Published by EH.NET (January 2002)

Christopher Armstrong, Moose Pastures and Mergers: The Ontario Securities

Commission and the Regulation of Share Markets in Canada, 1940-1980.

Toronto: University of Toronto Press, 2001. x + 424 pp. $60 (cloth), ISBN:


Reviewed for EH.NET by Ben Forster, Department of History, University of

Western Ontario.

This study of securities regulation in Ontario is rooted in the records of the

Ontario Securities Commission and, quite naturally, explores the arena in which

stock market actors pushed up against the boundaries of the law. Christopher

Armstrong has already explored how an earlier buccaneer market generated legal

and regulatory response in his Blue Skies and Boiler Rooms (1997), the

predecessor volume to this. As Professor Armstrong points out, the drafts of

this book were much longer than the finished product, and it’s likely that much

of what ended up on the cutting room floor concerned securities regulation

federally and in provinces other than Ontario, areas in which there was

considerable material in the earlier book. Strikingly, the non-Ontario content

of Moose Pastures is overwhelmingly American, and that must surely

reflect the files of the OSC. The first chapters of the book describe — in

sometimes wearying detail — how the American Securities and Exchange

Commission repeatedly pressed the OSC to restrict and confine telephone and

mail solicitation for penny mining stock promotions from Ontario into the

United States. The thrust of these chapters is to show how dubious operators

managed to use Canadian and Ontario law, and the weaknesses of the regulatory

system, to drain the money from apparently hapless Americans into promoters’

hands rather than into mining activity.

These chapters do not truly sustain the modified capture theory Armstrong

wishes to apply to the OSC, as much as illustrate how the OSC was

institutionally too weak, and legal authority too dispersed, to inhibit

questionable activities. As well, one might conclude that the regulatory system

was obsessed with outlier activities, not with the normative. It is precisely

the normal operations of the stock exchange — of brokers, of lawyers, of the

core institutional machinery of modern capitalism — which are absent in the

first half of the book. Was the “hanky panky at the fringes” — so “temptingly

easy” as one of Armstrong’s figures phrases it (p. 228) — something that could

penetrate to the heart of the system?

Armstrong, one discerns, would in part like to argue that it could, and he

certainly asserts that with few caveats the regulatory system was captured by

those it was intended to regulate. Capture was the case, he finds, not only in

the more extravagant scandals that came to light — ones which resulted in some

tightening up of the regulatory system — but also in more mundane regulatory

operations in which the OSC protected the securities system from competition

within and without. The startling Prudential scandal of the 1960s, a complex

fraud involving inter-related financial companies, exhibited an “unspoken

compact amongst crooks, lawyers, regulators and investors,” which, along with

the Windfall scandal, resulted in an extensive expansion of the OSC’s powers.

As Armstrong suggests later, that extension by no means ended the ability of

insiders to manipulate the system to their benefit. Brokerage firms used the

economic nationalism of the 1960s as a convenient cover to avoid mergers which

might carry them into the arms of American firms. And the Canadian brokerages

worked their anti-competitive magic in successfully resisting (at least for a

time) negotiated commissions. Certainly the OSC’s ability to act on behalf of

the small investor, and to structure the system to allow fair competition and

open access was limited.

The relative contemporanaeity of the period Armstrong explores made it

impossible for him to examine the internal records of brokerages and law firms

associated with stock market operations. The two last chapters, which deal with

mergers and brokerage competition, do however provide insight into the regular

operations of stockbrokers on the Toronto Stock Exchange. A picture of an

old-boys club — oligopolistic in character and intent, and with a relatively

rigid informal hierarchy — comes into focus. But this is an abbreviated view

of a very rich subject, and does not allow the reader to place the OSC’s

operations in perspective. Some better sense of the OSC’s world might have been

developed through comparative analysis, and through the exploration of the

evolution of the world of stock markets more generally. What of the emergence

of the Vancouver Stock Exchange and its role in the marketing of penny mining

stocks? Did that have a role to play in the decline of such activities in

Toronto? What of the regulatory and structural differences between the OSC and

the American SEC? After all, the shadow of the SEC is fully evident in much of

this book, and Armstrong does make a handful of direct comparisons, especially

in the last two chapters.

This book is an important exploration of a regulatory world that until now

could only be haphazardly patched together with much speculation. Armstrong

contains his muckraking impulse within a capture theory of regulation, modified

by allowing for the structure of law, distributed federal and provincial

responsibilities, and the honest adoption of a sometimes perverse free-market

ideology by regulators. The reader might wish to know more of the complex

capitalist creature being regulated, and the context of regulation, but

realistically the whole hog can’t be eaten at one meal.

Professor Forster is a specialist in Canadian business and economic history

and Chair of the Department of History at the University of Western Ontario. He

is currently working on the history of Canadian furniture manufacturing as

cultural and industrial artifact.