Securities Regulation

Comprehensive Draft Federal Securities Act Released Today

Anita Anand
Wednesday, May 26, 2010

The federal government today released a draft securities act filed in support of its constitutional reference to regulate capital markets activity.  The draft act is largely based on provincial securities legislation: for example, the provisions relating to disclosure of information, prospectus offerings and the public interest power remain generally the same.  However, the act contains a number of new provisions which together appear to be improvements over existing law.

To begin, the act contains a new purposes section. In addition to protecting investors and fostering fair, efficient and competitive capital markets, the new Canadian Securities Regulatory Authority must contribute “to the integrity and stability of the financial system”.  Expanding the purposes section in this way is sound. The financial meltdown demonstrated that systemic risks can arise from increasingly complex products (such as derivatives) and highly leveraged institutions (such as hedge funds) that distribute these products. Contributing to the stability of the financial system is thus a pertinent goal of securities regulation.

Selective Use of Data in the Debate About a National Securities Regulator for Canada: A Comment on The Lortie Paper

Anita Anand
Friday, October 22, 2010

1.   Introduction

Pierre’s Lortie’s recent paper[1] seeks to discredit federal reform initiatives to create a national securities commission by making the following claims:  Canadian capital markets rank above those in other countries as various international bodies suggest; the empirical evidence does not exist to support such a reform; and, the current passport system that operates in tandem with the Canadian Securities Administrators “constitutes[s] an example of Canadian federalism at its best” and change should not be implemented without compelling reasons.[2] Lortie suggests that Canadian investors, junior issuers, and the fairness and efficiency of Canadian capital markets will not benefit under a national securities regulator. Rather, the status quo is superior as it has allowed Canada’s financial system to outperform those in other countries.

The Houdini Gambit

Jeffrey MacIntosh
Wednesday, November 24, 2010

This commentary by Prof. Jeffrey MacIntosh was first published in the Financial Post on November 23, 2010.

Do the feds have the constitutional jurisdiction to create a national securities regulator? Not surprisingly, the federal government thinks so. Also not surprisingly, the government of Quebec does not. Quebec has referred the matter to the Quebec Court of Appeal for a decision (just as the feds have sent a reference to the Supreme Court of Canada, but the Quebec court gets the first kick at the can).

Ottawa’s legal case, in a recently filed factum with the Quebec Court of Appeal, totters on the brink of schizophrenia. At the outset, the factum invites the court to conclude that the issue of constitutionality “does not involve a performance assessment of the existing 13 provincial and territorial regulators.” But, mirabile dictu, much of the balance of the argument is sedulously devoted to demonstrating the manifest superiority of federal legislation. Go figure.

Systemic Fallacy

Jeffrey MacIntosh
Friday, December 10, 2010

The following first appeared in the National Post on November 23, 2010.

SYSTEMIC FALLACY

A national regulator wouldn’t have prevented the credit crisis

In its legal argument filed with the Quebec Court of Appeal, the federal government argues that securities regulation can and should address systemic (or economy-wide) risk — and that a national regulator would be better positioned to do this.

This hobgoblin is very much a latter-day addendum to the traditional apologia for securities regulation, which has always focused on investor protection and securities-market efficiency. What gave this new addition legs? Very simply, the credit crisis. The feds’ factum of legal argument states that “reducing systemic risk is an objective more informed by current experience.” Placing the blame for the economic downturn squarely on the shoulders of the securities regulators, the factum states that the crisis “illustrated a gap in regulatory oversight.” Moreover, “the dangers of systemic risk underscore the need for national, if not international regulation.” A national regulator, say the feds, would be better able to co-ordinate its activities with other federal institutions, such as the Bank of Canada and the Office of the Superintendent of Financial Institutions.

Introducing the Canadian Securities Law Portal

Anita Anand
Tuesday, January 25, 2011

For several decades, various expert panels have examined the possibility of creating a national securities regulator in Canada. On May 26, 2010, the Government of Canada tabled for information in Parliament the proposed Canadian Securities Act, which would establish a Canadian securities regulator. The Attorney General of Canada concurrently referred the Act to the Supreme Court of Canada, asking whether the proposed Act is within the legislative authority of the Parliament of Canada. This case is set to be heard in April, 2011.

The newly-formed Canadian Securities Law Portal will serve as a vital hub of information about this complex issue. The Portal will address numerous questions concerning the ongoing battle for jurisdiction to regulate the Canadian securities markets, including: Does the Parliament of Canada have legislative authority to enact the proposed Act? Why is a Canadian Securities Regulator necessary? What legal structure will ultimately govern issuers, intermediaries, self-regulatory organizations, investors and other capital market stakeholders? Would the structure proposed under the Act be effective if implemented? What are its strengths and weaknesses?

