TSX urged to do more to prevent conflicts of interest

Tue Jul 27, 2010 12:03pm EDT
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TORONTO (Reuters) - The Toronto Stock Exchange falls short of global listing standards and should do more to manage potential conflicts of interests in how it regulates listed companies, according to report published on Tuesday.

The report from the Canadian Foundation for the Advancement of Investor Rights (FAIR Canada) singled the TSX out as the only one of eight major exchanges in its review that did not have specific measures in place to root out potential problems.

"The TSX should implement safeguards to minimize the risk that conflicts will affect the administration of listings regulation, as well as address the perception that they could do so," the investor and shareholder advocacy group said in the report.

"The TSX's current approach is not best practice, and lacks basic safeguards that one would expect to see in place."

Toronto-based FAIR Canada urged the TSX to consider shifting listings regulation to a regulator like the Ontario Securities Commission or the Investment Regulatory Organization of Canada, a self-regulatory group that oversees investment dealers and trading on Canadian debt and equity marketplaces.

Alternatively the exchange could set up an independent regulation subsidiary or a separate listings regulation department, FAIR Canada said.

The Toronto exchange is operated by the TMX Group. FAIR Canada said it was only exchange of the eight it reviewed where listings are tasked to a unified department that is also responsible for regulatory oversight.

It noted that the New York Stock Exchange, Nasdaq and other U.S. markets have in-house, arms-length regulatory units that monitor for trading abuses and ensure that listed companies meet their minimum requirements.

TSX has only one domestic competitor, the Canadian National Stock Exchange. Alpha Group, an alternative trading system partly owned by dealer units of Canada's big banks, recently filed for exchange status to try to compete for listings.   Continued...