Investor Presentaiton

3.2. Information exchange It is said that financial markets authorities are only as effective as their ability to access reliable information and take action in case of a problem. Under its incorporating Act and the particular laws that apply in this area, Autorité des marchés financiers is empowered to supervise the entire mutual fund sector in Québec. It has inspection and investigative powers to check that practices are in compliance and enforcement powers to ensure that investors are protected. In addition to delegating some of its powers to self-regulating bodies, the Autorité also works closely with several other bodies that play specific roles in financial market supervision, investigation, and enforcement. Some observers state that this collaboration is quite limited in practice by current legislation in Québec relating to the exchange and disclosure of information. Here the Autorité faces two types of problems: 1) that of exchanging information with auditing firms and 2) that of taking joint action with the law enforcement community. 3.2.1 Limits on disclosure of information by auditing firms Mutual funds that are reporting issuers are required to file with the Autorité annual financial statements that have been audited by an outside auditor. Thus, the auditor plays an important role in ensuring that the fund's practices are in compliance and that there is no other situation that could create losses for investors. Under current regulation in Québec, these situations may not be notified to the regulatory bodies ¹¹. According to the Autorité, "....even if the auditor notes shortcomings in a reporting issuer's internal controls, it can implement compensating procedures that enable it to submit an unqualified auditor's report. This fact, though worrisome, will neither be disclosed to the public nor to the Autorité¹²." The exchange of information is also limited between 1) the bodies responsible for supervising the outside audit, namely Ordre des comptables agréés du Québec (OCAQ) and the Canadian Public Accountability Board (CPAB) 13, and 2) the Autorité and both of these two organizations. For the OCAQ, Professional Code confidentiality rules are what forbid both the Corporation and its members from conveying certain information obtained from 11 12 133 13 This mainly refers to articles of the Québec Civil Code, the Professional Code and the Canadian Charter of Rights and Freedoms. AUTORITÉ DES MARCHÉS FINANCIERS, Mémoire préparé dans le cadre des travaux préliminaires (brief drafted during the preliminary work), p. 47 The CPAB was formed in April 2003 at the initiative of the securities regulatory authorities and the Canadian Institute of Chartered Accountants. It is a non-profit organization, independent of the profession that aims to protect the Canadian public by inspecting auditing firms for which it has supervisory responsibility. Consultation paper Page 13

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