Canadian Financial Services Regulation, Analysis and Decision-Making

Chairs’ Welcome, Overview and Course Roadmap

• How this course works, how each module works, flows/relates, transitions and builds
• Goals of program – what this course seeks to achieve, and what it doesn’t
• Course components – what you can expect, pre-work, case studies/real-world examples and interactive lectures
• Active discussions and group activities – participants are also course contributors
• Practical reflection assessment at the end of the course (pass or redo)

Constitutional Context and Institutional Framework

• Mosaic of information – how financial system is set-up in Canada
• Historical development of financial regulation in Canada
• Constitutional division of powers and jurisdictional issues
• Role of self-regulatory bodies and market gatekeepers and intermediaries
• Canada in the world

ABCP Case Study: Financial Disruption and Regulatory Response

With a focus on Canadian examples illustrating principles-based regulation and system risk, a distinguished panel will provide an overview, the key issues and outcomes involving the Asset-Backed Commercial Paper Crisis, and the OSC sanctions case involving Coventree Inc., to set the stage for an open discussion on the topic of defining and achieving regulatory success, including weighing some of the relative advantages and disadvantages of the various approaches.

Traditional Legal Questions about Structure, Administrative Law and ‘Soft Law’

• Political and legal context of financial regulation in Canada
• Analysis of varieties of statutory mandates
• Administrative law and adjudicative powers of regulatory agencies
• How do Charter protections limit investigative powers and regulatory discretion
• Criminal law and procedure, the role of competition law
• Soft Law focus on Ainsley

Understanding Outcomes Based Regulation

• How to determine outcomes? (based on what your mandate is)
• Contextual vs. de-contextual
• How to determine whether a regulator is being effective? (dictated by policy considerations)
• Change of behaviour – is this a demonstration of success?
• Understanding Outcomes Based Regulation
• Principles-based vs outcomes-based
• Core concepts involved

Expert Panel: Definitions of Regulatory Success

An expert panel of faculty will discuss various definitions of regulatory success and with a practical focus on the theme of legal regularity vs. reduction of risk. Discussion will include real-world examples based on their experience, their insights and some ideas to help inform your regulation going forward. Discussion will focus on the following topics:

• Reduction of Systemic Risk: Key Issues for Financial Regulators
• Legal Definition of Success
• Political Definitions/Aspects of Success
• Institutional Design and Integration Success
• Risk vs. Reward and Using Technology/AI for Regulatory Decision-Making

Facilitated Discussion and Networking – Other Definitions of Success: Working Through Participants’ Own Perspectives

• Reduction of inequality
• Assessing regulatory effectiveness
• Performance principles for regulators – What makes a regulator excellent?
• Success of the markets relative to other jurisdictions
• Cost reduction and proportionality

Overview of Strategies and Tools for Regulation

In this session, faculty will provide a practical summary of each tool, how to use it and insights for how to determine which tools to use.

• How this module relates and where it will take you
• Disclosure
• Licensing/Registration
• Compliance/Supervision/Inspections
• Is a regulatory response always necessary? (Let the market determine)
• Other tools
• As part of this session, discuss the differences between market regulation and prudential regulation
• Enforcement
• SROs (use and continued relevance)

Series: An Examination of the Different Strategies and Tools for Regulation

• Disclosure
• Licensing/Registration
• Compliance
• Supervision
• Inspection
• Is a regulatory response always necessary?
• Role and limits of regulatory enforcement
• Cost-benefit analysis as a tool of regulation
• Regulators’ authority and capacity for discretion

Home Capital Case Study and Discussion – Understanding the Risks and Challenges of Regulatory Tools: Reconciling Different Outcomes 

Home Capital (Dangerous Opportunities, GRI Home Capital Case Study)

• Case overview and how and why it illustrates important compliance and enforcement elements
• Good example of when an entity is regulated by too many regulators
• Differences between market regulation and prudential regulation
• Focus on institutional soundness vs efficiency and integrity of markets
• Twin peaks models in other jurisdictions
• Issues of proportionality and risk in both approaches

Defining the Issue and Management of Stakeholder Relations

• What kind of input do regulators get?
• How do we determine whether there’s undue influence?
• Regulators need to understand stakeholders
• It’s a continuum and a need for sensitivity as to where boundaries are – self-funding and no desire or intent for the industry or politicians to think they own the regulator
• Discuss bright lines, gray areas and navigational strategies
• Ethics, bias, diversity and inclusion
• Consider the various categories of stakeholder separately
• Explore the issues that arise within each group
• Defining stakeholders and relationship systems and structures

