TORONTO (Reuters) - Canada's largest capital markets regulator is pushing for an amendment to the country's Criminal Code that would allow investigators to use wiretaps to investigate insider trading.
Such a step would give Canadian investigators a tool that their U.S. counterparts already have, and one that Ontario Securities Commission (OSC) Chairman Howard Wetston said on Thursday is needed to successfully prosecute a crime where proving intent is key.
The OSC is the largest and most influential of Canada's provincial and territorial securities regulators, and has jurisdiction over the Toronto Stock Exchange.
"In my opinion, we are missing a key tool that would assist in more effectively enforcing provisions against insider trading," he said in a speech to a Toronto business audience.
"Wiretaps would allow us to obtain direct evidence of the intention - I underline intention - to engage in illegal insider trading and tipping," he said. Tipping refers to the practice of passing along sensitive information that could then be used for trading.
The wiretapping would not be done by the regulator itself, but rather by provincial and federal police that work with regulators to investigate white collar crimes. Wetston said the OSC has been in early-stage talks with police about the issue.
Making the change would require lawmakers to add insider trading and tipping to the list of offenses that can be investigated with wiretaps.
Canadian regulators have long battled a reputation for being too soft on white collar crime due to cases such as the Bre-X gold salting fraud in the 1990s, which cost investors billions. Nobody was charged with fraud in the cause, and the lone figure who was charged with insider trading was acquitted.
More recently, regulators were criticized for their oversight of Sino-Forest Corp, one of several North American-listed companies with Chinese operations whose accounting disclosure practices came under scrutiny.
The OSC has tried to turn that reputation around in recent years by beefing up technology and hiring more enforcement staff. Last year it launched the Joint Serious Offences Team (JSOT), an partnership of the OSC and police aimed at targeting fraud, market manipulation and other such offenses.
Editing by Jeffrey Hodgson; and Peter Galloway