Securities Regulation

Securities Law Needs More Enforcement, Not More Laws

Anita Anand
Monday, March 24, 2008

Originally posted on Lawyers Weekly: http://www.lawyersweekly.ca/index.php?section=article&articleid=640

Many commentators believe that securities law violations are under-enforced and under-prosecuted in Canada. But quite apart from securities regulatory enforcement, what is the role of the criminal law in the enforcement of financial crimes? Criminal prosecutions are necessary not simply as a supplement to the quasi-criminal jurisdiction of securities regulators, but as a first line in the enforcement of financial crimes. But criminal law has been virtually unused for this purpose even though the law on the books is wholly sufficient. This is because its enforcement and application is the “weak link” in the process.

Consider the purposes in Ontario’s Securities Act which are “to provide protection to investors from unfair, improper or fraudulent practices; and to foster fair and efficient capital markets and confidence in capital markets.” In the quasi-criminal context, where the securities commission pursues an enforcement action in provincial court, the commission is bound to adhere to these objectives and, when adjudicating the matter, the provincial court is similarly bound. So the objectives of securities law are generally prospective and preventative for capital markets.

Backing the BCE Bondholders - Beyond Law and Contract

Anita Anand
Thursday, May 22, 2008

On May 21, 2008, the Quebec Court of Appeal reversed the lower court finding in the BCE Inc. case. BCE proposed an arrangement in which certain bondholders stood to be disadvantaged because the level of BCE's debt would be increased.  The higher level of debt would in turn decrease the value of the existing debt as well as occasion a loss of investment grade status. The Court of Appeal held that the bondholders' interests must be considered when the board is discharging fiduciary duties.  But the Court has pushed the concept of fiduciary duties into new territory, a move that seems to stretch existing law.

The Court conceives directors' fiduciary duties broadly, criticizing the BCE board for not considering how the plan of arrangement at issue might be unfair to bondholders.  The Court relies on the SCC decision in Peoples v Wise (SCC 2004). However, Peoples in my view misconceives fiduciary duties, thus creating a potential domino effect for future decisions like BCE. The problem with Peoples is that it interprets directors’ fiduciary duties as applying to a broad range of corporate stakeholders (creditors, suppliers, consumers, employees, enivronmental groups etc.), thus watering down the duty significantly: a duty owed to everyone is in effect a duty to no one.  But the BCE board was seeking to maximize shareholder value in a change of control transaction, something that most lawyers take to be settled law. 

Does the Credit Crisis Implicate the Need for a National Securities Regulator?

Anita Anand
Monday, November 3, 2008

There are strong arguments in favour of a national securities regulator  which have been voiced numerous times over the past few decades: greater efficiency in transactions, consistent and coherent presence  internationally, single enforcement body, uniform securities legislation, lower costs for issuers and registrants,  etc.  Flowing from a series of federal, provincial and industry reports, these arguments make a coherent case for a national regulator notwithstanding the usefulness of the passport system of regulation over the  past few years.

Recently, Finance Minister Flaherty provided another reason for a national securities regulator: current market turmoil (see Toronto Star, Nov. 2).  However, while a number of financial market issues are on centre stage in this context, only some of these issues fall within the jurisdiction of securities
regulation per se.  Thus, while the time seems ripe to bring this issue to forefront of the political agenda, the need for a national securities regulator is not obvious from current financial market conditions alone.

Pegged Orders: An Unfair Trade

Jeffrey MacIntosh
Thursday, January 15, 2009

This article was first published in the Financial Post on January 13, 2008.

In the old days, stock exchanges had a monopoly on trading listed stocks. Not any more. These days, electronic platforms known as “alternative trading systems” (ATSs) provide investors with a variety of trading forums. Some of these, like BlockBook, Liquidnet and MATCH Now, exist solely to cross large (mostly institutional) blocks of stock. But others, like Pure Trading, Alpha, Chi-X Canada and Omega, serve the entire investment community — trading some or all of the TSX and TSX-V listed stocks.

By introducing competition to stock trading, ATSs have already lowered the cost and increased the speed and efficiency with which stocks are traded. Nonetheless, the ATS phenomenon is still in its infancy in Canada — and so is the regulatory framework. While the regulatory apparatus mostly works very well, some recent trading practices have arisen that materially compromise the fundamental principles of price discovery and liquidity that lie at the very core of a modern trading system.

