Bill C-46 (Historical)

An Act to amend the Criminal Code (capital markets fraud and evidence-gathering)

Criminal Code

[Chuck Cadman, Canadian Alliance, Surrey North, BC]

moved that Bill C-338, an act to amend the Criminal Code (street racing), be read the second time and referred to a committee.

Mr. Speaker,I am pleased to rise today to debate the private member's bill I have brought forward on behalf of the citizens of Surrey North.

The bill proposes to amend the Criminal Code with respect to the activity commonly referred to as street racing. It was introduced because Canadians want the federal government to address the problem.

Street racing is killing or seriously injuring innocent people. The carnage caused by this reckless behaviour is on the rise in Vancouver, Edmonton, Winnipeg, Toronto and other cities.

Bill C-338 proposes to do something about it and today I ask the government to take action to stop street racing by supporting its passage.

Bill C-338 would amend the Criminal Code to provide that street racing is to be considered an aggravating circumstance for the purposes of sentencing a person convicted of an offence committed by means of a motor vehicle under section 220, criminal negligence causing death; or section 221, criminal negligence causing bodily harm; or subsection 249(3), dangerous operation causing bodily harm; or subsection 249(4) dangerous operation causing death.

The bill also provides for mandatory nationwide driving prohibitions to be served consecutively to any other sentence imposed.

On a first offence, a judge must suspend driving privileges for a period of one to three years; for a second offence, two to five years; and for subsequent offences, three years to life. Also, if death was caused on the first or second offence, a lifetime prohibition will be imposed on the second conviction.

Canadians want anyone who seriously injures or kills as a result of street racing to be prohibited from operating a motor vehicle for a significant period of time. They do not want individuals convicted of this carnage to serve a sentence and then be allowed to immediately get behind the wheel of a car. Neither do they want such individuals to simply move to another province to obtain a driver's licence.

Letters, phone calls and e-mails to my office from across Canada have expressed outrage over the carnage caused by street racing and lenient sentences being imposed, including conditional sentences. The victims do not support using house arrest for anyone convicted of being responsible for a street race crash that has either killed or seriously injured someone.

The British Columbia Automobile Association has advised me that its members are clearly in favour of swift and severe penalties for street racers. In its 2002 member opinion survey, its members expressed support for all penalties used to punish racers, including two year driver's licence suspensions, vehicle impoundment, fines and demerit points.

Last February 6 I received an e-mail from Margaret-Ann Blaney, minister of justice for New Brunswick. She has forwarded my bill and accompanying information to her officials in the justice department. She said that the suspension of driving privileges was of particular interest to her officials.

On February 4, Gord Mackintosh, minister of justice and attorney general of Manitoba, wrote me an e-mail concerning Bill C-338. He said the following:

Since the current Government of Manitoba was elected in 1999, it has introduced strong new measures to deal with dangerous drivers such as tougher driver's licence suspension provisions, including lifetime suspensions, and vehicle forfeiture for the most serious offenders. Amendments made to our Highway Traffic Act this past session have given our provincial street racing offence the highest maximum fine and the highest demerit point level available for provincial driving offences under that legislation.

I agree that it is important to ensure that there are appropriate measures to deter individuals from engaging in reckless driving behaviour that puts others at risk. I perceive that the challenge in pursuing Criminal Code changes is to weigh the effect of what may be inconsistencies in treatment between impaired driving and street racing offenders and to ensure that they are all workable.

You have raised an important issue.

In a January 21 letter to me, Robert Runciman, the then minister of public safety and security in Ontario, declared the following:

Street racing is a serious offence that puts all road users at risk and we must not tolerate it on our roadways. I am pleased that your proposed amendment to the Code would address the issue of street racing during the sentencing process. Mandatory driving prohibitions need to be served consecutively to any other sentence imposed by the courts. I hope your initiative will succeed.

Ontario responded to street racing by proposing legislation empowering police officers to immediately seize a vehicle and suspend a driver's licence for 48 hours. It also proposed to prohibit the use of equipment and substances, such as nitrous oxide, used to boost the performance of engines for the purpose of racing. Unfortunately, the legislation was not enacted due to the recent election. Hopefully the new Ontario minister of transport will reintroduce this legislation.

Jamie Muir, minister of justice for Nova Scotia, wrote to me on January 22 stating:

Although the police have not reported any particular problem enforcing the Provincial prohibition of street racing in this area, this appears to be an effective tool for helping to control the problem where it exists.

Dave Hancock, the minister of justice for Alberta, wrote on January 9 to say:

Street racing is a dangerous practice, which should be an aggravating factor for sentencing certain offenders.

He reminded me that Alberta has significantly increased the penalty for the provincial offence of street racing in the traffic safety act.

The Alberta justice minister went on to suggest that Bill C-338 could be amended to include impaired driving cases. I would have no problem considering amending Bill C-338 to apply to anyone convicted of impaired driving causing death or bodily harm where it can be established that street racing was a factor.

In my home province of British Columbia, Surrey-Green Timbers MLA, Brenda Locke, called on the federal government to crack down on street racers in a motion she introduced in the B.C. legislature.

With the passage of her motion on April 7 of this year, B.C. sent a strong message. Locke's motion calls on Ottawa to remove conditional sentencing for street racers who kill or maim innocent victims. An amendment was introduced to encompass all criminals convicted of a serious violent crime. Both the amendment and the motion passed in the B.C. legislature.

The motion was brought forward in honour of the lives of innocent victims of street racing: Jerry Kithithee, Constable Jimmy Ng and Irene Thorpe. Those three individuals were brutally killed by young men whose reckless, selfish, irresponsible and deliberate actions stole their lives and broke many hearts. There have been more since.

The motion was an important step in urging the federal government to make the necessary changes to the Criminal Code to make our roads safer. It was a de facto endorsement of Bill C-338, which I introduced in this place months earlier. Bill C-338 proposes the Criminal Code changes that B.C. seeks.

Street racing is the height of recklessness and a deliberate endangerment to communities. British Columbians understand the magnitude and the consequences of this activity and question why the courts treat it so lightly and ineffectively.

British Columbians seek justice for street racers and their victims. There have been numerous incidents where victims simply do not see justice.

A number of support groups in British Columbia support a crackdown on street racing. They include Family Survivors Against Street Racers, Our Angels in Heaven and Mothers Against Drunk Drivers.

B.C.'s solicitor general and minister of public safety, Rich Coleman, confirms that 60 vehicles involved in street racing have been seized and 180 driver's licences were suspended since amendments were made to provincial legislation in 2002.

Mr. Coleman stated the following:

This government has for some time been telling the federal government that in cases of offences involving violence, death and sexual assault, we don't believe there should be the opportunity for conditional sentences within the law. We have taken that to the table of the federal justice ministers.

Geoff Plant, the attorney general of British Columbia, says that conditional sentences have no role to play in street racing offences. He states:

The Criminal Code needs to be tightened up in the area of conditional sentencing so that conditional sentences are rarely, if ever, available for a crime of this nature.

MLA Locke concluded her remarks on the passage of her motion by saying:

It has been my privilege to work alongside Nina and her family as well as the Member of Parliament for Surrey North and other volunteers. I want to thank the Member of Parliament for Surrey North for aggressively raising this issue in the Parliament of Canada.

I should point out that the Nina referred to in this case is Nina Rivet who is a sister of Irene Thorpe, the woman who was run down by a street racer while out for a walk one evening.

What is the position of the Liberal government?

In response to a letter from me late last year, the Minister of Justice does not appear to be interested in helping to stop street racing. He says that mandatory minimum criminal penalties “do not work from the point of view of general deterrence and recidivism”.

There is no empirical evidence linking deterrence and recidivism as they relate to street racing. In fact, in a recent B.C. case, the driver who was eventually convicted for the street racing crash that caused the death of Irene Thorpe was arrested for speeding while he was out on bail, even though his licence was suspended as a condition of that bail. This counters the minister's contention because it shows clearly that there is a need for legal deterrence. There is a recidivism problem.

The minister also says that driving prohibitions should remain discretionary. He says that sometimes they may not be necessary because of long terms of punishment handed down to street racers who kill or seriously injure. The problem with the minister's contention is that no one has ever received any of these long prison terms for convictions resulting from street racing.

House arrest is being used for street racers who kill or injure people. This is inappropriate from the standpoint of the victims or their survivors and the protection and safety of communities that have a serious street racing problem.

The government also maintains that there are only a few minimum sentences provided for in the Criminal Code and that it is not willing to add more, such as the mandatory drivers' licence suspensions called for in this bill, but there are many areas in the Criminal Code that provide minimum sentences. I counted 26 offences in the 2004 Martin's Annual Criminal Code that carry a minimum sentence upon conviction. And many Canadians agree that there should be more minimum sentences for many more offences in the Criminal Code. Our criminal justice system needs more teeth.

The government also believes that taking account of aggravating circumstances for the purposes of sentencing is a very rare tool provided for in the Criminal Code. The justice minister suggested that aggravating circumstances for sentencing are virtually limited to hate motivated crimes, abuse of position of trust and authority, spousal and child abuse, criminal organization and terrorism.

In fact, there are other examples. Bill C-15A, passed in June 2002, made home invasion an aggravating factor in sentencing for certain offences. A judge sentencing a person for unlawful confinement, robbery, extortion or break and enter must consider it an aggravating circumstance if the offence was committed in an occupied dwelling where the offender was either aware that it was occupied or was reckless in this regard, and where he or she used violence or threats of violence against a person or property.

I point out that when I presented a motion to that effect at the justice committee a year or more earlier, government members called me silly, and yet they enacted it themselves a year later.

Bill C-46, currently before the justice committee, in clause 3 sets out four aggravating factors for sentencing purposes with respect to fraudulent manipulation of the public markets.

The minister's lame excuses betray a lack of serious consideration being given to this issue by this government. There is no requirement to equate street racing with other crimes in order to allow it to be considered as an aggravating circumstance.

I expect that the government will hang its argument against my bill on its refusal to consider minimum sentences and the use of aggravating circumstances when sentencing. Those are not good enough grounds for the government to fail to address the problem of street racing.

Sanctions should reflect the fact that street racing is an activity that goes beyond the regular criminal activities involving motor vehicles that are covered by the Criminal Code. Driving prohibitions must be nationwide to prevent anyone convicted of causing death or serious injury while street racing from simply moving to another province and continuing to drive.

As street racing incidents causing death and serious injury continue to occur in our major cities, passage of Bill C-338 would serve as a deterrent. This is a proactive legislative measure that would provide one step in the fight to stop street racing.

Today the government has the opportunity to support Bill C-338. It has an opportunity to stand up for the victims and to hold the perpetrators properly accountable.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I would simply like to point out that, in the debate on Bill C-46, the Bloc Quebecois had made a certain number of proposals, in fall 2002, following the Enron and WorldCom scandals and also our own scandal with respect to doctoring the books at CINAR.

We had proposed tightening the Criminal Code. A number of the Bloc Quebecois' proposals are now in Bill C-46. We are very happy to see that, but, at the same time, we wanted to ask much broader questions. As I mentioned earlier in my question to the member from the NDP, it would be desirable in the follow up to Bill C-46 for a hard look to be taken at these issues, especially by the Standing Committee on Finance. I had already proposed that, but unfortunately, it still does not seem to top the list of priorities.

We had also hoped that there would have been a very serious look at the use of tax havens by Canadian companies. We know that Barbados, for instance, a country with which the former finance minister signed a tax agreement, has become the third most popular destination for Canadian direct investments.

We cannot say that, on the one hand, Canada will be very strict when it comes to financial practices and then, at the same time, legalize or tolerate jurisdictions that close their eyes to a number of these practices.

Earlier I mentioned that the OECD lawyer, Mark Pieth, had suggested that the OECD member states should consider this. I think that this Parliament should seriously consider this over the next few months.

