Objectives, Outcomes, and Performance Measurement in Securities Regulation

1. We recommend a uniform set of core objectives of securities regulation and guiding principles of regulatory conduct for Canada.

2. We recommend that a guiding principle of regulatory conduct should be to facilitate the reduction of systemic risk.

3. We recommend that appropriate interim powers be prescribed in legislation to allow securities regulators to quickly respond to market events that might pose systemic risks to Canada’s capital markets.

4. We recommend that the guiding principles of regulatory conduct include the need for regulation to be cost-effective.

5. We recommend that they reflect the need to facilitate innovation and maintain the competitiveness of Canada’s capital markets.

6. We recommend the development of a single, uniform performance measurement system for securities regulation in Canada that includes timely reporting to the public on the advancement of statutory objectives, service efficiency, enforcement outcomes, and the costs and benefits of regulation.

7. We recommend that a governance board provide oversight of the performance measurement system, in order to ensure that it is advanced in a transparent and effective manner.

Advancing Proportionate, More Principles-Based securities Regulation

8. We recommend a more principles-based approach to securities regulation. We are convinced of the merits of this approach and believe that it would improve securities regulation in Canada. The approach, however, must be implemented with care, particularly with due regard to reducing regulatory uncertainty, rethinking enforcement, addressing the distinct needs of small public companies, and properly engaging investors.

9. We recommend the establishment of an independent panel that would represent the views and interests of small reporting issuers in the formulation of securities regulation.

10. We recommend the further examination of opportunities to better regulate public companies through the use of more proportionate-based securities regulation.

11. We recommend a risk-based approach to securities regulation and, therefore, consideration should be given to expanding the existing use of the risk-based approach in the Canadian context.

Independent Adjudicative Tribunal

12. We recommend the establishment of an independent adjudicative tribunal. However, we believe that the securities regulator should retain jurisdiction over certain decisions, such as discretionary exemptions from securities regulations and rules, as well as matters regarding contested takeover bids. The securities regulator has the policy expertise and the quick response capability to properly address these matters in a more timely fashion, which in our opinion outweigh the benefits of referring these decisions to an independent tribunal.

Better Serving Investors

13. We recommend the establishment of a dedicated service to address the lack of information, guidance, and support for investors in the domain of complaint-handling and redress. We envision that this service would disseminate comprehensive information about complaint-handling and redress in Canada. The service could be provided by a securities regulator or another regulatory entity.

14. We recommend the following to improve investor complaint-handling and redress mechanisms:

• a securities regulator with the power to order compensation in the case of a violation of securities law so that the investor would not be required to resort to the courts;
• establishment of an investor compensation fund funded by industry to allow the securities regulator to directly compensate investors for a violation of securities law; and 
• mandatory participation of registrants in the dispute resolution process of a legislatively designated dispute resolution body.

15. We recommend the establishment of an independent investor panel.

16. We recommend that securities regulators establish a dedicated investor issues group.

Recommended Regulatory Structure for Canada

17. We recommend the establishment of the Canadian Securities Commission to administer a single securities act for Canada. Our recommended structure would also include an Investor Panel, a Small Reporting Issuer Panel, a Governance Board, a Federal-Provincial Nominating Committee, a Council of Ministers, and an Independent Adjudicative Tribunal.

18. We recommend the immediate establishment of a Capital Markets Oversight Office reporting to the federal Minister of Finance.

Opportunities to Further Strengthen Securities Enforcement

19. In addition to the establishment of the Canadian Securities Commission, we recommend there be a full examination of larger structural reforms to strengthen enforcement in Canada, including a complete assessment of the merits of a National Enforcement Branch that consolidates administrative and criminal enforcement functions.

Improving the Regulation of Derivatives in Canada

20. We recommend that the regulation of exchange-traded derivatives be prescribed in securities legislation.

21. For OTC derivatives, we recommend that the Canadian Securities Commission have sufficient policy depth and resources to determine the best path for the regulation of OTC derivatives in the future.