Editorial We’re way behind on market regulation

We in this country are subjected to essentially the same market forces — including the excesses and abuses — as are our big neighbors to the south. Yet all too often we follow but lag behind their regulations and guide lines. Seldom are we seen to initiate and lead in this particular field.

Certainly we were all hurt by last October’s crash that wracked financial markets around the world. In its wake the New York Stock Exchange has come up with some major proposals that it hopes will avoid any repetition of that unprecedented 508-point plunge in the key Dow Jones average index. Among these would be an automatic one-hour halt in trading if it drops 250 points. And this would be synchronized with the big Chicago Mercantile Exchange.

The Toronto Stock Exchange is currently carrying out a staff review of the N.Y. proposal, we learn, with the likelihood that it would follow suit. And the other Canadian exchanges?

Too, there are other reforms that the big New York bourse hopes to institute that are designed to tame wild price swings and thus convince smaller crash-burned investors that markets are fair and will offer a level playing field for all participants. That’s something that the non-professional, non-institutional trader hardly enjoys today.

American securities regulators, too, always seem to be leading ours with tighter regulations and tougher teeth which they don’t hesitate to use with a vengeance. Examples are those penalties they have been meting out for insider trading, often where takeovers are involved.

And now, in a landmark decision, Washington’s Securities & Exchange Commission is moving to end dual-class shares that will lead to a one-share, one-vote standard for all companies listed on that country’s exchanges. This, surely, will have repercussions here where autocratic corporate abuses abound, although Canadian firms with U.S listing are exempt.

Those new regulations, with a grandfather clause, will for the first time call for uniform listing standards that will prevent publicly- held companies in the future from recapitalizing and issuing several classes of shares with unequal voting power. This is a practice all too common in this country today and that sees management creating a second class of stock with superior voting rights to avoid hostile takeover bids and literally giving management complete control.

Indeed this process, sometimes dubbed a shark repellant, can be carried to extremes here. As an example, one of our larger interlisted mining companies, fearing a hostile takeover several years ago, instituted a clause in its corporate setup stating that shareholders cannot change directors without the unanimous consent of its directors or that of 75% of its some 20,000 shareholders. This, in fact, permits its president to operate the company as if he was the majority shareholder, although he owns less than 5%. This is marketplace democracy?