Consumers as Stakeholders

• Complexity makes it easy for the most powerful players but not in the ordinary person’s view
• What is our role in defining the public interest?
• Perspectives on marginalized people/groups
• Establishment of IAP in Ontario, CSA and likely new SRO

Politicians as Stakeholders

• Relationship with the government; where does policy-making lie?
• Connection between stakeholders and funding
• Regulatory effectiveness and independence

Industry Stakeholders

• Defining the goals and connections of stakeholder relations
• How do they get information to perform ‘good regulation’
• Getting feedback from stakeholders who are directly affected/impacted
• The “how” question
• Consider the use of design thinking to regulatory problems

Open Banking: Case Study

Faculty will provide a practical overview of the case, key issues, risks and opportunities/outcomes involving open banking topics, and set the stage for an open discussion on the topic of good and bad examples of stakeholder engagement.

Facilitated Discussion and Networking – On the Ground: Good and Bad Examples of Stakeholder Engagement

• Other stakeholders (those who resist regulation)
• Stakeholders in a sense but outliers (those who seek not to be regulated)
• Using the system to achieve political ends
• Perceived regulatory capture
• Discussion of good and bad examples of stakeholder engagement

This Module will be led by Eric Pan, President & CEO, Investment Company Institute, and Elected Member, The American Law Institute, and feature guest speakers.

Identifying the Challenges of Institutional Complexity and Wicked Problems

• Recap of the institutional complexity of financial regulation in Canada
• Now outdated? The role of self-regulation
• Series of wicked problems
  • International organizations of securities commissions (IOSCO)
  • Enforcement
  • Structural/sectoral boundary issues
  • Consumer behaviour
  • Unintended consequences
• Discussion of these problems in the context of the institutional complexity in Canada

The Range of Solutions for Managing Institutional Design Challenges

• Responsive – market driven solutions
  • Development of technology
  • Further integration of financial regulators – pan-regulatory approaches
  • Promoting greater coordination
  • International standards setting as a type of solution

Identifying Solutions – Reviewing Examples of “Wicked Problems” and How they Intersect with Institutional Design

• Pandemic has led to view of “all hands on deck”
• International organizations and standards – IOSCO
• When is enforcement a wicked problem?
• Regulatory boundary problems
• Uncertainty problems
• Crypto

The Development of Populism

• How populism relates and where it will take the conversation
• Continued role of expertise
• Development of populism as an aspect of the regulatory future
• Design thinking as an approach to thinking through regulatory solutions

Facilitated Discussion and Networking – How “Wicked Problems” Intersect with Institutional Design

Faculty will lead participants through a facilitated discussion involving ‘wicked problems’ in order to work through identifying and finding solutions using principles of institutional design. Session will conclude with a class debrief and a checklist of considerations.

Overview of Regulation as Expertise 

Use of Technology, Information and AI in Regulatory Activities and Privacy Impacts 

• Technology, data, AI, ethics
• What does Reg Tech mean and how is it being used elsewhere?
• Big Data and Privacy issues for regulators
• If the technological infrastructure of regulation changes, what else needs to change?
• How will/should regulators respond?
• What’s happening to the boundaries of financial services providers in the face of BigTech and players like Amazon
• Privacy and Use of Information
• Crypto side

ESG/Climate Change: Examining Frameworks for Regulatory Decision-Making in Canada

Faculty will delve into developments and emerging risks, highlighting the use of different regulatory tools in various jurisdictions to help illustrate important concepts and issues associated with ESG and climate-related regulatory oversight and enforcement of governance, risk management, and disclosure.

The Future of Regulation and Regulatory Innovation Using Design Thinking 

• Proactive – design thinking strategies
• Brainstorming a problem and creative solutions from different perspectives
• Ideas for developing tools to overcome institutional design and jurisdictional limitations

Facilitated Discussion and Breakouts – Preparing for the Future of Regulation

Facilitated small group discussions, followed by a large group discussion and debrief, where you will connect to identify the top 3 insights to inform your regulation going forward. Everyone will come back together for group discussion and debrief.

To complete the course and claim your Certificate, you must complete these 3 steps by March 13, 2025:

1. Attend all six (6) modules (whether live, by viewing class videos, or both methods)
2. Upload your reflection via the course page (~1 page/300 words)
3. Complete and submit an online Self-Declaration Form via the course page