Ottawa owes it to investors to manage systemic risks and criminal enforcement in capital markets
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- Paul Bourque and Douglas Hyndman authored a C.D. Howe Institute report recommending Ottawa prioritize systemic risk management and criminal enforcement, citing U.S. tariffs and Middle East conflict as evidence of Canada's vulnerability to disruption
- Supreme Court of Canada rulings in 2011 and 2018 affirmed Ottawa's authority to collect data and monitor systemic risks in financial markets, according to the report
- Bank of Canada Governor Tiff Macklem called in March for enhanced surveillance of private credit, warning that risks in that market could spill into the broader financial system under stress
- Canada's 2007 asset-backed commercial paper crisis left investors holding more than $30-billion in moribund notes after contagion from the U.S. subprime mortgage meltdown, the report cites as a historic example of systemic risk spillover
- Canada's criminal enforcement track record is "universally regarded as weak," the report states, pointing to the Bre-X and Quadriga scandals as illustrations of the gap
- The report calls for a federal agency with a national mandate to investigate and prosecute securities offences and a "single point of political accountability" for systemic risk monitoring
- The previous government scrapped the co-operative capital markets regulatory system five years ago, which the report's authors argue Ottawa should resurrect elements of rather than reopen the unified regulator debate
Why it matters: Canada's patchwork approach to financial oversight leaves it an outlier among industrialized countries, and Ottawa's stated goal of reducing U.S. economic dependency requires retaining and attracting capital markets investment. A federal mandate for securities prosecutions would directly address the enforcement gap exposed by the Bre-X and Quadriga scandals, while systemic risk monitoring — already affirmed by the Supreme Court twice — remains unfinished business two decades after the 1935 Royal Commission first recommended it.
