OTTAWA — The piecemeal nature of current securities oversight in Canada could leave the sector vulnerable to organized crime, a new study warns.

The disparate system of market securities and regulatory bodies in Canada also makes it difficult to determine the possible scope of illicit infiltration, says the draft study released under the Access to Information Act.

Still, it identifies several examples of Canadian securities fraud -- from illegal market manipulation to so-called Ponzi schemes -- and underscores the attractiveness of such activities to sophisticated criminals.

"There are many ways in which organized crime has exploited the securities sector, and many other possible methods to abuse this part of the economy."

A final version of the study, commissioned by the Public Safety Department, is expected early this year from consulting firm Compliance Strategy Group.

The research project follows a recent Supreme Court ruling that declared federal legislation to create a national securities regulator would violate the Constitution by straying into provincial jurisdiction.

The draft study notes the provincial, industry and police agencies intended to ensure legitimate sales of stocks, bonds and other securities have overlapping roles.

It points to recent research on the absence of a national securities regulator and the "decidedly complex" system now in place.

"A host of issues have been raised such as a lack of co-ordination and political will to target violators, complicated multi-jurisdictional regulatory systems, the low priority afforded to fraud by police and prosecution, and the lack of timely and effective enforcement and prosecution."

While there may be occasional examples of Mafia-type groups operating in the securities market, the industry often demands advanced skills. As a result, says the study, such crime often involves not only traditional underworld groups but criminal entrepreneurs and the involvement -- sometimes through coercion -- of financial services personnel, lawyers, accountants and others.

The study says common schemes revealed in Canada through police intelligence include:

-- Artificial inflation, then quick sale, of shares through false information;

-- High-pressure telemarketing or online sales of supposedly low-risk, high-yield investments that are actually worthless;

-- Illicit offshore investments that bilk investors;

-- Pyramid or Ponzi deals in which investors recruit others, ensuring a steady flow of money toward fraudulent or non-existent shares.

An emerging danger to the securities sector is organized hacking groups who break into corporate computers, potentially gleaning valuable tips, said Stephen Schneider, a criminology professor at St. Mary's University in Halifax.

"I see a threat of being able to access insider information and using that to manipulate the markets," Schneider said in an interview.

"It's become extremely sophisticated."

The study says a key reason the securities sector is open to criminal infiltration is the traditionally light penalties.

"Although securities offences may be quite serious and invoke serious harm for individuals, companies and society, the penalties will often be limited to administrative and regulatory sanctions such as fines."

One solution is to underscore the seriousness of market offences, says the study.

"The profile of white-collar crimes needs to be elevated, and regulators, criminal justice officials and the media should place greater emphasis on public shaming and stigmatizing."

Though this may not deter dedicated criminals, it could persuade established individuals and firms to steer clear, adds the study.

It also suggests better monitoring and background checks on brokerage house employees and placement agencies who help staff such firms.

In addition, the study recommends fostering a culture of lawful and ethical behaviour through government efforts to educate the public and investors about market processes.

Finally, it calls for an "integrated intelligence model" to help pull together useful information from regulators, enforcement bodies, industry, academia and victims. This could help government and regulators issue timely warning to the public about brewing schemes, suggests the study.