The other aspect we must consider is the issue of responsible investing and measures benefiting investors and companies with responsible attitudes, not only in terms of their management practices, but also how they invest their funds.

To this end, even if we agree in principle, Bill C-46 is at most a first step toward proper regulations on administrative practices.

Bill C-46 contains a sticking point preventing the Bloc from voting in its favour. The extent of prosecution by crown prosecutors needs clarification.

During discussions on the bill, we were told that there will be prosecution protocols. Clearly, we will never vote for a bill that could be a Trojan horse for an idea the federal government has long promoted, in Ottawa and Toronto, that being the implementation of a Canada-wide securities commission.

We believe that this area comes under provincial jurisdiction, particularly in Quebec, and that our system is a good one. As proof, there have been no scandals, with the exception of CINAR, on the sort of scale seen in the United States, which does have a national securities commission.

We feel that our system has worked well. As a result, Bill C-46 must not be used to implement any secret agenda. Accordingly, we will withhold our judgment until third reading.

I wanted to speak because I thought it important to situate this debate on Bill C-46.

[Pierre Paquette, Bloc, Joliette, QC]

Mr. Speaker, I thank the hon. member for his speech. First, he said that the New Democratic Party had a very broad vision of what the market rules are. In other words, they needed to be limited to ensure that small investors, especially workers who invest their money in pension funds, are not swindled by financial or other harmful practices with respect to securities in particular.

I want to know what he thinks about the suggestion from Mark Pieth, OECD's expert on money laundering, who, after the Enron and other scandals, advised governments to work on regulations concerning the use of tax havens by their national companies.

I would like to know if, in his opinion, beyond Bill C-46, we should not be working on limiting the use of tax havens by Canadian and other companies.

[Peter Stoffer, NDP, Sackville—Musquodoboit Valley—Eastern Shore, NS]

Madam Speaker, it gives me great pleasure to speak on behalf of my party and the hon. member for Regina—Qu'Appelle to Bill C-46.

Bill C-46 is the sister bill to Bill C-45, the Westray bill. I want to say at the outset that my party supports the bill in principle, although we would have liked a few amendments and further discussion in committee.

I consider the bill to be important legislation and something that is long overdue. Our research department has indicated to me that David Lewis, Ed Broadbent, Tommy Douglas and others of our party asked for corporate accountability for a long time. Now we are starting to slowly see a bit of that. We have to give credit where it is due, which is to the media for the way it covered the Enron story and the Bre-X story.

Canadians are saying that enough is enough. Canadians are concerned about where their investment dollars go. Workers and their families are concerned about where their pension dollar goes. Nothing can make people more sick to their stomach in terms of our own money than when we see the head of Enron living in a lavish mansion in Florida, with I do not know how many rooms, while the workers at Enron have lost all their pensionable savings. How that can happen in a free and open democratic society like the United States is beyond me.

The question is, can it happen here? Without legislation it probably could.

We are hoping this particular bill has teeth. In order to have teeth, as my hon. colleague said earlier, we must ensure that the authorities who oversee and regulate this type of legislation, whether it be a commission, the RCMP, domestic police services or whoever, have the final authority to investigate, bring charges and make them stick. They will also need the resources because we know these corporations have deep pockets. They could tie up cases of this type in the courts for a long time. It is just the way the legal system is sometimes.

We must ensure that the people who will be prosecuting these companies or corporations in the future have the resources and the technical ability to carry it through. Otherwise, this will fall like a deck of cards.

Another concern is the protection of employees. Although the bill does discuss whistleblower protection, we do not think it goes far enough. Clause 6 of Bill C-46 makes threats and retaliation against employees an offence punishable either as an indictable offence, which carries the maximum sentence of five years, or as a summary offence.

It is quite curious that the government is introducing a law that exposes an employer who makes threats to a punishment that is less than that of extortion. This is especially worrisome when the purpose of clause 6 is to deter employers from committing economic extortion. What we mean by that is that the threat will always be there for employees. What will happen to an employee who decides that someone in the legal or political world needs to know that what is happening in the company is simply not right? Many people will hold back because they do not want to lose their jobs.

As well, if people are in a particular trade or in the financial services world and they become blacklisted, who will hire them? No one should be punished for telling the truth but a lot of people in the corporate world have that fear hanging over them. We also have it in the public service world.

I will just go off track for a moment. It is interesting that the commissioner of the Coast Guard, Mr. Adams, would write a letter to all his employees and say that if any of them have contact with a member of Parliament the Coast Guard wants to know the details of any conversations.

Why would the commissioner of the Coast Guard want to know about my conversation with an employee of the Coast Guard? It is none of the commissioner's business. In a free and open, democratic society, people, in my opinion, have the right to speak to their member of Parliament on any subject.

To turn back to the corporate world, we want to ensure that when people within the corporate world see, hear or feel that something is drastically wrong they will be allowed to speak openly. If they are wrong, the court of public opinion will weigh heavily upon them, but if they are right, they will be doing our country a great service.

As I said before, many of these corporations hire lot of people in this country, and thankfully they do, which is part of the good thing about businesses in this country working hand in hand with government to create a mixed economy, something I have always supported. However the reality is that we must protect people's pensions. We must ensure they have proper working environments and reliable salaries and wages to base their living on.

I come from the airline world. When Canadian Airlines merged with Air Canada I could not help but notice that Air Canada wanted to delay or hold back some of its employees' pension liability funds. We simply will never accept that. The 11th commandment in the world is “Thou shalt not fool around with thy pension”. A pension is what a lot of people work for, be they in the auto industry, the forestry industry, the airline industry or even members of Parliament for that matter.

The fact is that when we leave our places of employment after many years of service we rely on that pension plan to ease ourselves into retirement. For anybody, be it government or business, to attempt to fool around with that pension plan is despicable and criminal.

I am hoping the bill will deal with issues of that nature down the road. I think the essence of the bill is accountability, transparency, openness and fairness. It would ensure that when corporations show us their books and tell us that they were audited fairly by an independent agency that they will not be buffaloing, masking the figures or whatever, that those are the facts.

Who will ever forget Bre-X? I remember people telling me many years ago that I had to get into this Bre-X because it was so hot. They told me that I would be able to retire early if I invested in Bre-X. It was around $95 a share at that time. I possibly should have invested and left when it reached about $130 or $140 but I do not think I would have. I probably would have been like most investors, been a little greedy, held on and then lost everything. Why? Because Bre-X and the people behind it lied to the investors and to the Canadian people. It was out and out fraud.

How many people lost their shirts on that? How many investors were shaken in the stock market because the stock market commissions were not able to or could not, for whatever reason, find out until it was too late? This bill should send a clear warning to companies telling them that if they are thinking about attempting to defraud investors, to screw their employees and everything else, we will keep a very close eye on them. Again, we can only keep that close eye on them if we have the resources and the manpower to get that job done.

It may be my perception but, like anywhere else in a capitalist society, people can make large amounts of money if they are smart, know the right people and have a lot of luck at the same time. The thing is that a lot of those companies in the United States, and the list goes on and on, are corrupt. They use smoke and mirrors. They have influence and conduct insider trading. It goes on and on, and a lot of them get away with it.

However it appears that the United States is not afraid to go after the big guys. We saw the impeachment of Richard Nixon. We saw them go after Bill Clinton. We saw them go after the seventh largest corporation in the United States, Enron. The Americans do not appear to be afraid of these individuals, the amount of money they have or their influence. If they have done something wrong or it is perceived that they have done something wrong in the United States the government will go after them.

The problem in the United States, as it is here, is that far too many companies get away with those kinds of things and that is completely unacceptable.

I will give a quick analysis that was done by our research department. The integrity of our public markets and strong investor confidence has been an important issue for security regulators for a long time because these principles are the necessary foundation for any successful market.

We in the NDP always question the market system of our economy. Many of us in the NDP like a mixed market economy, one with the private sector along with government. We think government could be an appropriate tool and an appropriate avenue to work with private business to develop the economy so that we can equally share our resources across the country. As our famous leader of the CCF, J. S. Woodsworth, once said “What we desire for ourselves, we wish for all”.

If the market is perceived to be corrupt or influenced in any way, shape or form by some shady characters or some outside sources that makes investors very nervous and they will put their money somewhere else.

The main contribution that Bill C-46 makes to this effort is to act as a greater deterrent to would-be insider traders and provide courts with the authority to compel the production of documents to determine the nature and extent of insider trading.

Insider trading is a tempting way to take care of one's friends. If we had a lot of stock, let us say in Air Canada, which I believe is trading now at anywhere between $1.10 and $1.30, and we knew tomorrow that a big deal would be coming up for Air Canada that could raise the price of shares, would we not love to know that information beforehand so we could either buy more or sell out, depending on the circumstances? There are not too many Canadians who would not love to have that type of information but that information, called insider trading, is extremely dangerous to the confidence of all other investors.

What happens is that only a select few, those in the inner circle of whatever that kind of information will assist, will get it, while the vast majority of investors will be left out in the cold. That is simply wrong. I am glad to see that the bill actually tries to do something about that.

The codification of aggravating sentencing factors and the elimination of mitigating factors, such as status and reputation, if those attributes were relevant to the commission of the offence, will develop a more consistent and certain punishment regime. That is something we support. If corporate criminals want to commit those kinds of act and break the trust of investors and ordinary Canadians, we believe they should be punished to the fullest extent of the law. We like the idea of punishment for fraud going from 10 years to 14 years, fraud affecting capital markets going from 10 years to 14 years and market manipulation going from 5 years to 10 years.

I want to make sure that it just does not say “Here is your 14 year sentence but, by the way, if you serve one-third of it, with good behaviour off you go”. No. We have to make a strong deterrent and make sure that 14 years means 14 years.

I know of other concerns. Let us look at someone who commits a criminal act and gets eight years. I had an individual in my riding who had eight previous impaired charges and on the ninth one he actually killed someone, an 18 year old girl. He was sentenced to eight years but only served two of them. Many citizens in my riding, including myself, were extremely upset when that sentence was reduced.

It is just like Bill C-46 on corporate crime. When the head of a major company, which employees thousands of people, defrauds their pension plans, he or she only gets a few years while the employees lose all their savings and lose everything, which means that if they had no private savings of their own and have no other means of supporting themselves they will then turn to the government for assistance. The government should try to prevent that by making sure that if the bill says 14 years, then that is what the person gets, not 3 years and not if they are really good in jail they can go early. That is nonsense.

The NDP will ensure that further amendments come to this bill. We have always said that corporate accountability, business accountability, is extremely important. To the best of our ability we will make the government aware that any agencies or regulatory authorities must have the manpower and the resources to carry out identification and charging, to ensure that they have the wherewithal to carry through with those cases.

As I said earlier, companies can be charged but when the companies have all kinds of money to fight these cases, they can tie them up in the courts for a long, long time with appeal after appeal. Our judicial system must have the authority, the manpower and the staying power to ensure that cases result in convictions. In the end we must protect the investors, protect our workers and protect fellow businesses not only in this country but around the world. If we prove to investors around the world who are looking to invest in Canada that we have a fair, transparent and open system, that would go a long way in building our economy in the future.

There is still an unanswered question to which I have not received a satisfactory answer. It has to do with trade deals such as the WTO, NAFTA, or whatever they may be. Now that many of these companies are becoming very international in their nature, will this domestic law stand up to those trade deals in terms of people who own companies but do not actually reside in Canada? Will we be able to bring them to court satisfactorily with these trade deals hanging over us? Will those trade deals impede us from bringing this type of domestic legislation to the forefront? I do not know, but I would like those questions answered.

I am proud to say that our party will be supporting this bill in principle.

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, with respect to the first question as to which body would be responsible for enforcement, we need to differentiate between civil and criminal enforcement, and compliance and sanctions.

