In an attempt to restore the
public’s faith following some notable failures, the B.C. Securities Commission unveiled a new $250,000 investor education program in Vancouver last month.

A key component of the program is a Web site (www.InvestRight.org) that helps investors develop “critical thinking skills.” It includes a “scam meter” that allows investors to see whether the investment they are considering has any of the common elements of fraud, such as “Guaranteed high returns — no risk!” and “Offshore investment — tax-free!”

The BCSC is also launching a “red flags” communications campaign that will provide targeted warnings about certain kinds of frauds-in-progress. The idea behind the campaign is to warn people of these scams while investigations are being conducted. There will also be an ongoing program of investor education seminars, conducted by BCSC staffers and selected partners — such as the B.C. Crime Prevention Association, whose Wise Owl program is aimed at reducing the incidence of fraud among seniors.

All this is good. A recent Canadian Securities Administrators survey shows that even though most people believe in the importance of having a financial plan and conducting due diligence before investing, few people practise what they preach.

At the same time, the public is being besieged by bogus investment opportunities. The survey found that more than one-third of Canadians have been approached to invest in a financial fraud. This is not surprising, given the proliferation of stock-related spam
e-mail and Nigerian-style investment scams.

But educating and warning investors is no substitute for tough and timely enforcement. The BCSC can hold all the investment seminars it wants and issue all the warnings it likes, but unless it stems the flow of scams and scamsters, there will be little impact.

The BCSC has been under heavy criticism these days for some notable prosecutorial failures, undue delays in shutting down investment schemes, extraordinary delays in rendering enforcement decisions, the unchecked proliferation of shell companies used for OTC Bulletin Board manipulations and the unilateral withdrawal of certain disclosure documents that are vital to detecting stock scams — all against a backdrop of excessive staff salaries.

Of course, none of this was mentioned at the press conference, which had all the ingredients of a stage play. It was stacked with more than 100 people, almost all BCSC staffers, who listened attentively to BCSC chairman Doug Hyndman, who doesn’t exactly brim with charisma at the best of times.

Joining him in a cheerleading capacity was B.C. Attorney General Wally Oppal, who is in charge of the BCSC. Oppal said the InvestRight program will not only encourage investors to be careful, it will “remind those who set out to mislead or defraud the public that B.C. is serious about taking action against them.”

However, it is not clear how Oppal came to such a conclusion. There is absolutely nothing in the program that speaks to stepped-up enforcement.

NDP MLA Leonard Krog, the Opposition critic for the attorney general, later dismissed the program as nothing more than window dressing: “It’s putting a bandage on the wound without dealing with the infection. This is the lazy man’s response to the issue. It’s a classic public relations exercise. Investors are not being adequately protected. The reputation of this province as a place for scam artists who operate almost with impunity is not going to be corrected by a PR campaign.”

After the press conference, I asked Oppal about the extraordinary delays in adjudicating BCSC cases (the Pacific International Securities case took almost five years, and ultimately failed); the failure of the B.C. Supreme Court to deal harshly with repeat securities offenders (Michael Mitton, who already has 103 prior criminal convictions, was recently charged in Ontario with another stock fraud); and the utility of increasing court fines to $3 million from $1 million (when the courts never impose fines anywhere near $1 million).

As always, there were a few vague responses. And none of them provided any assurance that anything will change, at either the judicial or administrative level. IE