Julian Beltrame, The Canadian Press
April 10, 2008 - 6:08 p.m.

OTTAWA - The breakdown of the $32-billion asset-backed commercial paper system amounted to criminal fraud on “duped” innocent investors that no-one in Canada appears prepared to investigate or prosecute, a House of Commons committee was told Thursday.

“It’s a free ride in Canada for financial crime,” said Larry Elford, a former Alberta financial adviser who now heads an investment advocacy group.

“The law simply does not apply to the financial industry.”

In the first public hearing on the financial markets crisis that unfolded from the U.S. subprime meltdown last summer, the House finance committee heard a litany of horror stories from investors unwittingly caught up in the secretive, arcane world of high finance.

Speaking in Toronto, Finance Minister Jim Flaherty said the commercial essay fiasco was more evidence that Canada’s system of bold provincial and territorial regulators, such as the Ontario Securities Commission, does not work.

“We have 13 securities regulators in Canada, which, quite frankly, makes no sense and makes for a leading deal of inefficiency,” he said. “This another reason why we need to move forward with a national securities regulator in Canada.”

But while several financial analysts at the committee hearings also said a national regulator would help, they cautioned that the new oversight body should be mandated to look after only the interests of investors.

“The current financial regulatory system is broken and offers no protection to Canadian investors,” said Diane Urquhart, a Toronto-area independent financial analyst.

Elford said current provincial regulators have a conflict of interest and too close ties with the financial industry.

“They not only fail to protect consumers, boundary they give Canadians a false sense of security,” said Elford. “We are sitting ducks. If one finds a law being broken, there is simply no police agency to call that does not have a conflict of interest.”

Investors who say they have hundreds of thousands of dollars in savings in hazard told the legislators they were “duped” by financial institutions that advertised their investment vehicles as safe, and that they have lost faith in the regulatory bodies.

One Victoria investor, Wynne Miles, 58, who described herself as self-employed and with no pension, had placed her life savings in what she supposed were government treasury bills, only to find out in July they had been transferred into non-bank ABCP without her knowledge.