Authors: Mark Lokanan
Publishing Journal: Journal of Financial Regulation and Compliance
Purpose: This paper aims to examine the enforcement practices of the Investment Dealers Association of Canada (IDA) and argue that self-regulation simply does not work in the financial sector, as the sanctions available are neither applied with sufficient severity nor are the responsibilities for enforcement adequately divided between self-regulation, provincial securities commissions and the police.
Design/methodology/approach: The core compliance data for the study came from the IDA’s tribunal cases that were heard between 1984 and June 2008. The theoretical approach involves the invocation of classic articles by the likes of Stigler, Posner and Becker, the essence of whose conclusions is that institutions will act in their own best interests and cannot be expected to act in the public interest.
Findings: The findings show that over the period from 1984 to 2008, the severity of the sanctions increased consistently over the period. When penalty ceilings were increased, penalties increased. When in the latter phase of the period, public members (i.e. non-members of the industry) chaired the tribunals, penalties also increased.
Practical Implications: The study opens an avenue for ordinary users of financial information to process the data and question the validity of the numbers presented by listed firms. Furthermore, if fraud information is available, similar research can be conducted to examine the tendency for companies with anomalous financial reports to commit fraud.
Originality/Value: This study is the first to systematically examine the enforcement performance of the IDA.