who use privileged information not available to other investors in order to benefit themselves;
protecting employees who report unlawful conduct within their corporation - from retaliation by creating a new employment-related intimidation offence; and
raising maximum sentences for existing fraud offences and establishing aggravating factors to assist the courts in determining a sentence that reflects the seriousness of the crime.

The proposed amendments would also enhance the evidence-gathering tools available to investigators by adding production orders, with appropriate safeguards, to the Criminal Code. Investigators could obtain pertinent documents or data from third parties (those not under investigation) within a specified time period. While these orders would prove particularly useful in cases of capital markets fraud, they would apply to all criminal offences.

To complement the existing provincial jurisdiction for prosecutions, federal jurisdiction would be permitted, under the proposed reforms, to prosecute a narrow range of cases that threaten the national interest in the integrity of capital markets. Concurrent jurisdiction would increase the amount of resources available to tackle capital markets fraud cases.

In order to help ensure proper coordination, the Government of Canada will work with the provinces to establish prosecution protocols that would ensure a coordinated and effective implementation of concurrent jurisdiction. "Maintaining strong and vibrant capital markets is critical to a well-functioning economy," said Deputy Prime Minister

Manley. "The initiatives announced today are part of the Government's efforts to foster investor confidence in Canada's capital markets."

All of the measures announced today respond to commitments made in the 2002 Speech from the Throne and Budget 2003. They also complement and support federal priorities, including Building the Economy Canadians Need, Building the Accountability Canadians Deserve, as well as the broader public safety, crime prevention and national security agendas. The new initiatives also build on steps taken in co-operation with industry and regulators during the past year. A summary of actions to improve corporate governance and enhance investor confidence can be found at http://www.fin.gc.ca/activty/pubs/fostering_e.html

Meredith Naylor
Office of the Solicitor General
(613) 991-2865
Mike Murphy
Special Assistant, Communications
Office of the Minister of Justice
(613) 992-4621

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