Bill C-46 deals with criminal behaviour in terms of fraudulent activity, misrepresenting financial information, insider trading and protecting whistle-blowers. That is precisely one of the aspects with which the bill deals. It deals with criminal sanctions and calls for prison terms and fines.

Market enforcement teams would be established across Canada, as I said earlier, over the next of years. They would be composed of RCMP investigators, forensic accountants, lawyers and other investigative experts. The teams would be responsible for tracking down corporate criminals and deterring future occurrences of these crimes.

On the civil side, we have the Ontario Securities Commission that has sanctions of prison terms and fines for CEOs and chief financial officers who misrepresent economic realities in the financial statements. We have the Canada Business Corporations Act which could also have some civil penalties.

The point we have also made is that if we were to increase the sanctions under the Canada Business Corporations Act, the member is absolutely right to note that we would have to have the teeth and resources to monitor compliance and then we would have to have the resources to prosecute where companies were not following through on their responsibilities under the Canada Business Corporations Act, or indeed under the rules of the Ontario Securities Commission. But the Ontario Securities Commission would be something with which they would deal.

As Canadians, we should be monitoring how effective and productive these different players are in dealing with these issues because we will gain some experience and knowledge of how it is all working as we move forward.

[Roy Cullen, Liberal, Etobicoke North, ON]

Madam Speaker, I am pleased to participate in this debate on Bill C-46, an act to amend the Criminal Code (capital markets fraud and evidence gathering). This is a very important piece of the puzzle that is needed in Canada to reassert and re-establish confidence in capital markets.

The stories we hear about Enron and WorldCom in the United States create some questions in our minds as to what this means for Canada. We have heard of the Sarbanes-Oxley legislation in the United States and many wonder why we are not implementing similar legislation. A number of us on this side of the House decided to pursue this question.

The capital markets provide the lubrication for the efficient operation of Canada's economy. If the markets are threatened, the economic growth in Canada is impeded. Fewer jobs are created and the economic well-being of Canadians is attacked.

When we look at what has gone on in the United States with Enron and WorldCom and the response in terms of the congressional and legislative approach in Sarbanes-Oxley, we need to understand that Canada has a different set of capital markets. Canada has a different mosaic in terms of the jurisdictions that are involved in the capital markets. We need to design our own solutions here in Canada.

Bill C-46 is a very good start. It deals mostly with the enforcement and compliance components of dealing with capital markets fraud. Bill C-46 introduces new measures to strengthen enforcement against serious capital market fraud offences, measures previously outlined in budget 2003. This legislation tackles capital market fraud by creating a new Criminal Code offence of improper insider trading. It also protects employees who report unlawful conduct within their corporation from retaliation by creating a new employment related intimidation offence.

Bill C-46 also raises the maximum sentences for existing fraud offences and establishes aggravating factors to assist the courts in determining a sentence that would reflect the seriousness of the crime. It also enhances the evidence gathering tools available to investigators by amending the Criminal Code.

These are very important measures supported by the six integrated market enforcement teams that will be established across Canada over the next two years. These teams will be comprised of RCMP investigators, forensic accountants, lawyers and other investigative experts. These teams will be responsible for tracking down corporate criminals and deterring future occurrences of these crimes. This is a very important enforcement and compliance measure which I certainly support.

Canada is exposed to economic crime along the lines of Enron and WorldCom. In fact, many would argue that we have had some occurrences of that already. Many members in the House and many individuals across Canada are familiar with Bre-X Minerals. YBM Magnex, Philip Services, Livent Inc., Laidlaw, Cinar and Castor Holdings were fairly sizeable market frauds perpetuated here in Canada. We need to deal with this in Canada as well.

When we look at the approach to dealing with this type of economic fraud in Canada, we find that there is quite a quilt of different players and different jurisdictions. For example, the Canadian Public Accountability Board has been set up to monitor the independence and the role of auditors when they examine financial statements.

This body, which is actually chaired by the former governor of the Bank of Canada, will establish the rules by which audit firms can engage in non-audit work, such as tax work or management consulting, for audit clients of listed companies. It will set these guidelines in the sense of when auditing firms will be seen to have crossed the line of conflict of interest. It will also ensure that the firms that are auditing public companies have established mechanisms for quality control, for professional development. It will have the authority to delist auditors who fail to comply with the rules that have been established by this particular entity.

Our group that looked at this believes that this needs to be given a chance to work. We have confidence that it will work and it will deal with the question of auditor independence and auditor quality control.

When we look at the Sarbanes-Oxley legislation that was passed in the United States, there are many important best practices that are established in Sarbanes-Oxley dealing with the separation of the chairman and CEO roles, the question of the independence of directors and a host of other issues. What we need to do here in Canada is make sure that we pick those best practices that were established and where there is general consensus within the financial and investor community, these best practices should be adopted, whether they are in Canada, the United States or anywhere.

There is an important tool in Canada to show leadership in this particular area, and that is the Canada Business Corporations Act. The Canada Business Corporations Act affects many companies in Canada. In terms of the breadth of coverage of the Canada Business Corporations Act, it is something like 17% of all companies in Canada. It is quite a sizeable grouping of companies that are incorporated under this federal statute.

It is through this act that the federal government can exert some leadership by building into the Canada Business Corporations Act some of the best practices that most observers would conclude are the best practices in terms of corporate governance and a host of other items. One of those is the splitting of the chairman and CEO roles. It is probably more advantageous to separate those roles so that the chairman operates more independently and can act on a more objective basis on behalf of all the shareholders.

We have the question of the independence of the boards of directors. Too often we find that the board of directors is selected indirectly by the executive management group of corporations. They ultimately can become beholden to the management of the company. It seems to me that we need to have independent directors on the boards of public companies and we need quite a large number of them.

Let us look at the audit committees. Probably most public companies today have audit committees. It is quite important that these audit committees have directors that are well versed in financial reporting and financial affairs so that they can diligently do their work, listen to the reports of the external auditors and the internal auditors and take the steps that are necessary to protect the interests of the shareholders and other stakeholders.

In Canada, as I said earlier, there are a number of jurisdictions involved in dealing with corporate governance. For example, the federal government is responsible for the regulation of trade and commerce. It is responsible for banking and the incorporation of banks. It is responsible for patents and copyright. It is responsible for peace, order and good government and other matters not exclusively assigned to the provinces.

By the same measure, provinces are responsible for the incorporation of companies with provincial objects. They are responsible for property and civil rights in the province. They are responsible for the management of lands and resources and generally all matters of a merely local or private nature in the province.

As I said earlier when I gave the percentage of 17%, that is the percentage of listed companies that are federally incorporated. In fact the Canada Business Corporations Act applies to roughly 40% of all corporations, listed or not, in Canada.

One of the aspects that our little group on this side of the House looked at was whether we need to differentiate the rules on corporate governance as they relate to large corporations and small corporations. We felt that we should. How to define large corporations versus small corporations is something that needs to be looked at in more detail. Our group felt that large corporations have the breadth of resources, the scope of management and the scope of operation that they could be expected to have corporate governance at a higher level than some small companies that are restrained simply by the economies of scale, the very size and scope of their operations.

In Canada we need to ensure that we have capital markets that are operating efficiently and effectively. We also have players that monitor and regulate the securities industry. There are securities commissions in every province across Canada.

One initiative that our government has been pursuing for some time is to have a national securities commission or regulator that would bring all the provincial securities commissions under one roof. This would be the most cost effective and the most efficient way of doing it. If a company wants to list in Canada, right now it has to go to all the various provincial securities regulators. A national securities agency would be very efficient and effective.

Unfortunately the politics, as they sometimes do, get caught in the middle of this. Certain provinces want to see that happen and others do not. However, in terms of corporate governance and in terms of the efficiency and effectiveness of capital markets, having a national securities regulator would certainly go a long way to improving our corporate governance in Canada and would restore more confidence in the capital markets.

One of the securities commissions that plays a very lead role across Canada is the Ontario Securities Commission, simply because of its size, the number of listings, the number of companies in Ontario, the Toronto Stock Exchange being in Toronto, and much of the activity that takes place in Ontario and the large concentration of industrial activity. The Ontario Securities Commission falls under the Ontario Securities Act. This regulatory body is responsible for overseeing the securities industry in Ontario. It plays quite an important role in monitoring the compliance in corporate governance and financial reporting.

One thing we learned from the financial debacles in the United States and Canada, whether it was Enron, WorldCom, Livent here in Canada, or Bre-X, is the importance of financial reports that are accurate and reflect economic reality. The public companies especially have to come up with quarterly reports. There is huge pressure on management to show continued growth and earnings per share. Sometimes they are caught in a situation where they perhaps have to compromise their principles and distort the economic realities so that their shares can keep moving forward, especially if they have executive compensation schemes and stock options.

Stock options for executives is something that is here to stay. Our group on this side looked at the need for those stock option schemes and the way that executives and the management team are compensated to be clearly transparent. If the president has a number of stock options, it should not be hidden away in note 25 of the annual report. It should be highlighted, perhaps in the chairman's report or the president's report. It should be fully disclosed so that all shareholders are aware of the extent to which the management team participates in the profitability of the firm.

The group that we assembled would like to see some of the best practices of corporate governance incorporated into the Canada Business Corporations Act. There should be sanctions for failure to disclose financial information in a responsible and accurate way, especially for the CEO and the chief financial officer. If it is shown that the CEO and the chief financial officer misrepresented the financial statements of the company, there should be severe sanctions for that because there are many Canadians--directly or indirectly, through the stock market, pension plans or mutual funds--who are relying on the integrity of the financial reports.

Right now, under the Canada Business Corporations Act, the sanctions for misreporting financial information is minimal. We would like to see that beefed up along the lines of the measures that were introduced by the Ontario Securities Commission and along the lines of the legislation before us here today in terms of the Criminal Code.

In Ontario the penalties in the budget measures act of 2002 increased the fines and maximum prison terms for general offences, such as misrepresenting corporate financials from $1 million to $5 million and prison sentences from two years to five years less a day. The American equivalent, increased by the Sarbanes-Oxley act of 2002, is a fine of up to $5 million and/or up to a maximum prison sentence of 20 years.

As I said earlier, we believe that the Canada Business Corporations Act could be amended to increase both the fines and prison terms so that they are more in line with those of the Ontario Securities Commission. That would mean a fine of up to $5 million and/or a prison sentence of up to five years less a day.

Bill C-46 is an important bill and I want to talk about why we should support it in the House. It is part of a thrust of initiatives that must be looked at in a coherent way in Canada. We cannot just say Sarbanes-Oxley. It would not apply in Canada. If we were to legislate Sarbanes-Oxley here in the House of Commons, it would be thrown out because we do not have that kind of constitutional power.

However, by the same token, the Canadian Public Accountability Board must do its job in ensuring that auditing quality controls are good and that there are no conflicts. The Ontario Security Commission must pushing for strong rules in terms of good corporate governance, independent directors, separation of duties between the chairman and the CEO. There must be a requirement for good, honest financial reporting and severe sanctions. The Canada Business Corporations Act must incorporate the very best practices and ensure that if CEOs and chief financial officers do not play by the rules they will either go to jail or will pay heavy fines. Then Canadians would be protected, the capital markets would be efficient and effective, and people would have confidence in the capital markets in Canada.

In conclusion, this is a bill worthy of the support of the House. We should be pushing and promoting these other measures, especially the Canada Business Corporations Act amendments. I am confident that our government will bring forward those solutions in the not too distant future.

[Greg Thompson, Progressive Conservative, New Brunswick Southwest, NB]

Mr. Speaker, I want to put a few points on the record in regard to Bill C-46, an act to amend the Criminal Code in relation to capital markets fraud, and to enable the authorities to investigate, prosecute and imprison for wrongdoing.

