These comments are personal and do not necessarily reflect the views of my partners.|
Conferring rule-making authority on several Commissions (coupled with the requirement to reformulate all prior regulatory instruments) ensured the "bulking-up" of Commission staff and, in hindsight, appears to have constrained the ability of the CSA to focus its efforts collectively or strategically. Already fragmented and cumbersome policy-making processes became even more labour-intensive and the sheer volume of (at times inconsistent) initiatives and the complexity of steering them through the CSA appears to have induced a sense of resignation, evidenced by growing disinterest (or fatigue) in the "notice and comment" process that was designed to ensure relevance and accountability in securities rule-making. Some regulatory instruments (such as the ATS rule) are obsolete before adoption and impenetrable, even to Commission staff. James Langton's recent "report card" in Investment Executive spoke volumes about how the existing system doesn't work as it should.
While, historically, concerns with a fractured regulatory system were often dismissed as "par for the course", today other jurisdictions (including the U.K. and Australia) have moved to single regulators and the U.S. has demonstrated a political will and capability to address many key issues swiftly and progressively. While, historically, harmonization was seen as the solution to a fragmented system (as is suggested in the draft statement of priorities), today it is generally viewed as a barrier to progress insofar as it leads to standards based on consensus, rather than what's right, it prevents more meaningful, deeper integration and, to the extent that less than 100% harmonization is achieved, it requires ongoing compromise (and detracts from public confidence in the integrity of the regulatory framework).
My concern, is that notwithstanding the commitment, sincerity and intelligence of those responsible for administering securities regulation, it may be unrealistic to expect clear leadership or demand substantive accountability in performance from such a fragmented framework, absent sustained political as well as bureaucratic will.
Assuming such will can be mustered, perhaps one of the most immediate (and enduring) issues is, as suggested in your letter, one of accountability - the accountability of Commission staff to Commissions and of Commissions to legislators (and their other constituencies). While the draft statement alludes to accountability, there are no substantive proposals. Immediate work should be undertaken to achieve a national political consensus, with an opportunity for meaningful input from market participants, on an appropriate accountability framework for securities regulation. This should include directives to the Commissions to work on developing priorities, achieving specific goals within specific time frames and creating a mandate to facilitate discussion, on a national level, of appropriate structural reforms. Such a discussion need not (but certainly could) involve jurisdictional issues, and should be premised on a common political will to identify priorities and achieve meaningful administrative accountability for the performance of discreet, prescribed tasks. This focus should be one of the points where the federal "wise persons" committee and provincial ministers intersect. All of this should be conducted within a context of fiscal accountability - subjecting regulatory spending to the discipline of its "consumers" (without compromising agency independence) and reviewing the budgets of the CSA on a consolidated basis. Hopefully, this will encourage more co-ordinated, transparent and efficient resource allocation.
A final point. Much as we need to co-ordinate and simplify the regulatory framework, there is also a need to rationalize our self-regulatory infrastructure. At a time when self-regulation, generally, is under attack, it would serve all well to remember that there is only one investor/consumer. One cannot help but ask why it should require multiple self-regulators to ensure fair dealing. The overriding concern is that each self-regulatory organization that exists (or is created) adds costs and complexity to the system and (as has been the case with the evolution of the CSA), to the extent that they overlap in scope, provide the potential for uneven standards and enforcement as well as for regulatory gaps and bureaucratization.
Stikeman Elliott LLP