Moose Pastures and Mergers

Moose Pastures and Mergers: The Ontario Securities Commission and the Regulation of Share Markets in Canada, 1940-1980

CHRISTOPHER ARMSTRONG
Copyright Date: 2001
Pages: 450
https://www.jstor.org/stable/10.3138/j.ctt13x1q1p
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  • Book Info
    Moose Pastures and Mergers
    Book Description:

    A history of the development of the Ontario Securities Commission from the post-war years to the increasingly complex financial world of the 1970s and 1980s.

    eISBN: 978-1-4426-2078-0
    Subjects: History, Economics

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Acknowledgments
    (pp. ix-2)
  4. Introduction
    (pp. 3-20)

    Regulation is protean. Normally aimed at the protection of the public against fraud or exploitation, it can also be deployed to preserve desirable privileges for suppliers of commodities or services. This book focuses upon the regulation of share markets in Canada by the Ontario Securities Commission (OSC) during the period following the Second World War, when it emerged as the most important tribunal in the country. The study thus forms a companion volume toBlue Skies and Boiler Rooms: Buying and Selling Securities in Canada,1870–1940 (1997), which examined the period from the emergence of organized stock exchanges in...

  5. PART I

    • 1 ‘The Canadian Problem’
      (pp. 23-53)

      Rupert Bain was one Canadian broker who prospered mightily, even the dark days of the 1930s. Having founded H.R. Bain and in 1923 to deal in municipal and corporate bonds, he to gold stocks in the depths of the Depression. Between 1934 1936 Bain showed off his success with promotions like the Pickle mine by building a $250,000 house on the northeastern outskirts Toronto, the twenty-nine-room mansion with its ten-car garage and landscaped gardens adjoining a nine-hole golf course and a for his polo ponies and other bloodstock.¹

      Floyd Chalmers, editor of the country’s leading business newspaper, theFinancial Post,...

    • 2 Self-Regulation
      (pp. 54-77)

      Reliance upon the principle of ‘full, true and plain disclosure’ by promoters, dealers, and insiders lay at the heart of Ontario’s 1945 Securities Yet the new legislation also gave the Ontario Securities a mandate to review the registration of every dealer and to ensure that it was in the ‘public interest’ That task occupied much of the time of the commission during 1946, as a good many shadier characters were deprived of their licences. At the same OSC officials convinced themselves that the most effective means out abuses was to rely upon self-regulation. Various elements the financial community would be...

    • 3 Moose Pastures
      (pp. 78-111)

      ‘The Canadian problem’ created by the high-pressure marketing of stocks in the United States showed no signs of abating during early 1950s. In fact, the advent of the atomic age only made worse. Uranium stocks became just as hot sellers as gold and shares, while the Cold War created a demand for other exotic like titanium and beryllium that might lie beneath the Precambrian Shield in Canada. Rocky, fir-clad hills and marshy lowlands, otherwise fit only to be ‘moose pastures,’ were touted as potential mother The ‘stockées’ at the promotional houses on Bay Street remained as ever seeking out gullible...

    • 4 Regulating the Stock Exchange
      (pp. 112-132)

      The number of shares handled on the Toronto Stock Exchange remained severely depressed during the early part of the Second World War, and by 1942 seat prices had declined to just $12,000. Yet as victory by the Allies became increasingly likely, the pace of trading began to pick up. In April 1945 more shares changed hands than during the entire twelve months of 1942. By the time of the 1946 annual meeting the exchange’s president could report a new record for yearly trading of 440 million shares; along with a record number of listings, this surge drove the cost of...

    • 5 Fighting Fraud
      (pp. 133-154)

      Two or three times each year during the late 1950s Sam Wacker would another of his promotional scams. For instance, in the spring of complaint was received from an investor in Michigan that the for Triton Uranium Mines contained falsehoods. As a the Broker Dealers Association called stock salesman Benjamin on the carpet to find out who was behind Triton. Posner, who the company was controlled by a Toronto police inspector, was a ten-day suspension for unethical conduct for selling shares by of a false prospectus. However, his boss at George Hogarth and let slip that Triton was really ‘a...

    • 6 Windfall
      (pp. 155-198)

      On 12 April 1964 the Texas Gulf Sulphur Company announced a huge discovery of zinc, copper, and silver in Kidd Township near Timmins, Prospectors commenced a frantic staking rush to secure nearby. Mining promoters hastened to try to market shares in junior mining company with a promising property as speculators scrambled to get in on the ground floor. During April and May alone, Toronto Stock Exchange reported that $6 million had been raised the primary distribution of stock in listed mines. Another classic Canadian mining-share boom was under way.

