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?

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.

Prof. Anita Anand and JD student Grant Bishop - "Securities blanket"

Thursday, March 8, 2012

In a commentary in the Financial Post, Prof. Anita Anand and JD student Grant Bishop say that Ottawa should move now to enact securities regulations in areas that are clearly within federal jurisdiction ("Securities Blanket," Feb. 10, 2012).

Read the full commentary in the Financial Post.

Prof. Jeff MacIntosh on securities regulation: "Let provinces run it"

Tuesday, February 21, 2012

In a commentary in the Financial Post, Prof. Jeff MacIntosh examines aspects of a provincially-run securities regulatory regime ("Let provinces run it," January 26, 2012).

Read the full commentary on the Financial Post website.

Profs. Anita Anand and Andrew Green - "Carrots needed"

Tuesday, November 29, 2011

In a commentary in the Financial Post, Profs. Anita Anand and Andrew Green write about how the federal government could make a national securities regulator a reality if the Supreme Court makes a favourable judgement in the reference on the issue ("Carrots needed," October 26, 2011).

Read the full commentary on the Financial Post website.

Prof. Jeff MacIntosh - "A mini-bubble in bioenergy stocks?"

Tuesday, November 29, 2011

In a commentary in the Financial Post, Prof. Jeff MacIntosh investigates whether a stock-market bubble is developing in bio-energy stocks ("A mini-bubble in bioenergy stocks?", November 2, 2011).

Read the full commentary on the Financial Post website.

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