In February 2015, a jury in Calgary found two men guilty of defrauding as many as 3,000 investors – a third of them Canadian – of about $300 million. The RCMP characterized the crime as the largest Ponzi scheme in Canadian history.
One of the purposes of securities regulation is to protect investors from such schemes, as well as “pump and dumps” (encouraging investors to buy shares in a company to artificially inflate the price before selling one’s own shares) and Internet fraud. Although Canada’s regulatory system has made advances in recent years, it has also been criticized for ineffectively deterring these kinds of financial-market abuses.
To advance research into investor rights, Prof. Anita Anand has been named the J. R. Kimber Chair in Investor Protection and Corporate Governance at the Faculty of Law – the first research chair for investor rights in North America. The new chair is funded by a gift from Hal Jackman (LLB 1956), a U of T chancellor emeritus and former lieutenant-governor of Ontario.
Named after J.R. Kimber, who is widely considered the architect of Canada’s modern securities regulatory regime, the chair will enable Anand to pursue research into investor rights.
“We should not underestimate the importance of investor protection in today’s capital markets,” says Anand. “More than 50 per cent of Canadians are invested in our markets outside a registered retirement savings or similar plan. Ensuring that investors are adequately protected is fundamental to the well-being of our society.” Studies have shown that, in addition to financial losses, victims of investor fraud can suffer from depression, anxiety and stress, and a worsening of family and personal relationships.
Technological advances – such as equity crowdfunding and growth in less-regulated private markets – have increased opportunities for investment fraud and, as a consequence, the need for new regulatory tools to protect investors, says Anand, whose research focuses on capital markets regulation and corporate governance. Since 2010, she has served as the academic director of U of T’s Centre for the Legal Profession and led the development of its new program on ethics in law and business. She is cross-appointed to the School of Public Policy and Governance.
“Investor protection is based on an understanding of the public interest,” says Anand. “Among other things, I plan to investigate whether new remedies for investors, including a remedy whereby investors gain back lost funds, are warranted given the potential contribution of these remedies to bolstering confidence and efficiency in our markets.”