A short time ago I was talking about an article I happened to be reading in the latest edition of Business Week. The bill is in response to what has happened in the United States and, to a lesser degree, obviously, to what has happened in Canada.

The United States congress, which is the equivalent of our Parliament, recently passed a bill called the Sarbanes-Oxley act of 2002 that will tighten up the criminal code in relation to some of the wrongdoings in the business world, and in the investment world in particular.

One of the famous cases, which I am sure everyone has heard about, was Kozlowski of Tyco International, an individual who was reported to have stolen $170 million from the company he represented as chief executive officer. In addition to that, there were unauthorized loans and bonuses to fraud investors of that company of another $430 million. The trial is underway in Manhattan as we speak.

That is not the only case. There have been many. We have all heard of the Enron scandal where individuals cooked the books and used accounting deceptions and procedures to make it appear as though the company was making money instead of losing money. As a result of that, companies like Enron and WorldCom have gone broke and the employees and shareholders have been left penniless, with the exception of the chief executive officers of those companies. Some of those trials are still ongoing and we have yet to know what the outcome of those will be.

The most famous example of alleged wrongdoing in the marketplace is Martha Stewart. The article I was reading from the latest edition of Business Week talks about some of the improprieties that might have been conducted by Martha Stewart and her company in terms of insider trading.

I only have to remind the House of when the bubble burst for Dotcom and how some of the investment companies themselves worked the system to drive up the initial price offerings of companies, only to cash in the initial offerings that they received at brokerage houses. It was discovered there were no earnings behind those inflated prices, no history of earning money and no potential to earn money. As a result of that a lot of people suffered needlessly. Innocent investors suffered. You and I know some of those people, Madam Speaker. They are our friends and neighbours who were, the term which is often used is not very sophisticated, sucked into that type of investment thinking they were good investments but which were not good investments.

The bill before us now would attempt to crack down on some of that illegal activity. It would increase the maximum sentences for existing fraud offences, establish a list of aggravating factors to aid the courts in sentencing, allow the courts to issue production orders to obtain data and documents from persons not under investigation and establish concurrent federal jurisdiction to prosecute certain capital market fraud cases. That is where the act would have to work in conjunction with the provinces, which would have the lead in any of those prosecutions because of the jurisdiction the provinces enjoy in these areas.

One point I briefly touched on was insider trader. This is where people within the industry provide information to allow their friends to buy shares at a particular price, knowing full well the price will be driven up by a certain announcement, an approval or whatever.

Bill C-46 creates a new criminal offence of insider trading. It is already illegal. It would create a new criminal offence with harsher penalties. This is a topic that members have heard me speak to time and time again in the House.

In fact I have a bill before the House now, Bill C-241, entitled the whistleblower's bill. It would provide whistleblowers within the public service a level of protection. When they see something wrong within government, public servants can in fact blow the whistle. In other words, they can report that wrongdoing knowing full well that their jobs will be protected. They will not be run out of the government or dismissed from the government or treated unfairly in any way for uncovering wrongdoing.

One thing Bill C-46 would do is provide whistleblowing protection to employees who expose wrongdoing under federal or provincial law. A new criminal offence of employment related threats or retaliation would carry a maximum term of five years. In other words, people within the corporate structure could in fact be prosecuted under criminal law for subjecting their employees to that type of harassment or punishment simply because they were reporting wrongdoing. I think that would allow many more people to come forward when they see that happening within capital markets or within investment houses.

One of the best examples of that I believe was with one of the top executives of Merrill Lynch. Knowing full well what was going on within Enron, he was very reluctant to classify Enron as a good buy in the investment market. He was punished by his own company. He was ostracized and humiliated. Eventually he had to leave the corporation simply because he was telling the truth. This type of legislation would protect individuals like him.

The current maximum sentence for fraud and fraud affecting the public market would rise from 10 years to 14 years. The sentences would be stiffened up. The maximum term for fraudulent manipulation of stock exchange transactions would rise to ten years from five years.

The other component of Bill C-46, which I never thought of myself until going through this legislation and understanding some of the work the committee did and how it actually arrived at this specific component, is it adds a list of specific aggravating factors that would result in harsher penalties, such as the extent of economic damage caused or the impact on market stability.

Again, if we look at Enron, it is the biggest corporate collapse in the history of the United States. The penalty for that would be much more severe because a lot of hardship was imposed on an awful lot of people, not only its employees but individual investors who had put their entire life savings into some of Enron's stock. They wreaked havoc on the lives of a lot of people, including some of their employees. Those types of aggravating factors would be considered when sentencing was handed out.

A person's reputation and status in the community or workplace can no longer be considered as a mitigating factor in lower penalties in cases where those who commit capital markets fraud rely on those very factors to carry out their crimes. Let us take the example of Martha Stewart. I hate to pick on her. I am not sure that is fair.

However, we could argue that Ms. Stewart has done some good in the community, even though we do not see all of it. No one would argue that in terms of donations or sponsoring specific groups. What now will happen is her profile in the community will no longer be considered a factor in terms of the sentencing. In other words, all the good we do will not be part of the sentencing. We will be treated as harshly as the next person, despite some of the public good we may have done.

If we look at the Enron case, that was the defence some of the executives used; look at the public good and how well they had behaved themselves in the community in terms of charitable donations, et cetera. This would discourage that. In other words, it really boils down to the fact that they can not hide under that cover. They would be sentenced on the severity of the offence they perpetrated and could not hide under the cover of a public name or having done public good in the past.

We support the bill and hope that it can be strengthened as we go along. Normally this would be left up to our justice critic to debate this but our justice critic now just happens to be our party leader. I am not sure where it is in terms of parliamentary committee.

I do know the Senate banking committee spent about a year looking at the bill. During its study, it examined other jurisdictions like the United States. The U.S. Congress passed a bill, which mentioned earlier, about a year ago now. Some of the things that were recommended are not in this bill, and I just want to put those on the record.

There are obviously a lot of good things in the bill, but some things have been left out and here are just a few of them.

Code of ethics--

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC]

Madam Speaker, we are indeed casting a critical eye on this bill. We must ensure that, within the federal jurisdiction, we have the best legislation possible and that the Criminal Code is strengthened. Potential defrauders must know that if they engage in illegal activities, they will have to pay the price. That is the federal government's responsibility.

We must ensure that we have the best legislation possible in that area but, at the same time, we must ensure that the provincial jurisdiction with regard to securities is respected. Indeed, we have seen over the last few years that there is no consensus in Canada on the issue of transferring this responsibility to the federal government.

Earlier, my colleague from Joliette talked about a committee that will have to make recommendations on this subject. We must simply ensure that, through Bill C-46, we are not doing now what the member for LaSalle—Émard wants to do when he becomes prime minister, which is encroaching on provincial jurisdictions.

We hope that the final version of Bill C-46 will respect Quebec's jurisdiction while including in the Criminal Code the tools needed to reassure investors, particularly small investors, as to the safety of the system governing the whole issue of security trading.

[Greg Thompson, Progressive Conservative, New Brunswick Southwest, NB]

Madam Speaker, I was reading the latest edition of Business Week on this very topic and I wanted to bring some timely information to the House.

I have a question for the member. I am fascinated by the federal and provincial jurisdiction in this area. My understanding is that Bill C-46 would give added strength to the federal government but recognizing that jurisdiction is provincial, not taking away from the province. I know that is a sensitive issue in the province of Quebec. However my understanding is that it would strengthen the federal role but would not diminish the provincial role. Is that his understanding of Bill C-46?

[Pierre Paquette, Bloc, Joliette, QC]

Madam Speaker, I will begin by congratulating the hon. member for Kamouraska—Rivière-du-Loup—Témiscouata—Les Basques for his presentation. This is no easy subject. In these 20 minutes he has managed to explain in layman's terms the key principles of the bill we have before us.

I would like to revisit one particular aspect, the one crucial for us, namely the regulation of financial markets and the recurring plan of the federal government to create a Canadian securities commission.

I imagine that everyone is well aware that the present finance minister has sought the advice of Harold MacKay in this undertaking—the selfsame Harold MacKay who authored the MacKay report, which led to Bill C-8, a bill we passed after the last election. Mr. MacKay proposed the creation of a wise persons' committee to advise the minister on the best route to take to regulate the securities market across Canada.

This wise persons' committee should soon submit its recommendation, which, as on many issues, is likely to be along the lines of establishing a Canadian securities commission. Membership would be voluntary, to put pressure on the provinces and Quebec as well. The Ontario Securities Commission clearly supports this initiative of a Canada-wide securities commission. The federal government's game plan will be to make sure all the provinces are onside, so as to isolate Quebec, and say, “Look, we are not forcing you to get onside, but since you are alone on your side, this will be a problem”.

I would like to ask the hon. member this: based on the questions he raised and what I just said, is the danger with Bill C-46 not a classic in terms of federal government interference, using a real problem and real concerns of the public—in this case, small investors and future retirees—about losing a portion of their savings because of financial fraud?

This is a real problem. We see it in the municipalities, which have financial needs with respect to infrastructures, we see it with child poverty. So, in response to a real problem, a real concern, a solution, be it legislative or financial, is proposed along with a slew of terms and conditions that result in us living in an increasingly centralized country, while what the Fathers of Confederation had in mind was a confederation. Without the guarantees the hon. member referred to, Bill C-46 may well become another part in this huge puzzle of the federal government intended to centralize Canada and make it a unitarian state.

That is my question for him.

[Paul Crête, Bloc, Kamouraska—Rivière-Du-Loup—Témiscouata—Les Basques, QC]

Madam Speaker, I am pleased to speak today on Bill C-46. The Bloc Quebecois is in favour of the bill in principle, but reserves its decision on the division at third reading stage until we see how the government reacts to our amendments.

I would remind members that, as early as the fall of 2002, the Bloc Quebecois urged the federal government to tighten the provisions of the Criminal Code so that the authorities would have better tools at their disposal to fight corporate fraud. The Bloc is therefore delighted that the government has given in to our pressures and has taken our opinions into account and retained some of our suggestions.

We do, however, find it unfortunate that not all of our suggestions were accepted. For this reason, we advise you that, barring major amendments at third reading, we could decide to vote against it, even if we do agree with the principle at this second reading stage.

These major reservations, however, relate to an aspect of the bill that we shall be trying to amend at the committee stage. We find it difficult to understand that this bill could provide that a federal attorney also has jurisdiction to prosecute Criminal Code offences concerning capital market fraud.

This is especially worrisome to us since the federal government has publicly announced its intention of establishing a Canadian securities regulator. Having a Canadian Securities Commission was one of the obsessions of the former finance minister, soon to be the prime minister of Canada. And this would be done despite the fact that jurisdiction over this area is clearly indicated, despite the fact that the securities commissions in each province have made their choice clear. The former finance minister, the member for LaSalle—Émard, seemed intent on getting his way on this.

We are concerned about what Bill C-46 will turn out like if it is not amended in order to ensure clear respect of Quebec's jurisdiction. For us, regulation of securities clearly falls under the jurisdiction of the Government of Quebec. We therefore disagree with the federal government's intentions in this regard and want to be sure that no encroachments of jurisdiction will result.

But, I want to talk in general terms about this legislation. This enactment amends the Criminal Code by creating a new offence of prohibited insider trading and creating a new offence to prohibit threatening or retaliating against employees for disclosing unlawful conduct. The enactment increases the maximum penalties and codifies aggravating and non-mitigating sentencing factors for fraud and certain related offences. In other words, the allowable sentences are being increased so as to deter people from committing this kind of offence.

Furthermore, in keeping with the Criminal Code, the enactment provides for concurrent jurisdiction for the Attorney General of Canada to prosecute those offences, taking into consideration the reservations I mentioned earlier.

In addition, the enactment also creates a new procedural mechanism by which persons will be required to produce documents, data or information in specific circumstances, to make it easier to build a solid case, without getting lost in a legal labyrinth when information is quickly needed to serve as evidence, and to ensure that any necessary changes can be made as soon as possible.