Price discovery involves the determination of a suitable trading price for a given security. Liquidity occurs when investors can easily (and at reasonable cost) find a counterparty with whom to trade.

Webcast of Roundtable on the Creation of a National Securities Regulator

Thursday, February 12, 2009

On January 30, 2009, the Faculty of Law hosted a roundtable on the creation of a national securities regulator and the report of the Expert Panel on Securities Regulation, featuring Profs. Anita Anand and Jeffrey MacIntosh, as well as experts Jeremy Fraiberg and Peter Hogg. The webcast of the event is available on the Faculty of Law website.

 

Canada's Banks: Conservative By Nature

Anita Anand
Wednesday, April 1, 2009

This commentary was first published in the Financial Post on March 31, 2009.

In a recent interview with a major U.S. news network, Prime Minister Stephen Harper touted the fine regulatory balance that underpins the strength of Canadian financial institutions. Without question, Canadian banks have been relatively insulated from the economic turmoil that has crippled their U.S. counterparts. But why is this case? What characteristics particular to the Canadian economy and corresponding legal regime have protected Canada’s financial institutions?

If we look deeply, we see that Prime Minister Harper is partially right: The regulatory regime is an important factor to consider. Yet other considerations, including a conservative mentality that pervades our financial system and its players, are also relevant in the analysis.

Why Macro is Prudent

Anita Anand
Thursday, September 24, 2009

This commentary was first published in the Financial Post on September 23, 2009.

The G20 leaders meet today in Pittsburgh. While macroprudential regulation is likely to be on the agenda, countries continue to wrestle with how, if at all, this concept fits within existing legal frameworks and indeed whether new regulators or committees will be created in each country. But, taking a step back, what does "macroprudential regulation" mean? Should Canada proceed down this road? If so, how?

Macroprudential regulation focuses on the financial system as a whole, seeking to minimize system-wide distress in order to avoid reductions in aggregate output (GDP). This is unlike microprudential regulation which seeks to minimize distress in individual institutions in order to protect depositors. Macroprudential regulation focuses on common exposures across financial systems and institutions rather than the entity-specific focus of microprudential regulation.

The Move Towards a National Securities Regulator

Anita Anand
Tuesday, January 19, 2010

Profs. Anita Anand and Andrew Green have posted a new article on SSRN titled "Why is this Taking so Long? The Move Towards a National Securities Regulator."

Abstract:

Game theoretical analysis can be useful in contexts such as securities regulation, where multiple decision makers (i.e. securities regulatory authorities or commissions) act unilaterally but can also potentially reap benefits from cooperation. We deploy several models in seeking to render more transparent the strategies and payoffs that motivate jurisdictions to support or resist the introduction of a national securities regulator for Canada. Our analysis suggests that consensus has not been reached regarding a national regulator not only because of a lack of cooperation but also because of a lack of coordination. Indeed, it seems plausible both that provinces recognize the benefit of adopting a common standardized regulatory model; and that the source of disagreement surrounds the precise regulatory content of that common standardized model. This paper explores the implications of this insight.

The article will be published in the University of Toronto Law Journal, Vol. 60, No. 2, April 2010

 

Should Securities Regulators Care about Systemic Risk?

Anita Anand
Wednesday, January 20, 2010

One of the implications of the global financial meltdown is a renewed focus on the purposes of securities regulation and whether these purposes should include considerations relating to systemic risk. Monitoring systemic risk has traditionally been within the realm of financial institution (i.e. prudential) regulation, not securities law. Yet the line between prudential regulation and securities law is becoming increasingly blurred given the complexity of financial markets, a complexity characterized by the growth of private markets in which derivative securities are bundled and sold by a variety of institutions. This evolution in financial markets means that securities regulators now need to care about systemic risk. Indeed, monitoring systemic risk should be a principle that is integrated into the securities regulatory regime.

Watch visitor Prof. Edward Altman and panel discuss the global credit meltdown

Thursday, April 1, 2010

On March 3, 2010, the Faculty of Law hosted a discussion on "Current Conditions and Outlook in Global Credit Markets." Professor Edward Altman, of the Stern School of Business, New York University, gave a presentation, followed by a panel discussion with international and Toronto specialists in the field.

You can watch the entire event online, and read Prof. Altman's presentation.

Prof. Altman was also interviewed on BNN television about the current situation in global credit markets.

 

Pages