Faculty of Law to Host Magna Roundtable

Anita Anand
Monday, January 31, 2011

Magna Panel Discussion
Thursday, March 3 4:00-6:00 p.m.

The Faculty of law will be hosting a roundtable to discuss the collapse of Magna’s dual class share structure, one of the largest change-in-control transactions in Canadian history. Controlling shareholder Frank Stronach received consideration of roughly $1 billion in cash and stock for the sale of his Class B shares, which represented an unprecedented premium of approximately 1800%. The transaction attracted strong opposition from certain institutional shareholders, as well as from Staff of the Ontario Securities Commission (OSC). The OSC ordered the company to provide more disclosure for shareholders in June and, thereafter, the transaction was approved as a plan of arrangement by the Ontario Superior Court in August, 2010.

With generous support from the James Tory Fund for Studies in Business Law, the Roundtable will discuss both the corporate and securities law implications of the transaction. The panel discussion will be held on Thursday, March 3rd, 2011, at 4:00 p.m. in the Bennett Lecture Hall at the University of Toronto, Faculty of Law, located at 78 Queen’s Park. Panellists will include:

The Arab Demonstrations, the Sub-Prime Mortgage Crisis, and "Black Swans"

Mohammad Fadel
Thursday, February 3, 2011

This commentary was first published on the Foreign Policy magazine website on Feb. 2, 2011.

The nationwide decline in housing prices that began in 2006 was supposed to be, we were told, impossible. Because its impact was limited initially to the sub-prime mortgage market, which was a relatively small part of the overall home-mortgage market, policy makers at the Department of the Treasury and the Federal Reserve assured us that its effects would be contained. That prediction, we now know, turned out to be horribly wrong.    

So, too, the revolutions in Tunisia and Egypt were said to be impossible. Even after the shocking events of Tunisia, pundits were quick to deny their relevance to Egypt. Egypt was a much larger country; its population was less educated, less politically savvy, and too habitually passive to become revolutionary; moreover, Egypt's security service was much larger and tougher than those of Tunisia, and in any event the Egyptian military could be relied upon to come quickly to the aid of the regime in the event of any crisis. Indeed, some pundits were quick to dismiss Tunisians entirely from the Arab world.

Who Can Regulate Canadian Securities?

Jacob Ziegel
Monday, July 25, 2011

This commentary by Prof. Jacob Ziegel was first published in the National Post on July 15, 2011.

On April 12 and 13, the Supreme Court of Canada held a two-day hearing on a Reference from the federal government asking the Court to determine the constitutional validity of the proposed Securities Act published by the federal government in May, 2010. The question all the parties to the hearing must now be asking themselves is how the Court is likely to respond to the Reference.

The need for federal securities legislation has been discussed for at least 30 years, yet successive Liberal and Conservative governments refused to bite the bullet. The Harper administration showed greater mettle and became convinced that a national securities regulator was essential for Canada in light of the financial crisis that gripped North America, and much of the rest of the world, in 2007 and 2008. It was also the solution recommended by three federal task forces that were established between 2003 and 2009.

Don’t Throw in the Towel: Systemic Risk in Securities Markets Must be Federally Regulated

Anita Anand
Friday, February 17, 2012

An edited version of this editorial appeared in the Financial Post on February 10, 2012.

In its recent decision, the Supreme Court nixed the federal proposal for a national securities regulator, finding that its proposed scheme was unconstitutional.  Admittedly, the federal government’s proposal largely (and intentionally) uploaded the current provincial regime to a federal statute. The Court held that, while aspects of the proposed legislation were within the federal wheelhouse, these could not justify a “wholesale takeover” of securities regulation in Canada. 

Nonetheless, the Court’s decision should not be read as foreclosing on a federal role in securities regulation.  The judgment specifically observes that provinces would be incapable of enacting legislation to effectively address systemic risk and comprehensive data collection.  Indeed, the Court expressly stated that “[t]he need to prevent and respond to systemic risk may support federal legislation pertaining to the national problem raised by this phenomenon”.

Prof. Anita Anand: "Telus funds ignore governance"

Sunday, April 29, 2012

In a commentary in the Financial Post, Prof. Anita Anand analyzes the attempt by a major shareholder to profit from Telus' move to abolish its dual-class structure ("Telus funds ignore governance," April 28, 2012).

Read the full commentary on the Financial Post website.

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