Clearly, this bill follows on the heels of recent corporate scandals in the United States. We only need mention Enron. These scandals have made us aware of how fragile our financial system is and how much we rely on it.

During the 1930s, before the crash, many of our parents and grandparents grew up believing that the stock market was undoubtedly a bit corrupt. After the crash, this sector had to rebuild a more honest, proper and appropriate image or reality. But recent scandals have tarnished the reputation of the financial sector, which desperately needs an unassailable, solid image. Investments take a beating when we can no longer trust the institutions charged with ensuring the transparency of financial transactions. The result is fewer transactions and disinterest on the part of investors. We must remedy such situations.

Although at first we thought that only large investors were affected by a stock market crisis, that is not the case. As I was saying, the biggest players on the stock markets are the pension funds. As a result, if a pension fund suffers large losses, it is the small investors who can lose their life savings and see their retirement projects go up in smoke.

That is why it was time for the federal government to intervene in this matter. The Bloc Quebecois has been speaking out on this subject for over a year. It is a question of ensuring that, at the end of the day, the people who have invested in the pension funds and who do not necessarily have day to day control over what happens to them, the people who trust the companies who administer the funds, will not have the surprise of finding themselves, at retirement, with assets that are not what they might have expected. This situation has been begging for a solution.

For example, in 1998, the Canadian trusteed pension funds held assets of more than $500 billion. Of that $500 billion held in pension fund assets, about $115 billion was invested in Canadian stocks and some $57 billion in foreign stocks. Four million Quebec and Canadian workers contribute to these funds. Only the financial assets of the chartered banks exceed the capital held by the pension funds.

That illustrates the importance of this market, the importance of assuring these small investors, those who invest trustingly, through their pension funds, that their money is well invested.

In addition, analysts have recently observed that trusteed pension funds tend to favour investment in stocks rather than in fixed interest securities. It is all the more important to ensure the validity and security of the system.

In light of the previously mentioned figures, it is clear that a financial crisis would have a direct impact on the retirement incomes of millions of households and it is precisely those households that we have to protect.

Fortunately, to date, Canadian markets have been relatively spared from professional misconduct, except for the cases involving CINAR and Nortel.

In the CINAR case, the Bloc Quebecois condemned it in this House and revealed that there indeed had been major fraud within this company. Today, the company has started up again with new directors, but we do not know the full story, because the federal government signed an agreement through Revenue Canada to put out the fire.

It was clear in this situation that interests close to the Liberal government were called into question, as were some people who were friends of the current regime. A way was found to prevent them from getting the sentences they deserve and that should have been handed down in these cases.

Nonetheless, the CINAR and Nortel crises, and everything that happened in the United States, should encourage us to ensure that our legislation is well drafted and stronger, in order to discourage cheats who might want to abuse the system.

However, the Bloc Quebecois feels that despite the fact that our securities regulation systems are, in the opinion of many experts, much more comprehensive than what existed in the United States before the financial crisis, it is nonetheless important to send a clear message to corporate directors that financial misconduct constitutes a serious crime that is not acceptable in our society.

Let us learn from what happened in the United States. The messages were not clear enough. People had a field day and thought they could do all kinds of things like artificially inflating companies, and conducting all kinds of financial transactions that eluded pension fund administrators.

By the time a scandal breaks, it is too late for people who invested in these companies in good faith, thinking these were rather sound investments. We are not talking about investments in high risk areas. That is not how it was presented to the people who invested in good faith.

In the United States, a really fraudulent system was set up. Here, in Quebec and Canada, this did not happen because we were better protected to begin with; still, there are lessons to be learned, to ensure that in the future the system will be much more efficective than it is right now.

That is why, in the fall of 2002, the Bloc Quebecois called for major changes to be made to the Canadian Criminal Code in order to provide the appropriate authorities with better tools to fight crimes of a financial nature.

What are these changes the Bloc Quebecois is calling for? In a nutshell, since the fall of last year, we have proposed adding a section to the Criminal Code that would make insider trading a criminal offence in order to send a clear message to company directors that the use of confidential information obtained in the performance of their duties for the purpose of making profits or avoiding losses would not be tolerated.

The idea is to avoid situations where, having heard that a transaction is about to take place, a person lines her own pockets during the time when no one else, or almost no one else, is aware of the transaction.

Perhaps we thought for a long time that it was enough to rely on the good faith of people. We are realizing that we need measures, actions and stiff penalties to prevent insider trading. Such offences are one of the most tragic ways that investors' confidence in the system can be shaken.

These offenders figure, “Others in the company, such as executive officers, stand to profit, while I, by the time news of the transaction reaches me, will not have the chance to buy and sell shares the usual way, since the game will be almost over and what could be gained will already have been gained because others have beat me to it, using information before they should have to pocket piles of money”. This way, they make profits or avoid losses at the expense of other investors who do not have access to the same information. This sums up my point.

We wanted this provision to be added after section 382 of the Criminal Code. It would have created an offence of insider trading, which would have carried a maximum sentence of ten years' imprisonment so that people would be well aware of the consequences they could face before they decided to engage in such a behaviour. Then, should they be found guilty of such an offence, they would have to pay dearly.

We see that the government accepted our suggestion and included a new offence of insider trading in the bill. We are pleased about that. The Bloc Quebecois also proposed that a new offence be created for securities fraud. This offence, which would be patterned on the measures adopted in the United States and which would also carry a ten-year prison term, would prohibit fraud when selling or buying securities.

The Bloc also proposed two amendments to section 397 of the Criminal Code. This section clearly stipulates that fraud is committed by someone who:

(a) destroys, mutilates, alters, falsifies or makes a false entry in, or

(b) omits a material particular from, or alters a material particular in,

a book, paper, writing, valuable security or document.

These provisions could have applied to falsified financial statements. It was noticed when gathering evidence, particularly in the American cases, that documents had disappeared and that the tools needed to punish those who had made these documents disappear were not available since no punishment was provided for in the Criminal Code.

Furthermore, subsection 2 makes it a specific offence if documents are falsified with the intent to defraud creditors. This makes it even more relevant. In both cases, the sentence is five years. We, in the Bloc Quebecois, believe that this kind of sentence is not harsh enough to have a deterrent effect. Consequently, we propose that the maximum sentence be increased to ten years so that the message is clearer. People must understand that this type of behaviour will not be tolerated and that those who are caught will have to pay a very high price.

Finally, we suggest that a third paragraph be added to section 397. This paragraph would deal with falsification of documents with intent to defraud stockholders. We think that stockholders, whose investments are not secured, unlike most creditors, constitute a category that is more vulnerable because they have no way of recovering their investment. Consequently, we cannot see why there is a specific offence of fraud that creditors might be the victims of, and there is no similar offence concerning stockholders. We are trying to correct this situation and we hope that the bill will correct it.

Thus, the bill contains provisions on insider trading. As I said, the Bloc is pleased to see them included in the bill. It also prohibits threatening or retaliating against employees for disclosing unlawful conduct or for assisting law enforcement officers to investigate cases of capital market fraud. These employees also need to be protected against intimidation. Of course, when a scandal occurs, when we learn suddenly that someone, particularly if it is at the top level, has committed fraud, we can be sure that some people in the company will keep a low profile. If we want them to have a lawful conduct, we must provide these employees with the leeway and the protection they need to be able to act.

These employees often have a key role to play in disclosing scandals in companies, but they may be intimidated or threatened, including through measures against their job or their livelihood. Someone may suggest that, if a certain document is found, perhaps they will lose their job and will be made to pay the price.

People must be protected from this; otherwise the threat can be such that some may cave in. Even if it cannot be justified, some do it. Moreover, at the present time we do not have the necessary tools. They must be given adequate protection.

Creation of a new offence of threat or reprisal relating to employment would encourage people with inside information to co-operate with law enforcement officials and would punish those threatening or making use of reprisals. This offence would be punishable with up to five years' imprisonment. Obviously, we are in favour of this provision too.

Some of the provisions regarding insider trading, threats or reprisals were requested by the Bloc Quebecois and we hope they will be made into law.

To strengthen penalties in cases of fraud on financial markets, and to make sure that the punishment fits the crime, the proposed reforms would increase maximum sentences for existing fraud offences, and would establish aggravating circumstances, which the courts should take into consideration in sentencing.

Maximum sentences would rise from 10 to 14 years for the present fraud offences under the Criminal Code, and for those affecting the public market. Maximum prison sentences for market manipulation offences would increase from 5 to 10 years.

The proposed reforms would also include a list of specific aggravating circumstances allowing the courts to impose stiffer sentences for the most serious offences. Factors such as the extent of the economic impact or any negative impact on investor confidence or market stability could lead to increased sentences.

The message is very clear, if you work in that sector and if you act illegally in such a way that it has a major impact on investors' confidence, you deserve to be penalized accordingly.

On this side, we want to send a clear message to people who work in that sector, namely that there is no room for fraud because too many people are involved. Also, we are talking about the money of too many people—who often are not the direct investors—who can lose their savings because of this type of behaviour.

Moreover, a person's reputation and standing in the community or work environment, which have always been considered mitigating factors that can reduce penalties, could not apply in such a case. It would not be possible to say that the person in question was generously involved in various volunteer activities or that sort of thing. If a crime of this nature is committed, such factors cannot be used to reduce the penalty.

Finally this is a sector in which these factors are often used to minimize the impact of a crime when the wrongdoers are found out, because they are often people with important positions or philanthropic activities. But the philanthropic aspect does not, in our opinion, justify reduced penalties.

And now, the improvements: this bill provides for improved evidence-gathering procedures. Some sections have the effect of compelling professionals not to respect their duty of confidentiality. Under certain circumstances, this bill can compel a professional to produce documents and even prepare documents that may concern confidential matters, which could certainly come under someone's privacy.

Therefore, even though these sections provide that orders to produce may be subject to certain conditions in order to protect privileged communications such as lawyer-client privilege, the fact remains that some confidential information could be divulged, under certain circumstances.

Thus we might wonder if the fact of compelling a professional to communicate confidential information could undermine the confidential relationship between clients and professionals. I think that this is one idea we should explore in committee in order to ensure that the planned measures maintain the necessary balance in this regard, while still ensuring that the bill will have a dissuasive effect.

We also ought to mention section 487.015 of this bill, which is an attempt to respond to this concern by enabling anyone named in an order under the two preceding sections to apply to a judge for an exemption from the requirement to produce any document, data or information referred to in the order.

If a person says he does not want to provide the information and has good reason not to do so, he may go before the judge and obtain an exemption. So this is a kind of safety net for the protection of the information, but it does not automatically lead to the protection of such information; the judge is called upon to assess the appropriateness of the request.

It remains to be seen what criteria judges will use for denying the disclosure of confidential information. It will therefore be important at committee stage for witnesses to tell us what these criteria might be, and for us to study the proposals and suggestions. We will need to see whether it is appropriate for them to be incorporated in the act, or as regulations, or whether we need to take some other form of action to ensure that there is a clear understanding of the leeway available for obtaining authorization not to transmit this personal information.

Clause 487.013 allows the banks to disclose confidential information such as the account number, status and type, and the date on which it was opened or closed. As well, they can provide the account holder’s date of birth, currentaddress and any previous addresses.

We must point out immediately that this information is an integral part of a person's private life. When they are requested, the individual's privacy is of necessity being encroached upon. It is incumbent upon us to question just how necessary this breach of privacy is to the objective of this bill.

Quebec and Canada have workable laws to protect privacy. These could still be improved, but it is important that the principle be respected. We would be very pleased if the clause by clause study of the bill, and the contributions of those appearing before the committee could cast some more light on this, so that we can shape the bill accordingly.

