Canadian Lawyer

MEASURING THE APPLICATION OF SECURITIES LAW S tarting this fall, Montreal law professor Stéphane Rousseau will embark on a three-year odyssey into the intricate world of the application of Canadian securities law. Rousseau, who focuses on corporate law, financial markets regulation, and law and economics at the Université de Montréal's Faculty of Law, has been awarded a $300,000 grant to take an unprecedented close-up look at how laws and other rules governing Canada's capital markets are enforced. The money comes from a dedicated education and good governance fund at Quebec's Autorité des marchés financiers, the body mandated by the provincial government to regulate the province's financial markets and provide assistance to consumers of financial products and services. The resulting findings of the project will be shared in the form of new databanks compiling decisions, training sessions for lawyers, law students, and industry players in Quebec and elsewhere in Canada, and a series of working papers. Rousseau says developing more pointed expertise in how Canadian laws and regulations are applied could ultimately favour better protection for investors and increased effectiveness in oversight and operation of the capital market, the part of the financial system where money is raised and invested in securities and other types of investments. "Over the past 10 years or so, there have been growing concerns internationally, and in Canada, about the quality of enforcement of securities laws," says Rousseau, who also holds the faculty Chair in Governance and Business Law. "At the same time that a lot of generalities have been formulated about enforcement, what has been lacking is a finely detailed or granular understanding of what is really happening. So the project is designed to improve knowledge on how laws are applied by the courts, securities com- Stéphane Rousseau is getting into the details of securities regulation. missions, self-regulatory organizations, or even eventually those covered through arbitration, otherwise the discussion will remain based on two or three decisions or two or three scandals." In year one of the project, Rousseau and his team will construct a databank of decisions rendered over the past decade by civil and common law courts, securities commissions in Canada's provinces and territories, and industry self-regulatory organizations and develop a grid to analyze them. Another databank will list decisions by Canadian regulators that specifically interpret and apply the notion of public interest, with the intent of obtaining an understanding of the parameters that direct such decisions and the resulting sanctions. All decisions in the databanks will be coded according to whether an approach based on rules or legal principles was used, says Rousseau. In addition to a quantitative analysis to identify any trend, a qualitative examination will consider www.CANADIAN Central how Canadian courts and other instances interpret a particular rule or legal principle, and if there is any variation depending on what type of party is involved. "It may be that in the course of our research we will find that certain dispositions or certain rules do not work well in the end because the courts or other organizations have difficulty applying them, either because of the way they are drafted or because the intent of the law is not well understood," says Rousseau. He explains even though a rules-based approach is typical in many common law jurisdictions, notably the United States, the principles-based approach has gained ground in countries like the United Kingdom and both approaches have been merging in Canada along with discussions about what is the best way to proceed. While some advocate that rules provide clarity, others argue rules do not cover all situations or take into account the increasing sophistication of financial markets and types of transactions. Looking at how decisions are made could provide a further point of reflection, adds Rousseau, and help regulators, policy-makers, and law practitioners decide what kind of changes might be needed. "Securities law is a domain that changes quite quickly, so that is part of the challenge," says Rousseau. With some basic understanding of how enforcement has been taking place in hand, Rousseau says the next step in the project will be to begin offering annual training sessions to share the project's findings on enforcement and the state of jurisprudence. That will help build up know-how and lead to informed discussion on what parameters exist and what steps might be taken to keep up with an everevolving situation. — Kathryn Leger kathryn.leger@videotron.ca L a w ye r m a g . c o m September 2013 9

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