In his final speech as governor of the Bank of Canada, David Dodge blamed, in large part, lack of transparency and disclosure of information for investors for the recent market turbulence.

“One of the key lessons of the last seven months is how information asymmetries can lead to, or exacerbate, disruptions in financial markets,” Dodge said while addressing a luncheon for the Empire Club of Canada and the Canadian Club of Toronto on Monday afternoon at the Fairmont Royal York hotel in Toronto.

In recent years, investors have increasingly turned to complex, structured products with an eye for greater returns, he said. And as these securities became more complex, it became progressively more difficult to gather the information required to assess the quality of the assets backing the security and, thus, the risks involved.

“Because of the complexity and opacity of some of these securities, it was very difficult for even sophisticated investors to determine, with confidence, just how badly affected their investments were,” he said.

Consequently, investors must demand greater transparency and, in turn, vendors will be forced to structure securities in a way that allows for investors to more clearly see what they are buying, Dodge said, adding that he is confident market forces will go a long way in rectifying the situation.

However, Dodge also emphasized the importance of improving enforcement in securities markets by co-ordinating the efforts of all involved parties: securities commissions, law enforcement agencies, prosecutors, ministers of justice and attorneys general.

“At the moment it’s highly fragmented,” he said. “Progress is being made, but it’s painfully slow.”

Dodge also noted the lack of rules for exempt-market securities when compared to the strict requirements imposed in the retail market. He later called the situation “a little strange.”

“It seems to me that some very basic disclosure is needed in every market,” he said.

Dodge did not lay blame on credit-rating agencies for the asset-backed commercial paper situation, but did note that one solution might be to require issuers to make public all the same information they provide to credit-rating agencies.