Finally, I will address the charges by federal prosecutors. As I said at the start, this is where we in the Bloc Quebecois have a problem, and this is why. The regulation of financial markets is an area that comes under the jurisdiction of Quebec and the provinces, as does the administration of justice.

Under this bill, the Attorney General of Canada would have concurrent jurisdiction with the provinces and territories to prosecute certain criminal fraud cases, including the proposed new offence of illegal insider trading. Federal involvement in this area would supposedly be limited to a narrow range of cases that threaten the national interest in the integrity of capital markets.

These limits need to be very precisely defined. There may be a way to vote in favour of this bill, if we receive enough guarantees on this point and on the whole issue of federal prosecutors.

According to information released by the federal government, the Government of Canada will work with the provinces to ensure proper and efficient concurrent jurisdiction by establishing prosecution protocols.

But between statements of good faith by the federal government and reality, there is often a grey area. I understand that measures to protect provincial jurisdictions should be adequate, clear and precise, and meet the approval of the Government of Quebec and the other provinces.

For many years, the federal government, through the former finance minister, the member for LaSalle—Émard, wanted to implement a Canada-wide securities commission, and thereby intervene directly in provincial jurisdiction. We have to make sure that the federal government does not achieve through the back door what it has so far failed to do through the front door.

We now see what the hon. member for LaSalle—Émard thinks about transferring money to the municipalities. In a very roundabout fashion, he is proposing direct involvement in the municipalities in full view of the provinces. He is blackmailing the municipalities, saying that if they want money, they must tell their province to sign the agreement. This amounts to political bargaining, which is unacceptable and does not respect areas of jurisdiction.

So, if this can be done with the sales tax, it may be possible to do it indirectly through this bill. We must ensure that this is not the direction we are heading in.

Consequently, we cannot support these new provisions. They confirm, in our minds, the federal government's new desire to get involved in the securities sector, which is the responsibility of Quebec and the provinces, as I just demonstrated.

Overall, however, this bill respects a number of the Bloc Quebecois' proposals. It will provide our system, in Quebec and Canada, with the tighter controls it needs, at a time when people have lost confidence, to some extent, in the markets and the securities sector.

So, we must send a clear signal. This bill contains some interesting measures to reinforce a system that, fortunately, in Quebec, was already better than the Canadian system.

The only thing left to do is ensure that Quebec's jurisdiction is respected. If so, the Bloc Quebecois will vote in favour of this bill at second reading. Once there have been consultations and once the committee has heard from witnesses, if we are assured that Quebec's constitutional jurisdiction will be respected, we will vote in favour of the bill at third reading. We will thus have helped create legislation to build an even better securities sector, and we will have also made a satisfactory contribution to the Quebec and Canadian economies.

[Brian Masse, NDP, Windsor West, ON]

Mr. Speaker, it is a pleasure to speak in the House today to Bill C-46, an act to amend the Criminal Code (capital markets fraud and evidence-gathering).

It is tempting to go down the road, as several speakers have, about the government and its practices versus what it is trying to accomplish in the bill, but I will not do that. I want to talk about this specific bill and feature some of the things that I think are positive but also some of the major weaknesses that need to be discussed.

I know that with the coming election boundary changes we are fast-tracking that bill for the member for LaSalle—Émard to make sure the provincial requirements for new seats will happen. That is something that has been going over the summer and it is happening right now.

I would expect the same thing to happen to Bill C-46. Because it is important for Canadian families and for businesses we need to ensure the business of the House is not ground out. I do not want to see that hypocrisy. The bill is certainly owed to the general public.

The mere fact that we are talking about this shows us that the entire free market system has been shattered by unprecedented corporate fraud. Formerly reputable accounting firms, business leaders and banks have been shaken to their foundations, and it is not just in Canada. WorldCom, Xerox and Enron are good examples in the United States of what has driven us to recognize that there are problems.

These problems highlight a systemic or financial system. It is systemic because it is not just isolated to one or two groups or organizations. They have far-reaching effects and they involve multiple companies and organizations that we do not even know about.

We have focused exclusively on the top, not just the medium and the small, which we still do not know about. Plenty of excellent corporations, which are working very well within the system, are being punished as well because others are abusing it. We need to make sure that stops. There is no doubt about that.

The current spin by the financial market backers and government backers is that this is individual ethics rather than a systemic problem. However the reality is that right now we require the toughest policing between lawyers, police officers and investigators and l to ensure that people can come forth with information and we can gather information. That is a significant change over the last several years. That is an identification that we have systemic problems with our system that is hurting, not only people who invest money but the development of our free market economy, and that has to change.

One of the issues that is not addressed in the bill is another question that needs to be raised. I believe it is fraud. We have a system right now where a CEO can come into a company, cut thousands of workers, sell equipment and assets, raise the price of the stock for the short term, get a big cash handout, a series of bonuses and then leave the company in ruin. That also has to be addressed. The bill does not address that but we should start talking about that as a change to the system.

We have literally thousands of workers who have lost their jobs and people who have lost their investments for a short term, and that has to stop.

This has been driven by a number of issues that have happened in the United States and worldwide, as we said, where millions of dollars have been lost.

The U.S. congress responded by passing the Sarbanes-Oxley act and enhancing enforcement and funding to support investigations and prosecutions. It was very swift and clear on this and here we are still fumbling with it through our system. That is not acceptable.

After listening to thee discussions today from the government side and the opposition parties, it sounds like there is support. My hope is that we will continue to press that and ensure that we at least have some improvements. Where those improvements should go in terms of the length and distance, everything from the actual types of tools that the prosecutors have to the actual fines and jail time, might be different but we have to make sure that something gets through.

I hope we go for some very strong laws and improvements that the bill requires.

On June 12, 2003, Bill C-46, a companion to Bill C-45, the Westray bill, was tabled and presented as a Canadian response to the Enron fiasco and the Sarbanes-Oxley act. It is important to note that we are talking as well about some environmental and human safety issues at the workplace. It would make people responsible for their actions and they no longer would be able to hide behind a corporate identity or symbol. It would actually bring to the forefront people who make decisions and who are derelict in their duties.

This is something that is actually important and exciting, because it gives those people providing good, stable jobs with the best practices the ability to compete with those who cheat the system.

This package intended to maintain investors' confidence in Canada's publicly traded companies includes spending of $120 million over the next five years, together with proposed amendments to the Criminal Code. The money would go towards the creation of six integrated market teams, IMETs, made up of RCMP investigators, federal lawyers and other experts.

That in itself is acknowledgment once again of systemic problems. We have a government that has a record of dismantling public service and privatizing. That is the record over the last 10 years. The government is now admitting it needs to create another body to deal with this problem. If it is $120 million, I do not believe that is going to be sufficient, because the document itself outlines the fact that government is going to go after the major perpetrators, that they will not be able to get to the other ones. The government is scratching the surface with this.

Despite that, the $120 million may not even be enough money for policing the greatest of crimes. Hopefully when we get to the committee stage we will hear from delegations and from witnesses and experts who will bring numbers forward. I would expect that suggestions will be made to raise that amount of $120 million to provide for appropriate legal repercussions and prosecution so that people do not get away.

Bill C-46 makes insider trading a criminal offence with a 10 year sentence. The bill targets employees of corporations and others who use privileged information not available to other investors to benefit themselves. That is a significant achievement in itself. It shows that there actually will be some repercussions. I do not believe that is enough. I will get into that later with a comparison of what is happening in the United States. I believe we need to go farther than that.

It also creates a new offence punishable by up to five years in jail to prohibit intimidating or retaliating against employees who report fraud and other unlawful practices or conduct in the financial markets. This will protect employees from employment related harassment and punishment; that is whistle-blowing. Members of the New Democratic Party have been calling and advocating for whistle-blowing protection for many years. It is a good feature to have, but five years is not enough to protect an employee.

We know that some of these people may not necessarily even get prison time. They could be out and they could also hold other jobs with competitors. They could have inroads with groups, organizations or other investors and that could have a repercussion on employees. I want to see greater detail on how we can protect those employees to make sure that when they step forward they have the confidence that not only will their business will support them, but also that outside of that the Government of Canada and the institutions of justice will protect them and their family.

Without that, we are going to lose many files. We will see many cases requiring more investigation and cost. We have to simply say that we will not let people hang out to dry by themselves, that we are going to protect them and their families when they have the courage to step forward. That has not happened enough in the past.

Right now the bill also codifies non-mitigating factors. For example, if a corporation has been a good corporate citizen and used that leverage, then it will be used against a corporation not to lessen a fine. That is an improvement. That is a first step and there is no doubt about that.

I think we should be looking at other things over a company's history to see what taxable deductions it has been using. Has it been lunches? How much booze has been written off? What about the environment? Has it actually caused environmental problems and written them back as a tax deduction? That can currently be done in the government's program. A company can spill or create a toxic waste and actually get a fine and then at the same time claim it back on income tax. Has the company done these things?

There are political donations, golf games, and all the different things that a company has used through their system. They should be examined. The corporation should be made to pay it back if it has actually had someone on the take or was basically using information or those experiences to better their position or to share that arrangement amongst people. The reality is that taxpayers end up paying for that as they write off those deductions. Taxpayers are subsidizing those deductions. All of that should be added to the actual bill.

Right now Bill C-46 creates a new procedural mechanism by which persons will be required to produce documents, data or information in specific circumstances. One of the good things about the bill is that these production orders may be issued without another party's knowledge, which will allow investigators to gather evidence from third parties such as banks and auditors without tipping off the subject of their investigation.

That goes back to my position on whistle-blowers. We would be able to save millions of dollars, strengthen cases and ensure that justice would be done if we can get that information and cooperation, but that takes the confidence of those people stepping forward. As it is right now, I do not believe the bill provides that confidence. It does not provide that ironclad commitment required. We know that this type of system will actually create better opportunities for us to prosecute and to be successful, but once again, that has to be enshrined in such a way that people feel protected.

As things stand right now, there is a deterrent effect. Punishment for fraud would increase from 10 to 14 years, for fraud affecting capital markets from 10 to 14 years, and for market manipulation from 5 to 10 years. I believe that is not enough. That has to change. We should be looking for stiffer penalties. As well, if damages are over $1 million fines could be increased. Perhaps we have to look at lowering that $1 million. I am not sure whether I am comfortable with that and I am looking forward to hearing witnesses come forward to discuss that.

The bill also allows the Crown to prosecute for insider trading. That is very important. We think that should move forward right away.

One of the concerns we do have with the bill it is that there are still some vague definitions involved. There is an issue of vague information in regard to insider trading, that is, how significant is significant? The definition is not there. We know that there can be increased penalties because significant information comes forward or there is significant alteration on the market, but who is going to define that? I do not think that leaving this entirely to the courts is good. Whether it is a 15% drop in the stock or a financial issue affecting later performance, those are things we have concerns about. We would like to see these further defined.

There is another aspect of Bill C-46. Once again I will go back to whistle-blowing; I can do this quite a bit because we have been talking about whistle-blowing for years. Instead of amending the Criminal Code we should keep the broader definition of extortion so that it still exposes offenders to an indictable offence punishable by life in prison. What we can do is make sure that it is one of the harshest penalties out there.

There is no mention in the bill of accessories to fraud or wilful blindness. I am going to go through a brief scenario on Enron to give an example of some of the weaknesses of the bill that we need to discuss. Obviously the offence of fraud requires an element of intent to deceive, but what happens when there is no intent to defraud yet the failure to act allowed the deception to take place in itself?

For instance, let us take the example of the Enron fiasco, which in part prompted this legislation. There, the accounting firm of Arthur Andersen admitted to making “errors in judgment”. It shredded thousands of documents relating to its audit of Enron and suspected or knew that Enron was breaking security regulations.

