Expert Panel on Securities Regulation

Creating an Advantage in Global Capital Markets


Table of Contents

We have reviewed the merits of an independent adjudicative tribunal for Canada. We note that this issue is fundamentally about the perception of fairness in the adjudication of regulatory matters rather than strengthening enforcement.

Most securities commissions in Canada conduct regulatory, enforcement, and adjudicative functions. They develop policies and rules, investigate and prosecute alleged regulatory misconduct, and preside over adjudicative proceedings. The adjudication of regulatory matters is conducted by the commissioners of the securities commission who preside over hearings to review the facts of the case, to hear the arguments, and to render a decision. Numerous commentators suggest that this multifunctional commission structure fosters the perception that the adjudicative process is unfair, lacking independence and impartiality. They recommend that the responsibility for adjudication should be given to an independent adjudicative tribunal.19

To inform our deliberations, we commissioned a research study on Quebec’s independent adjudicative tribunal, the Bureau de décision et de révision en valeurs mobilières (the “Bureau”).20 The Bureau is the only independent adjudicative tribunal in respect of securities regulatory matters in Canada. It was established in 2004 as part of a larger set of structural reforms that principally created the integrated financial sector regulator for Quebec, the AMF. The Bureau has broad powers under the Quebec Securities Act to enforce compliance, including the power to revoke licenses, freeze assets, and impose other administrative penalties. It can also review decisions rendered by the AMF and recognized SROs, such as IIROC. The Bureau has three full-time members, including a chair and deputy chair, as well as three part-time members, each with extensive experience in securities regulation and litigation. Members of the Bureau are appointed by the Government of Quebec for a period of five years. The decisions rendered by the Bureau can be appealed to the Quebec courts. The financial operations of the Bureau are overseen by Quebec’s Minister of Finance and Auditor General.

“…it is clear that greater separation between adjudicative functions and other responsibilities can significantly enhance the credibility of institutions as well as the integrity of the legal system of which they are an extension.”

Desjardins Group

We believe that the experience of the Bureau lends further support to the merits of establishing an independent adjudicative tribunal. Our research study on the Bureau provides support for the establishment of an independent adjudicative tribunal. The experience to date mitigates concerns that have been expressed with regard to the separation of the adjudicative function, particularly with respect to the policymaking function and possible over-procedura-lization. However, as discussed later in the report in the section, “Our Recommended Structure for Canada,” some Panel members would like to see oversight of the independent adjudicative tribunal in the context of promoting operational efficiency while others thought such a function might compromise the independence of the tribunal.

Many of the decisions made by the Bureau since 2004 have invoked the public interest. In defining the public interest, the Bureau has looked to the core objectives of securities regulation, specifically promoting investor protection and enhancing economic efficiency. This is consistent with the approach employed by other securities commissions in Canada as well as that followed by the Supreme Court of Canada. The Bureau appears to make decisions that are mindful of the policymaking and rulemaking activities of the AMF. Finally, the Bureau uses procedures that work to foster a fair hearing process. These procedures reflect the seriousness of the proceedings, but do not appear to be overly burdensome or a source of delay.

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.

We believe that an independent adjudicative tribunal should be established within a framework of a single securities act administered by a single securities regulator for Canada. A national tribunal, adjudicating matters based on the securities regulations and rules administered by a single securities regulator, would provide greater consistency in decisions and concentrate adjudicative expertise. The adjudicative tribunal would also better support a more principles-based approach to securities regulation, since it would likely provide greater consistency in the interpretation and application of principles in its decisions.

In the absence of a single securities regulator, action should be taken to examine proposals that respond to recent calls to create a pan-Canadian independent adjudicative tribunal within the current system.21 Such a tribunal could be established unilaterally by the provinces, or in collaboration with the federal government, depending on the desired scope of adjudicative powers to be delegated to the tribunal.22


19 See, for example, Osborne, C.A., D.J. Mullan, and B. Finlay. “Report of the Fairness Committee
to the Ontario Securities Commission.” (2004).

20 Rousseau, Stéphane. “The Québec Experience with an Independent Administrative Tribunal Specialized in Securities.” Expert Panel on Securities Regulation (2009).

21 For example, see Jérôme-Forget, Monique. “The Passport Securities System.” Speech to the Investment Funds Institute of Canada. Toronto (October 2007).

22 See Rousseau, supra 20.