In a just published report, the British Columbia Securities Commission wants more regulation in the name of deregulation. The report, entitled New Concepts for Securities Regulation, would encourage investors’ class actions against regulatory offences—in brief, let everybody sue anybody in sight.

The proposals would also give the regulatory bureaucrats “enhanced public interest powers.” Canadian securities commissions could even go after the professionals they don’t like: “A commission would be able to order that a professional cannot appear before it or prepare documents that are filed with it,” says the document, adding that “[t]his power would be similar to existing powers of the U.S. Securities and Exchange Commission.”

These proposals are part of the goal to standardize securities laws in Canada. But, especially after what happened last week at the Ontario Securities Commission, we should beware of “enhanced public interest powers.”

Recall that the OSC had brought charges related to insider trading against Michael Cowpland and his holding company, M.C.J.C., before an Ontario Court of Justice. Last week, M.C.J.C. pleaded guilty and in exchange the OSC dropped the charges against Cowpland personally. The judge imposed a $1-million fine. Then, the OSC moved to its own kangaroo court to impose a more severe punishment.

One OSC commissioner commented that “[i]nsider trading is by its very nature a cancer,” apparently forgetting that, just a few decades ago, most Western countries did not even considered it a disease. Perhaps it’s freedom of contract itself that the securities bureaucrats consider a cancer. After all, the OSC also set up a kangaroo court against Air Canada last July, in an arcane matter of “selective disclosure” that was not very selective and pertained to “material information” that wasn’t very useful.

The BCSC wants to strengthen all over the country the same “public interest” that rules OSC’s kangaroo courts. The expression “public interest” appears 33 times in the Ontario Securities Act, but is never defined. In most cases, it appears in whimsical statements, such as, “If the Commission considers that it would be in the public interest” (Section 17), “if it is satisfied that to do so would be in the public interest” (S. 21), “as the Commission determines to be necessary or appropriate in the public interest” (S. 21), “if in its opinion it is in the public interest (S. 127), and so forth. What is this “public interest” of which the OSC is the guardian?

Consider the case of insider trading. Insider trading has many economic advantages, which have been well documented in the literature since Henry Manne’s 1966 classic Insider Trading and the Stock Market. But let’s admit it also carries disadvantages for some investors—which is especially true, by construction, if the state tries to make them believe that every soul on Earth gets the same material information at the same split second. Let’s admit that, in certain cases, the use of inside information can work for the interests of insiders and against the interests of non-insiders. Conversely, forbidding insider trading may further the interest of the non-insiders, and hurt the interests of the insiders.

From this simple analysis, we can deduce the definition of the public interest which seems to underlie what the OSC busybodies do for a living: The public interest is the interest of some public against some other public, the favoured and the disadvantaged publics being determined by the state. The “public interest” is thus a smokescreen to hide the promotion of some private interests against other private interests.

This is not surprising, for the state generally acts by coercively transferring income and advantages from some individuals to other individuals. Abstruse financial regulations are only the tip of the iceberg, and the securities commissions are only the financial materialization of the basic problem of the state—of the state “by its very nature,” as our bureaucrat-philosopher-kings would say. Whether the state acts in the name of 51%, 49%, 90% or 10% of the population does not change the fact that a public interest that plays against some members of the public cannot be called the public interest.

Talking about bureaucrat-philosopher-kings, the BCSC calls its document a “concept paper.” They gave us a concept paper about new concepts for regulating non-problems.

In the classical liberal tradition, to which we owe what’s left of our liberties, the public interest can only be a common interest, i.e., what’s in everybody’s interest. The public interest is necessarily narrow if it is to encompass everybody’s interests. The more we increase the role of the state, the more we let securities commissioners run loose, the less public is the so-called public interest.

The bottom line is that the OSC and the BCSC are defending not the public interest but the private interests of some people. At best, these private interests belong to some part of the investing public. At worst, they are the interests of some control-freak types manning state bureaucracies. The latter are like what Adam Smith called “the man of system”: “he seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard; he does not consider that the pieces upon the chessboard have no other principle of motion besides that which the hand impresses upon them; but that, in the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.”