Most cases prosecuted under this legislation will not involve outside firms such as accounting firms so closely involved in the actual offence, but the example illustrates how an outside firm's omissions can contribute to commission of the offence itself. That is why under Bill C-46 we need to explore the possibility of imposing a legal duty on outside firms dealing with financial statements or companies to take reasonable steps to verify or scrutinize the accounting practices of their clients to expose them to criminal liability.

It is not good enough to just pass the buck. We would have those groups and organizations that are actually paid as businesses having to show their confidence in what the corporation has put forth to the market to prove and back up what they have done; they could not hide. That is one of the weaknesses of the bill. It does not go after them the way it should and it would allow situations like that of Enron to continue to happen.

It has become obvious that it is not practical to rely only on the deterrent effects of criminal legislation to prevent such disasters. What is needed are better watchdogs to oversee the affairs of corporations and to ensure that businesses' accounting practices comply with the law that all material information is being disclosed.

Once again it goes back to the whole concept of whistle-blowing to gather that information and ensure that it can be used, and it cannot be just the corporation. We must have those accounting firms responsible. They as well would be responsible. If we look at some of the accounting cases, and I am going to read out a couple of them, we know that they are very important to the actual criminal liability issue. One is Enron, as I mentioned. I will not go through that again except to say that basically in 1997 it overstated its earnings by about $600 million U.S. It should have been responsible and so should all the partners who signed off on that.

Tyco allegedly avoided payment of $1 million U.S. in sales tax on $13.2 million in artwork. They did not show that. They should have been responsible. Adelphia Communications lent billions of dollars to the founders, the Rigas family. The family relinquished control of Adelphia which had defaulted on $7 billion U.S. in debt and filed for chapter 11 bankruptcy protection on June 25. Once again its loan documents and information were not accounted for. Livent is another one where financial records were manipulated to hide losses of $100 million.

Once again, those who sign off on this business need to be responsible and should be considered as part of the offence in itself.

I am going to compare some of the differences between the United States and Canada as we discuss Bill C-46.

Right now for insider trading, Canada gives 10 years in prison. In the United States, the maximum sentence for insider trading is going to increase from 10 years to 20 years, with a fine of up to $5 million U.S. That is the minimum.

For threatening whistle-blowers in Canada, there is up to five years in prison. In the United States it is going to be up to 10 years in prison.

On increased enforcement, they are actually going to be hiring 200 new investigators, lawyers, and auditors and establishing an accounting oversight committee to monitor and regulate accounting industries. That once again goes back to my argument on the accounting, that they are actually identifying that and providing a resource for that.

The sentence for fraud in Canada is raised from 10 years to 14 years. In the U.S. it is actually going up to 20 years in jail.

I agree with the debate about whether or not there should be minimum sentences provided. My concern quite frankly is that a judge could give a minimum sentence which would not act as a deterrent. A person would get a couple of years perhaps and there would be no real repercussions on his or her life beyond that. Maybe there would be some professional repercussions but it would not be the same compared to the businesses and the families that had lost their savings and their ability to plan financially for their futures. I have some real concerns that we may not get the type of deterrents we are seeking.

The government needs to look at this. We need to focus if we are really going to attack this problem. It is systemic. It is not something that happens to one or two companies. We know that fraud occurs and market practices are very vulnerable to a number of people who are taking advantage of the system. We need to be in front making sure that justice is going to happen.

We have a different perspective on corporate crime here in Canada. We see street crime and we act on those things a little differently, but regarding white collar crime we have done very little or nothing at all. That has to change. This bill should move quickly through Parliament to ensure that Canadians are protected and that their investments are there for the future.

A motion to adjourn the House under Standing Order 38 deemed to have been moved.

[Rob Anders, Canadian Alliance, Calgary West, AB]

Mr. Speaker, I have some questions for my colleague with regard to the whole concept of capital markets fraud. I think we have a prime example of that in the new Liberal leader and I will enunciate why.

The new Liberal leader has been committing a form of tax evasion for years. Talk about capital markets fraud. Somebody who owns Canada Steamship Lines, plus a total of about 132 other related companies, has been hiding his money and his profits offshore. The hypocrisy of it is that while he served as the finance minister in this place he bragged about how Canadian taxes were so good, but he was hiding his money offshore and not paying Canadian tax. Why? He obviously thought Canadian taxes were awfully high. I would say that is a good example of capital markets fraud, which Bill C-46 is all about. The former finance minister would know capital markets fraud all too well.

What does my colleague think about Paul Martin Sr. having acquired Canada Steamship Lines for pennies on the dollar? This was a crown asset that was sold to Paul Martin for next to nothing. Talk about capital markets fraud and taking money--

[Inky Mark, Canadian Alliance, Dauphin—Swan River, MB]

Mr. Speaker, I am pleased to rise today to speak to Bill C-46. For our viewers this evening, let me begin by reading a summary of Bill C-46:

This enactment amends the Criminal Code by creating a new offence of prohibited insider trading and creating a new offence to prohibit threatening or retaliating against employees for disclosing unlawful conduct. The enactment increases the maximum penalties and codifies aggravating and non-mitigating sentencing factors for fraud and certain related offences and provides for concurrent jurisdiction for the Attorney General of Canada to prosecute those offences.

That indeed is a tall order.

The Progressive Conservative Party supports Bill C-46 in principle.

Why have we seen this legislation come into being? Recent major accounting deceptions and other corporate scandals, such as those of Enron and WorldCom in the United States, have resulted in multi-billion dollar losses and have devastated investor confidence. The United States has already responded with the Sarbanes-Oxley Act of 2002 and with increased resources for investigations and prosecutions.

The Canadian government is now acting to increase the resources available for enforcement of existing Canadian laws and to strengthen existing criminal sanctions. What we gather from that statement is the government wants to be seen and perceived as being tougher on crimes, certainly capital market crimes. Yet at the same time we see the government being really soft on criminals. It is easy to say one thing but, as the old saying goes, to walk the talk is something else.

Even in the field of immigration enforcement, Ontario has a total of eight immigration enforcement officers. That is in a province the size of the Ontario. It just does not make any sense.

The Youth Criminal Justice Act has created a lot of problems from coast to coast to coast. Communities are dealing with vandalism and youth crime and their hands are tied. They really do not know how to deal with it. In fact I have spoken to attorneys general of the provinces and they have the same problem. They really question why the new Youth Criminal Justice Act is the way it is. It is actually worse than the Young Offenders Act which it supposedly replaced.

In the field of immigration, which I am very familiar with, I am told that staffing levels are not up to 1994 levels. When the Liberals came into power, they made all those big cuts, like $24 billion in health care. They also did the same thing in immigration even though the work probably tripled or quadrupled from 1993 to today. It is easy for the government to say it will be tough on crime, and now we are looking at a new bill. However to be tough on crime, it has to put in the resources.

Some members spoke today about mandatory sentencing. On my way back to Ottawa, I read in the paper that the attorney general of Manitoba, Gord Mackintosh, was asking the federal government to change the Criminal Code so that no bail would be granted to repeat offenders. It is creating a problem in the field. There is a huge disconnect with what we believe should taking place and what is actually taking place out in the real world.

There are new offences under this act. Insider trading is already illegal under the provincial securities laws and the Canadian Business Corporation Act. In instances that merit a more severe response, Bill C-46 creates the new criminal offence of inside trading with a maximum prison term of 10 years.

Bill C-46 also provides whistleblowing protection for employees who expose wrongdoing under federal or provincial law. A new criminal offence of employee related threats or retaliation would carry a maximum prison term of five years.

Bill C-46 is really about making the private sector and the capital market sector more accountable. Governments and certainly this government should eat their own words. If they really want to be accountable, they should demonstrate that by the way they spend taxpayer money. How accountable are they?

The bill talks about capital market fraud. The Auditor General has criticized the government for keeping the House of Commons in the dark when it comes to the way it has spent the money on the failed gun registry. It is fraudulent how it spends billions of taxpayer dollars. If it wants to tell taxpayers, the citizens of the country, how things should operate, then it should set the example.

When we examine the long gun registry from the fraudulent point of view and the waste of taxpayer money, this is really what we are trying to do here today. Bill C-46 is about the capital market, people's money being used in a fraudulent manner or in misleading investments in the private sector. With the long gun registry, even today the government still has not reported to Parliament what the total cost of the program has been so far. The government still has not reported to Parliament what the total cost will be to implement the firearms program.

The Treasury Board officials finally admitted that even they will not know the total cost of the firearms program until the fall. The government has been hiding the truth from Parliament and the public for seven years and has not been any more forthright in the last five months, over this past summer, or even this fall. Even when we ask questions about the new estimates of the Department of the Solicitor General, the Solicitor General refuses outright to say that there is a new $10 million in his account for the long gun registry.

The government estimates are still grossly under reported because of the justice department's plans and priorities report for 2003-04, which was tabled this past March, has 111 blanks. We are talking about the government's use of taxpayer money.

The government also refuses to reveal the cost of enforcement compliance as recommended by the Auditor General. The government refused to release a cost benefit analysis on the firearms program by declaring it a cabinet secret.

When we talk about accountability, it leaves a lot to be desired in the way the government handles taxpayer dollars.

Bill C-46 is supposed to be tougher on crime with tougher Criminal Code sentences. The current maximum sentence for fraud affecting the public market will rise to 14 years from 10 years and the maximum term for fraudulent manipulation of stock exchange transactions will rise to 10 years from 5 years.

Perhaps we need tougher minimum sentencing. In other words, we need mandatory minimum sentencing for people who are convicted of capital market fraud.

Bill C-46 also adds a list of specific aggravating factors that would result in harsher penalties such as the extent of economic damage caused or the impact on market stability. A person's reputation and status in the community or workplace can no longer be considered as a mitigating factor to lower penalties in cases where those who commit capital market fraud rely on those very factors to carry out their crimes.

In the area of evidence gathering, Bill C-46 introduces production orders as a tool for criminal investigations. Production orders are already part of the Competition Act. They are also less intrusive alternatives to search orders. They would compel a third party to produce pertinent documents within a specific time period. Failure to comply could result in a jail term of up to six months and a fine of up to $250,000.

Regarding concurrent jurisdiction, currently the Criminal Code gives the provinces responsibility for prosecuting cases that involve capital market fraud. With Bill C-46, either the federal or provincial governments may prosecute such cases. The government says that the federal involvement would be limited to a narrow range of cases that threaten the national interest.

As I mentioned earlier, the provinces need to be wary when the feds promise that they will fund prosecution under the federal courts. We have many examples where funding relationships between the federal government and provincial governments on paper appear to be in order. However in practical terms, in real costs, day to day activity, it just does not work out. Health care is a good example. We all know the problems of health care across Canada. As was mentioned, when it was first started, the cost was shared between provincial and federal government, fifty-fifty. Now we are down to about 15¢, I believe.

Another good example is the long gun registry on the prosecution side. Eight provinces have already indicated that they will not prosecute long gun registration offences and that they will let the federal courts deal with the prosecution of people who have breached Bill C-68, those hunters or firearm users who either do not have the gun registered or do not have a possession certificate. Up to today I know probably hundreds of people who have been stopped and caught for that breach, yet no charges have been laid by the federal government.

I know the reason why no charges are being laid. The government is in no way willing to spend millions of dollars prosecuting innocent Canadians who do not have their family heirloom or some rabbit gun their grandfathers passed on to them registered.

In terms of the financial relationship with Bill C-46 provinces have to tread very carefully.

The government is playing catch-up with the United States lawmakers who have already passed legislation, not just to strengthen criminal sanctions but also to reform the way corporations are governed. Boards of directors, auditors and audit committees all have key roles to play in protecting the interests of shareholders. Indeed the scandals that rocked the capital market of 2001-02 are widely seen to be the result of poor corporate governance, lax auditing, accounting standards and oversight and the incentives provided by executive compensation arrangements. In spite of this, the government's background information on Bill C-46 does not once mention the role of good corporate governance legislation.

