Canadian Regulator Opposes Proposed Offshore Investment Rules

by Carla Johnson, Investors Offshore.com

19 October 2001

Canada's self-regulatory organisation for investment firms, the Investment Dealers Association (IDA), says it is opposed to the belief that the industry should be forced to disclose the identities of individuals who hold secret offshore brokerage accounts where there is no suspicion of criminal activity.

According to a report from Canadian newspaper, the National Post, a confidential six-page draft discussion paper from the IDA has concluded that 'there are rules and procedures in place' to enable the authorities to take appropriate measures to protect the capital markets without having to reveal the identities of all of the industry's offshore accounts.

'The Association believes that in practice, there are a number of circumstances where knowing the beneficial owner of an account is not essential to the protection of the capital markets in Canada,' states the report.

If forced to follow a policy that requires Canadian firms to open up details of their offshore account holders, they could face huge losses in business which currently earns them around C$20 billion a year. The report added: 'There are no other jurisdictions requiring complete disclosure in all circumstances and therefore, Canada would find itself at a competitive disadvantage amongst the respected world markets.'

Joseph Oliver, president and chief executive of the IDA, told the National Post: 'The industry feels the requirements shouldn't be greater than those that exist in other countries with similar regulatory environments. We're operating in a global market and we don't have to be excessive.'

However, the IDA report did admit that investment firms, particularly brokerages, should be more consistent in their agreements with each other nationwide on when and under what circumstances information regarding identities should be disclosed. 'There are only certain situations where member firms should have direct responsibility to know the beneficial owners of the account,' it said.

The IDA report came about earlier this year after a ruling by the British Columbia Securities Commission which called for higher standards in offshore investment practices throughout Canada when the Commission disciplined Jean Claude Hauchecorne, a Vancouver-based broker, for executing trades in offshore accounts for clients who had committed securities violations in the US and had known dealings with organized crime.

Since the ruling, four of Canada's major securities regulators including British Columbia, Alberta, Ontario and Quebec have paid closer attention to the increasing use of offshore accounts and intend to force brokerage firms to reveal identities. In addition, the Securities Commissions are preparing a letter of inquiry to the 194 investment firms registered under the IDA requesting information on accounts they operated in the offshore havens blacklisted by the OECD last year.

Recommended