Quebec sets course on regulatory harmony

By Philip Porado | May 20, 2009 | Last updated on May 20, 2009
3 min read

If Canada is serious about doing away with its regulatory patchwork and moving toward common enforcement of securities violations, it can take cues from Quebec, according to presenters at a Capital Markets Institute forum in Toronto.

Stéphane Rousseau, who chairs the University of Montreal’s Centre for the Law of Business and International Trade, noted a separate adjudicatory body in his home province has managed to balance public interest without resorting to overkill.

“There’s been no problem with the fact that the more strict procedural rules hold up processing of cases,” he said, adding it would be worthwhile to see such a system implemented across Canada.

“We know how to get there in terms of structure,” Rousseau continued. “The challenge is to ensure that the expertise is there to deal with the complexities of the marketplace.” Of course, regional representation on a pan-Canadian tribunal would be important to ensure it could respond to the different ways business is done across the country.

The biggest problem for many firms, said Robert Brush, a partner with Crawley, Meredith, Brush, in Toronto, is the current hearing system often makes them feel they’re being judged by the same people who charged them. A bifurcated tribunal model, which separates the adjudicatory function, goes a long way toward solving that problem.

“Truly effective regulation only exists when stakeholders perceive the system to be fair,” he said. That being the case, the bifurcated model’s ability to enhance the perception of fairness helps improve the regulatory environment out of the box.

For the model to continue working, Brush noted it will be critical to staff the tribunals with people who understand both securities law and the adjudication process.

Next Steps

All fair points, noted Osgoode Hall Law School associate professor Poonam Puri, but why stop with adjudication? In her comments following Rousseau’s presentation, she advocated creation of a separate structure to house both adjudicatory and enforcement activities under one roof.

“In addition to bifurcating adjudication, we can also separate enforcement,” she said. The enforcement body would have its own independent adjudicative tribunal.

A single agency would improve consistency in application of securities laws and regulations, Puri said, and help remove regional disparities.

The model would also be more efficient, she said, because there would be a single budget for securities enforcement activity in Canada, instead of the current 13. And, it would allow for the folding of activities currently conducted by the RCMP’s Integrated Market Enforcement Team into the new body. This would permit criminal investigations to commence more quickly, although Puri acknowledged criminal matters emerging from this new enforcement entity would have to go before a specialized court, with judges who have expertise in securities matters.

Creation of a common enforcement operation could even offer an alternate route to the development of a common securities regulator for Canada, she said.

Some forum participants were open to that idea, while others expressed a need for Canada to keep its eyes on the prize of finally obtaining a national regulator for the securities industry.

“Our emphasis should be on getting a national commission,” noted one participant. “Get that in place, and after that we can work on a tribunal.”


Philip Porado