      One of the cherished myths about Canadian mining was that most...

    • Illustrations
      (pp. None)
  6. PART II

    • 7 Challenges
      (pp. 201-221)

      By the early 1960s the Ontario Securities Commission found itself facing new kinds of regulatory problems. Previously, much of the commission’s efforts had been devoted to policing stock promoters, most of whom trafficked in the shares of speculative resource companies. Now, however, the regulators became concerned about the continuing operations of corporations, particularly when the activities of management might lead to investors being defrauded. Financial-service companies created a particular challenge because their assets consisted primarily of changing portfolios of loans, advances, and other paper. Not only did these inventories turn over rapidly, but these items could be difficult to value...

    • 8 Disclosure
      (pp. 222-258)

      Even before the Windfall affair in the summer of 1964, while the swindles at Prudential Finance and Atlantic Acceptance remained hidden view, other concerns had arisen regarding the lack of disclosure the operations of public companies. A growing wave of corporate mergers in Canada had already led the Ontario government to commission a task force to look into possible changes in securities legislation to protect investors. When the royal commission on Windfall established, it too was directed to consider regulatory changes. default by Atlantic Acceptance in mid-1965, along with the reports the two investigative bodies, seemed to confirm that the...

    • 9 Decline of the Broker-Dealer
      (pp. 259-280)

      The new Securities Act that came into force in Ontario in 1967 relied principally upon greater disclosure about corporate affairs to protect investors. By that time the business of Toronto’s broker-dealers who promoted speculative shares in the over-the-counter market had already entered a serious decline. The 1961 ban on marketing unregistered stocks in the United States, forced on the Broker Dealers Association by the Toronto Stock Exchange, quickly took a heavy toll, since up to three-quarters of the shares in speculative mining companies had been sold over the telephone to American buyers. A decade earlier the Broker Dealers Association had...

    • 10 Foreign Ownership
      (pp. 281-299)

      By the late 1960s American brokers and investment bankers were eyeing Canada as a field for expansion. Many in the financial community were acutely nervous about the impact of competition from firms that were larger and better capitalized, and they looked to their regulators to protect them. These demands became part of a broader debate about the role of outsiders in the investment business. Should such people be permitted to invest in brokerage houses and investment dealers, or should they continue to depend upon internally generated funds and capital raised from senior management? Before long, the Ontario Securities Commission found...

    • 11 Mergers
      (pp. 300-324)

      Corporate mergers created a whole new set of regulatory problems for Ontario Securities Commission during the 1970s. Though the Securities Act of 1966 required much greater disclosure concerning the affairs of companies, questions still arose about how the interests of investors, particularly small shareholders, might be protected in event of a takeover. Should everyone be paid the same price for his stock, or could the owners of control blocks receive a premium an acquirer? In the early 1970s pressure arose for another major of securities legislation, but eventually the drive stalled of disagreements over such issues. The OSC often found...

    • 12 Competition
      (pp. 325-339)

      During the 1970s the Canadian financial community found itself under increasing pressure from competitive forces. As the rate of inflation rose, securities markets stagnated and brokerage profits declined. In an effort to deal with these problems, investment houses sought to improve their position by raising the uniform commission rates charged on stock trading. Yet these attempts encountered resistance. The movement for negotiated commission rates was gaining strength in the United States, and by trying to resist such changes, Canadian brokers risked seeing business shift away to American dealers and exchanges. The Ontario Securities Commission found itself pushed into the uncomfortable...

  7. Conclusion
    (pp. 340-346)

    ‘End near for penny-stock abuses,’ blares the newspaper headline.¹ Not likely, the cynic replies. Crime does not cease simply because of the passage of new laws, and more than a couple of new rulings by the Ontario Securities Commission would be needed to stamp out operators using high-pressure methods to sell over-the-counter stocks at excessive markups. Securities regulators will continue to be required to protect investigators against fraud and deception for the foreseeable future.

    When Ontario passed its new Securities Act in 1945, officials at the OSC believed that they now had the tools to clean up the business of...

  8. Appendix: Indexes of Common Stock Prices, 1940–1977
    (pp. 347-348)
  9. Notes
    (pp. 349-410)
  10. Illustration Credits
    (pp. 411-412)
  11. Index
    (pp. 413-424)