I refer to your memorandum of February 22, 1951,? in which you enquired as to the present position concerning the fraudulent sale of Canadian stocks in the United States, and asked me to draft a letter to Mr. Wrong.

2. You will recall that Parliament, in 1942, refused to approve an amendment to our Extradition Treaty with the United States which proposed to make the fraudu­lent dealing in securities an extraditable offence, after strong protests had been received from Toronto brokerage interests and various mining organizations across Canada. These bodies argued that strict compliance with United States securities legislation would seriously hamper the flow of United States venture capital to the Canadian mining industry. The argument was also raised at that time that securities legislation in Canada is a matter within the jurisdiction of the Provinces and that the Federal Government does not have the power to enter into the "policing" of the securities field in an indirect manner through an extradition treaty.

3. A further attempt was made in 1945, after consultation with the Provinces, to find an unobjectionable formula for the extradition of persons involved in security frauds. This resulted in the drafting of a new formula which was presented to Par-liament, again in that year, in the form of a Protocol. After the same groups, which protested the ratification of the original amendment, had again protested the ratifi­cation of the new Protocol, Parliament shelved consideration of the problem and referred it to the Standing Committee on External Affairs. The latter's report was referred by Cabinet back to the Department of External Affairs. The problem was then considered by an interdepartmental committee in 1946 and 1947. This com­mittee could not come to a firm decision as to what action should be taken. It appears that the constitutional problem prevented further action and the question remained in abeyance until October, 1950.

4. Since this date, the United States Embassy in Ottawa and the Securities Exchange Commission in Washington have been pressing for reconsideration of an extradition treaty which would make the fraudulent dealing in securities an extra­ditable offence. On February 7, 1951, the Canadian Ambassador in Washington informed the Department that the United States Embassy in Ottawa had been instructed to press for a meeting between officials of the Securities Exchange Com­mission and appropriate Canadian officials. We have now received the opinion of the Department of Justice to the effect that it would not be advisable to renew efforts to make securities offenders extraditable. When Mr. Morgan of the United States Embassy called to see me on February 20, 1951, 1 suggested that no useful purpose would be served by continuing the previous approach to this problem. I suggested instead that the Securities Exchange Commission might deal directly with the Ontario Securities Commission and try to achieve some working arrange­ment by which the operations of the individuals concerned could be checked by appropriate administrative action under provincial legislation.

5. You may agree that an arrangement between the two Commissions for the solution of the problem might obviate the need for further intervention by the fed­eral authorities in a question which is fraught with constitutional difficulties. I think this new approach might bring about the desired result. At least it will forcibly bring the problem to the attention of the Ontario authorities. Economic Division concurs in this.¹¹⁸

6. I attach for your signature, if you approve, a despatch to Mr. Wrong.¹¹⁹

K.J. BURBRIDGE

¹¹⁸ Note marginale :/Marginal note:
Agreed. A.F.W.P[lumptre].

¹¹⁹ Note marginale :/Marginal note:
Mr. Wolfe: Please have [a] copy of memo and despatch sent to Minister for information. March 2 [A.D.P. Heeney].