NOTE: the following first appeared in the Financial Post, December 10, 2014
Two weeks ago on this page I presented detailed and extensive criticisms of the Cooperative Capital Markets Regulatory Authority (CCMRA), which aims at creating a one-stop securities regulator for B.C., Ontario, N.B., P.E.I. and Saskatchewan (and whatever other provinces and territories might choose to sign on). In a response to my criticisms, Phil Anisman dismissed my views “tendentious, overstated and often incorrect.” On the contrary, I believe that they are fair, balanced, and accurate. The factual errors are Mr. Anisman’s, not mine. As this debate has already consumed a lot of space, I will limit the scope of my comments here (although a longer and more detailed version is available online at FT Comment).
Phil Anisman’s detailed critique of my series of opeds on the Cooperative Capital Markets Regulatory Authority (which aims at creating a one-stop securities regulator for all of B.C., Ontario, Saskatchewan, N.B., and P.E.I., and any other jurisdictions that may sign on) are “tendentious, overstated and often incorrect.” In fact, they are air, balanced, and accurate. The factual errors are his, not mine.
One theme in Mr. Anisman’s response is that some of the provisions that I have said are departures from present securities legislation may be found in some of the existing provincial securities enactments. This misses the point in a number of ways.
The Ontario Securities Act is the most appropriate benchmark because 80% of Canada’s capital market activity takes place in Ontario. Therefore, something like 80% of the lawyering takes place in Ontario, and radical changes to the Ontario template will be responsible for massive professional (if not transactional) re-tooling. In addition, the majority of the changes that I note in my articles are not anticipated in other statutes anywhere in the country (or in only one province).
Given the above criticism, Mr. Anisman rather curiously acknowledges that various of the statutory precedents in other provinces are “undesirable” or not “preferable from an accountability perspective,” and that the proposed legislation presents “significant issues.” In light of these observations, perhaps Mr. Anisman ought to have focused his efforts on propounding solutions to some of the pressing issues presented by the CCMRA proposals, rather than pinning his star to “worst of breed” statutory precedents.
Another theme in Mr. Anisman’s comments is that the CCMRA’s proposed legislative changes are merely incremental. However, they are anything but. There are various provisions in the draft Provincial Capital Markets Act (PCMA), for example, that allow the regulators to elastically expand their licensing powers by designating virtually anyone as, amongst other things, a “market participant,” a “recognized entity,” a “designated entity,” or a “marketplace” – with discretionary authority far beyond that contained in existing regulation.
Under the CCMRA, the regulators may also expand their regulatory purview through the ability (via the rules) to define anything as an “unfair practice.” Mr. Anisman states that “both the OSC and BCSC may currently make rules defining ‘unfair practices’.” However, neither statute does anything of the sort. The OSC’s rule-making authority in this respect is much more truncated than that in the PCMA, and Mr. Anisman has unfortunately misread the B.C. statute, which provides the B.C. Commission with no such authority.
Commenting on my concern about the protection of confidential information gathered by the Authority, he asserts that under the PCMA, the Chief Regulator (CR) “is subject to confidentiality obligations.” However, the PCMA explicitly allows for the disclosure of confidential information to a host of parties, including law enforcement authorities, other regulators, various enumerated public and private actors, and “any other person, authority, entity or agency, if the Chief Regulator considers that exceptional circumstances exist for doing so and that it is necessary for the purposes of this Act.” The federal Capital Markets Stability Act (CMSA) is similar.
Mr. Anisman states that my conclusions about the regulator’s accountability are premature, since the published drafts “do not include the legislation that will create the Authority and implement the Agreement among the federal government and participating provinces… [nor the] provisions for coordination with non-participating provincial regulators. Both are necessary to evaluate the potential effectiveness of the cooperative regime and the Authority’s accountability.” This, surely, must be some kind of joke. Yes, it is impossible to get a whole picture of what we are facing without these important statutory provisions, but the real question is why the drafts were put out for comment with neither those key provisions nor the regulations attached. Mr. Anisman’s criticism is properly directed at the provincial and federal authorities who, contrary to universal practice and sound governance, put out drafts for comment in an incomplete form.
Mr. Anisman suggests that my comments are “a last-ditch attempt to scuttle the proposed cooperative national securities regulator.” However, the MOU has been signed and (aside from a constitutional challenge) it appears that the lemmings are heading inexorably for the cliff. Rather, my aim is to encourage the participant jurisdictions to eschew radical alteration of the existing regulatory structure and to start with something that looks more like the legislative template that currently predominates in both Ontario and much of the rest of the country. The draft proposals are a monument to the triumph of expedience over principle, and I stand by my comment that these drafts should be chucked in the dust bin in favour of a fresh start – without the regulatory overreach that fairly seeps out of every pore of these ill-advised overtures.
Jeffrey MacIntosh is the Toronto Stock Exchange Professor of Capital Markets at the Faculty of Law, University of Toronto, and a director of the Canadian Securities Exchange.