Shortly after the government tabled Bill C-46, the Senate banking committee completed a year long study of the circumstances that resulted in the American corporate scandals. The committee was particularly interested in whether these circumstances might occur in Canada with similar results and if so, how they might be avoided.

While the committee called for tougher sanctions, whistleblowing protection for those who report financial irregularities and increased resources to investigate wrongdoing, it also recommended legislative measures to: require that a majority of board members be independent; require the development of a code of ethics to be followed by all board members; require audit committee members to be independent and financially literate; limit the non-audit services that auditors can provide to their audit clients; require the chief executive officer and the chief financial officer to certify that the annual financial statements fairly represented the organization's results and financial conditions; and prohibit compensation committee members from being a member of management and require them to have expertise in compensation and human resources.

The challenge will be to separate jurisdiction between the provinces and the federal government. We must be aware that father does not always know best. The Progressive Conservative Party looks forward to the further hearing process at committee level.

[Richard Marceau, Bloc, Charlesbourg—Jacques-Cartier, QC]

Mr. Speaker, on behalf of my colleagues in the Bloc Quebecois, I am pleased to take part in this debate at the second reading stage of Bill C-46, sponsored by the Minister of Justice, which deals with capital markets fraud and evidence-gathering.

Members will remember that this bill was introduced just before summer recess last spring, after months of waiting and pressure from all sides. The gigantic financial scandals that we have seen over the last 24 months, such as Enron, Arthur Anderson and WorldCom just to name a few, have shown how urgent it is for the government to legislate in that area in order to protect not only investors but also the whole economic system.

But the government was dismally slow to react, being too busy, no doubt, managing the leadership crisis within the Liberal Party of Canada. The bill was finally introduced, very late unfortunately, but we can nevertheless be pleased that we do have it before us now. I will take this opportunity to say that the Bloc Quebecois will support speedy passage of this bill so that we finally have legislation that will effectively regulate financial transactions and ensure the accountability of business auditors. To this end, the Bloc Quebecois will propose certain amendments to specify both the scope and the spirit of the bill. I will be more specific about these amendments later in my speech.

I would remind members that, in the fall of 2002, the Bloc Quebecois urged the federal government to tighten the provisions of the Criminal Code so that the authorities would have better tools at their disposal to fight corporate fraud. In fact, several elements of the bill stem from our party's contribution to the debate, but we find it unfortunate that some of our suggestions were not accepted.

We still have major concerns about one particular aspect of the bill. We find it difficult to understand that this bill could provide that a federal attorney also has jurisdiction to prosecute Criminal Code offences concerning capital market fraud. This is especially worrisome to us since the federal government publicly announced, or at least suggested, its intention of establishing a Canadian securities regulator.

As you know, and this is an aspect that is particularly important to the Bloc Quebecois, securities regulation clearly falls under the jurisdiction of the governments of Quebec and the provinces. We must therefore ensure that the various jurisdictions are respected, thereby countering the federal government's designs in this respect.

This will be discussed further at committee stage, and I believe we ought to focus on the principle of the bill for the time being. So, the bill amends the Criminal Code and creates two new offences, namely insider trading and threats and retaliation against employees who may have revealed corporate misdeeds. At the same time, the maximum sentence for some offences, including fraud, is increased, and certain rules relating to aggravating and mitigating factors will be codified to facilitate interpretation at the time of sentencing. In addition, the bill gives the Attorney General of Canada jurisdiction to prosecute these offences.

The enactment also provides for new mechanisms whereby certain persons will be compelled to produce documents, data or information that will often be specific. As I said in my introduction, there is a very specific context requiring legislation in the financial sector today.

Corporate scandals in the United States have made us aware of how fragile our financial system is and how much were collectively rely it. Some might think that only major investors can be affected by a financial debacle and that the small savers who make up the most part of the population are therefore relatively safe. The fact is that this is totally untrue.

In fact, the biggest and most powerful financial players are represented by the whole familiar panoply of pension funds, and this inevitably means that part of these funds consists of our fellow citizens' savings. Thus, if a pension fund were to suffer substantial losses, it would be the small investors who would pay the heaviest price, even to the point of losing their life savings and seeing their retirement plans go up in smoke.

In this regard, and without getting too entangled in numbers, in order to understand the factors at stake here, it is important to note that in Canada in 1998, Canadian trusteed pension funds held assets of more than $500 billion. Statistics Canada, in a 1998 report entitled “Trusteed pension funds, financial statistics,” estimated that of the $500 billion held in pension fund assets, about $115 billion was invested in Canadian stocks and some $57 billion in foreign stocks.

These sums, which appear astronomical to ordinary mortals but are commonplace in the financial world, represent the contributions of four million Quebec and Canadian workers to these funds. As an illustration, only the financial assets of the chartered banks exceed the capital held by the pension funds.

There is another important fact that illustrates the need to regulate the integrity of administrators. It has to do with the propensity of trusteed pension funds to favour investment in stocks rather than in fixed interest securities. As such, and in light of the previously mentioned figures, it is clear that a financial crisis as serious as the one suffered by our neighbours to south, would be devastating to Canada. The consequences to the retirement incomes of millions of households would be immeasurable and it is precisely those households that we have to protect.

Fortunately, to date, Canadian markets have been relatively spared from large-scale professional misconduct, except for the scandals involving the former directors of Cinar and Nortel. However, we feel that despite the fact that our securities regulation systems are, in the opinion of many experts, much more comprehensive than that which existed in the United States before the financial crisis, it is nonetheless important to send a clear message to corporate directors that financial misconduct constitutes a serious crime and that the punishment will fit the crime.

This is what prompted the Bloc Quebecois, in the fall of 2002, to call for significant changes to the Criminal Code in order to provide the appropriate authorities with better tools to fight crimes of a financial nature.

A year ago, my colleague from Joliette and I proposed adding a section to the Criminal Code that would make insider trading a criminal offence in order to send a clear message to company directors that the use of confidential information obtained within the scope of their duties for the purpose of making profits or avoiding losses would not be tolerated. This is essentially a question of fair play since making profits or avoiding losses in this manner impacts negatively on other investors who do not have access to the same privileged information.

We had suggested amending the Criminal Code by adding, after section 382, a specific reference to insider trading as a criminal offence punishable by a maximum prison sentence of ten years. We are quite pleased at the interest the government has shown in our proposal by including it in its bill.

Additionally, the Bloc Quebecois proposed that a new offence could be created for securities fraud. This offence, which would be patterned on the measures adopted in the United States, could carry a ten-year jail term. It would prohibit fraud when selling or buying securities. The Bloc had also proposed two amendments to section 397 of the Criminal Code. This section clearly stipulates that fraud is committed by someone who:

—destroys, mutilates, alters, falsifies, makes a false entry in or omits a material particular from, or alters a material particular in a book, paper, writing, valuable security or document.

In our opinion, this provision could have applied to falsified financial statements. Furthermore, subsection 2 of this section makes it a specific offence if documents are falsified with the intent to defraud the creditors.

Currently, both offences carry a five-year prison term. We believe that this sentence is so light that it might not deter unscrupulous individuals from committing fraud for millions of dollars. Consequently, we had proposed increasing the maximum term of imprisonment to ten years.

Finally, we proposed adding a third subsection to section 397 of the Criminal Code to specifically target the falsification of financial documents with the intent to defraud shareholders. We believe that shareholders are a more vulnerable category since, unlike the majority of creditors, their investments are not guaranteed. Furthermore, although the information they are provided with is accessible, it is not easy to understand.

I would remind hon. members that these small investors are included in the major pension funds, and few such investors know exactly what is in their portfolio. We therefore have trouble seeing the reason why there would be a specific offence relating to fraud of which creditors are victims, and yet where shareholders are concerned a similar provision would not be included in the Criminal Code. This is precisely the flaw the Bloc Quebecois wants to correct, and we are hopeful that the government will realize the singular nature of this situation.

As I have said, the government plans to add to the Criminal Code a provision defining insider trading and its criminal nature, subject to up to ten years in prison. Although insider trading is banned at this time under provincial legislation on the sale of securities, and the Canada Business Corporations Act, this new Criminal Code offence is intended for the most egregious offences that merit stiff criminal penalties.

This new proposal for an offence being directly modelled on the Bloc's proposal, we cannot be anything but pleased that it is included in the bill. It seems, for once, that the government has heeded the opposition and bowed to our arguments.

The same thing goes for threats of reprisal against employees. It is necessary, indeed vital, for there to be special protection for employees who blow the whistle on fraud, or contribute information that leads to its discovery by assisting law enforcement officers in the investigation of such situations. The purpose of this is both to reveal such financial frauds and to protect employees from the intimidation which might occur in such circumstances.

Often these people play key roles in the disclosure of corporate scandals, but as a result are at risk of intimidation or threats, including action affecting their employment or means of livelihood. Creation of a new offence of threat or reprisal relating to employment would encourage people with inside information to cooperate with law enforcement officials and would punish those threatening or making use of reprisals. Let us note in passing that this offence would be punishable with up to five years' imprisonment if Bill C-45 is passed with this provision.

Overall, prison sentences would be increased to reflect the gravity of the crime and its repercussions. The proposed reforms would establish aggravating circumstances, which the courts should take into consideration in setting sentences. Thus the bill calls for maximum sentences to rise from 10 to 14 years for the present fraud offences under the Criminal Code, and for those affecting the public market. Maximum prison sentence for market manipulation offences increase from 5 to 10 years.

Factors such as the extent of the economic impact or any negative impact on investor confidence or market stability, defined as aggravating circumstances, could lead to stiffer sentences.

It is also of particular interest that, under these provisions, the accused or convicted person cannot invoke a reputation in the community or work as an attenuating factor for sentencing, This is precisely because these qualities are, more often than not, used to defraud and commit crime. We do acknowledge that these proposals are highly interesting, but regret that the government has not chosen to make use of our suggestions on stiffer sentencing for offences under section 397 of the Criminal Code.

I wish to call the attention of the House to the fact that Bill C-46 will force professionals to breach their duty of confidentiality.

Under certain circumstances, the government's legislative proposal would force a professional to produce information or documents, which could result in the disclosure of confidential information infringing on an individual's privacy.

While the clauses in question provide that the production order may contain terms and conditions to protect a privilegedcommunication, particularly between a lawyer and theirclient, the fact remains that confidential information might be disclosed in certain circumstances. We must therefore ask ourselves if forcing a professional to provide confidential information could undermine the professional-client relationship of trust.

However, a person named in an ordermade under these provisions may apply to a judge for an exemption from therequirement to produce any document, data orinformation referred to in the order. It remains to be seen what bases judges will use to prohibit the disclosure of confidential information.

Before I conclude, I would like to come back to an issue I raised at the beginning of my speech about the involvement of federal prosecutors. In fact, this includes some irritants that would need to be alleviated for the bill to be passed quickly.

As you know, financial market regulation comes under the jurisdiction of Quebec and the other provinces, as does the administration of justice.

Under this bill, the attorney general of Canada would have concurrent jurisdiction with the provinces and the territories to prosecute certain criminal fraud cases, including the proposed new offence of illegal insider trading. Federal involvement in this area would supposedly be limited to cases that threaten the national interest in the integrity of capital markets.

According to information released by the federal government, the Government of Canada will work with the provinces to ensure proper and efficient concurrent jurisdiction by establishing prosecution protocols.

We cannot support such a deliberate encroachment by the federal government in provincial areas of constitutional jurisdiction. What is even worse is that all of this goes to prove the federal government's intent to infringe upon yet another area of Quebec and provincial jurisdiction, the securities market.

Lastly, we are now debating the principle of the bill and we look forward to having the opportunity in committee to examine some of these issues in greater detail. Therefore, at this time, the Bloc Quebecois will support Bill C-46 in principle.