Canada Opposition Parties Seek Hearings on Early Economic Data Releases
Canadian opposition parties are pushing for hearings into Statistics Canada’s practice of releasing economic reports a day before publication to at least 69 government workers and political aides.
Liberal lawmaker John McCallum said he will ask the House of Commons Government Operations Committee to review the policy, which investors said is undermining market confidence. The New Democratic Party, the country’s biggest opposition group, said it’s considering a similar move.
Finance Department officials and ministerial staff can see up to nine different reports, including employment and inflation, according to government documents requested by Bloomberg News under freedom of information law, as well as responses to e- mails and interviews. Staff at the Privy Council Office, the international trade and human resources departments, and central bank also see data early, officials said, bringing the tally to at least 69.
“I think that’s far too many people receiving that information,” said McCallum, a former chief economist at Royal Bank of Canada who served as Canada’s revenue minister between 2004 and 2006. “Obviously the more people get it, the more likely there will be a leak, or there will be inappropriate behavior.”
The government should restrict early access to a “much smaller group,” said Peggy Nash, finance spokeswoman with the New Democratic Party.
“Most of these insiders don’t need to have this data. They can find out when the rest of Canadians find out,” Nash told reporters in Ottawa.
Karl Belanger, senior press secretary for the NDP, said the party would support hearings as the issue raises a “serious concern.”
Statistics Canada data drive movements in the $61.2 billion daily market for the country’s dollar, as well as bonds and the Toronto Stock Exchange. The currency jumped as much as 0.7 percent in the hour before stronger-than-forecast jobs data were published in May 2009, leading to speculation by traders and private-sector economists that the number in the report had been disclosed. The agency found no evidence of a leak.
On the business day before publication, an analyst in the Finance Department’s economic analysis and forecasting division either goes to Statistics Canada to get a copy of the release, or downloads an encrypted file, documents show. The analyst gives a copy to three other senior officials in the department and writes a so-called house card that prepares the minister for questions in Parliament. A pool of 18 finance department officials can see some or all of the reports at 2 p.m. Eight others, including up to five political staff in the minister’s office, have access at 5 p.m.
‘Probably Be Less’
“It surprises me that the number is that big,” said Ed Devlin, the London-based head of Canadian portfolio management at Pacific Investment Management Co., manager of the world’s largest bond fund, referring to the number who can see releases. “It should probably be less.”
Former finance minister Ralph Goodale, who held the position between 2003 and 2006, said he would be informed by phone of the data by the top bureaucrat in the department the night before the official release.
“There was no broad discussion or circulation. That was a private conversation. The deputy minister was alone and I was alone, and it didn’t involve 69 people,” Goodale said in a phone interview.
The number of officials receiving early access should be reduced, and those officials should be identified, he said. “If they’re so important, then the public has a right to know who they are.”
Procedures are also in place for advance access to specific releases for 12 people at the Department of Foreign Affairs and International Trade and 15 at Human Resources and Skills Development, as well as about 15 at the Bank of Canada. Raymond Rivet at the Privy Council Office, which supports the office of Prime Minister Stephen Harper, declined to say how many people have access, citing security reasons.
“Advance release information is provided to a restricted number of authorized federal government organizations to ensure they are in a position to react in a timely fashion when data may have an impact on policy,” Statistics Canada spokesman Peter Frayne said in an e-mail.
Access “is restricted to only those persons with a work- related need,” Frayne said. “The data are delivered to them through secure channels and the receiving organizations apply strict security measures to protect the information.”
Suspicions of Leaks
Currency traders contacted the Bank of Canada in 2009 with suspicions of data leaks, documents obtained by Bloomberg show. As well, Statistics Canada released an audit from KPMG LLP earlier this year saying the agency had automated computer processes that inadvertently made economic data available to data distributors before the official publication time for more than six years. That process was stopped in November after Statistics Canada learned of the early release.
Bank of Canada spokesman Jeremy Harrison, and spokeswomen Anna Maddison at human resources and Caitlin Workman at trade said in separate e-mailed statements that they have strict safeguards in place to protect advance data.
Finance Minister Jim Flaherty’s office “treats confidential data with extreme caution,” spokesman Chisholm Pothier said by e-mail. “The individuals receive the data to properly brief the Minister on it and its broader policy implications. It is reasonable and important for the Minister of Finance to receive information in a timely fashion on news that has an impact on the economy.”
Pool of Translators
Aside from the minimum of 69 government workers who are authorized to receive at least one data report, Statistics Canada had a pool of 40 external translation firms and individuals who receive reports early so they can translate them into English or French, Canada’s official languages, documents show. The precise total of people with advance access couldn’t be determined because both the Privy Council Office and Statistics Canada refused to say how many people are authorized to receive data early, citing security concerns.
The agency rejected a 2009 internal recommendation that it “reinforce security and confidentiality” by hiring employees to translate data. The proposal was turned down because the C$90,000 ($88,500) in startup costs and C$66,000 per year in additional ongoing expenses were judged to be too great, documents obtained under Canada’s Access to Information law show. Frayne said Statistics Canada continues to use external translators.
Off the List
Industry Canada, the ministry responsible for Statistics Canada, asked last year to be removed from the list of departments that receive pre-released economic data, spokesman Michel Cimpaye said in an e-mail.
Tony Clement, who was Industry Minister from October 2008 until May, said it isn’t necessary to involve so many people.
“It’s not rocket science to figure out for extremely sensitive information to have a much more direct path to a minister,” said Clement, who is now Canada’s Treasury Board president, in an Oct. 13 interview at Bloomberg’s New York headquarters. “There are easier ways to do it, quite frankly.”
Canada’s policies contrast with other countries that either have more stringent rules governing pre-release of data, or have moved to tighten access. Canada is one of 68 countries that subscribe to the International Monetary Fund’s data dissemination standards, which set out best practices for economic reports. More than half the countries ban all early access to reports.
In the U.S., the payrolls report is given to the president through the Council of Economic Advisers office the night before its release. The secretaries of labor, commerce and the treasury only receive the information 30 minutes before it’s made public, along with the Federal Reserve Chairman, according to the IMF. Pre-release of Canadian data occurs between 14 and 18.5 hours before publication.
The U.K. implemented rules in 2008 aimed at tightening early access. They stipulate job titles of people who receive data early must be made public. In contrast, a Canadian Finance Department document, obtained under the Access to Information law, had the names and titles of all officials who receive data redacted.
Nobody has alleged that any of the 69 has used the information improperly. Still, David Love, a trader of interest- rate derivatives at Le Groupe Jitney Inc. brokerage in Montreal, said he’s wary of taking market positions ahead of key releases. “You have to play safe,” Love said.
“The data should be kept so tight,” Love said in a telephone interview. “Do you know how much money you could make by having the data one day before? It’s crazy.”