HOW ADEQUATE IS CANADA’S SECURITY REGULATION?
Since the Financial Crisis of 2007-2008 there have been many movies books and television specials discussing its cause. In essence, they all make the case that the crisis was caused by insufficient securities regulations. I don’t have the space, time or knowledge to discuss this issue in my blog. Fortunately, there are some PBS documentaries that discuss this issue and are free on-line.
The most recent is “The Untouchables”, which examines the state of securities regulations as of September 2013. You can watch it for free here. For more detail regarding the history of the Financial Crisis, there is the Special: “Money, Power and Wall Street”. It is located here.
I assumed that since Canadians did not have to bail out its banks, our securities were sufficiently regulated. Now I question that belief. In the Record on 11, March, 2014 there is an article that can be read online here.
Basically, the article states that financial institutions that violate securities regulations can plead “no contest” and pay a fine. The problem is that these financial institutions do not have to admit any wrong-doing. In their civil suits, investors need to prove that these financial institution violated securities regulations. Most commercial transactions are incredibly complex, however. Having to prove the business’s malfeasance greatly increases the wronged investor’s investment of time and money. Investors, however, are financial vulnerable and often elderly. They have neither the time nor the money to take financial institutions to court to try to recover his or her money. The ability of financial institutions to plead “no contest” substantially reduces the ability of wronged investors to receive compensation for his or her loss.
I found an organization called the Canadian Foundation for the Advancement of Investor Rights. The website is here. It lists several areas where Canadian securities are under-regulated. I recommend spending some time to go over it. The reports are written so that a layperson can understand them. The website is a real eye-opener.
The question arises, however, is what does this have to do with small-business? Well, I have to start saving for retirement. I imagine that retirement looms large in the minds of you as well. Conventional wisdom suggests that you invest in mutual funds as much as possible. From reading the FAIR website, however, I believe that many business owners might be better off investing in his or her business. Although there is a great deal of risk in either strategy, at least small-business owners are in a better position to understand and minimize future problems.