Moose and Financial Regulation?

Everyone knows you aren't supposed to judge a book by its cover, but no such rule exists for titles. Recently, on an unrelated book search, I came across a UTP book creatively titled Moose Pastures and Mergers by Christopher Armstrong. I was immediately interested in finding out exactly what a scholarly contribution on moose pastures would entail. However, a quick glance at the subtitle, The Ontario Securities Commission and the Regulation of Share Markets in Canada, 1940-1980, informed me that the topic of the book wasn't quite what the title initially suggested. Far from turning me off the subject (finance and economics have never been my chosen interests), I became even more interested in learning how such disparate topics as moose pastures and financial regulation were related.

As it turns out, 'moose pastures' is a term that was given to the barren land of the Precambrian Shield that was fraudulently pitched to the public as a sound investment for mineral prospecting. This type of deception, resulting from false and misleading claims, had become so problematic by the 1950s that the Ontario Securities Commission was under increased pressure to protect would-be investors. However, as Armstrong illustrates, despite the best intentions, the OSC ended up being hindered by the same folkloric beliefs as the prospectors: the notion that the most significant discoveries were made by independent prospectors, and that buying penny shares in such ventures offered the ordinary investor the best opportunity for huge returns. As a result, the OSC always fell short of offering share holders the depth of protection they so clearly needed.

As Armstrong transitions to the second half of the book, which deals with the wave of corporate mergers in the 60s and 70s, the overall theme of how best to regulate the market becomes increasingly evident. During this period law makers were faced with the unenviable task of finding a happy medium between the expansionist desires of brokers and companies on the one hand, and the protective needs of public on the other. The former felt that the only acceptable form of regulation was self-regulation, whereas the latter sought tougher rules to protect them from the aftermath of incidents such as the Windfall Mines affair of 1964, in which numerous stocks were sold at inflated prices only to discover that the proposed land had no significant quantities of any minerals. As Armstrong continually demonstrates, with both moose pasture shares and mergers, the OSC was forced to balance the capitalistic demands of big business and investors' desire for financial security.

Although these events happened roughly 50 years ago, the decisions made by the OSC and various other government and regulatory bodies have had a profound effect on the investment practices of today; doubts about the virtues of self-regulation grew through the 1970s and to this day investor protection remains an important principle of securities regulation. With almost uncanny foresight, Armstrong also commented on some of the financial complexities that are all too familiar to us now: "the complexities of 'hedges' and 'index funds' are such that compelling full disclosure about a mining claim or a takeover bid may seem almost simple by comparison." Perhaps in light of the recent financial meltdown and current backlash against new financial regulations, the cases presented in Moose Pastures and Mergers are of even greater relevance now than when the book was originally published.