Doug Hyndman, chairman of the B.C. Securities Commission, suggests that if the Canadian Securities Administrators are to tackle the issue of investor restitution, then it will take the form of setting a mechanism to help guide investors through the process.

Speaking at the Investment Dealers Association of Canada’s annual conference in Banff Monday, Hyndman said that the BCSC discussed the possibility to pursuing the power to order restitution as part of its recent regulatory reform efforts and it concluded that it isn’t really the business of securities regulators.

That could change as a result of the current debate over restitution, Hyndman suggests. But, he notes, the BCSC decided instead to pursue the power to order disgorgement of ill-gotten gains, which could then be paid into court and distributed to investors.

Hyndman allows that consumer restitution and dispute resolution are an ongoing issue. A particular area for regulatory involvement may be situations in which unsophisticated investors get into disputes with very sophisticated, well-resourced brokerage firms. Hyndman suggests that there could be some role for regulators to help these clients who can’t afford a lawyer to deal with a dispute, but need some help navigating the system. He adds that this sort of effort should ultimately help the industry, which doesn’t benefit from the existence of groups of angry, disillusioned investors.

Jean St-Gelais, CEO of the Autorité des marchés financiers and current chairman of the Canadian Securities Administrators, suggests that, at the CSA, there is no appetite for tackling the issue of restitution. However, he notes, the AMF has a system that compensates consumers for up to $200,000 for losses due to fraud (although this doesn’t cover securities).

As for B.C.’s restitution strategy, the legislation that came out of the B.C. model has yet to be implemented. Hyndman will be meeting with B.C.’s recently appointed finance minister in an effort to get the legislation back on the legislative agenda. In the meantime, he suggests that the BCSC is adopting the philosophy underpinning BC’s new legislation in its rulemaking — namely that it should only make rules when they are necessary, and that they should be in plain language so they are easy to understand and follow.

On that count, the BCSC is reviewing all of its compliance review processes, including SRO oversight, and it plans to move to more outcome-focused regulation generally. Hyndman says that market participants will be held accountable for compliance with the rules, but it won’t necessarily be telling them how to comply with the rule, Instead, it will provide guidance.

This same sort of stealth approach to reform is taking place at the CSA level, at which efforts to introduce a uniform securities law appears to have floundered. Instead, Hyndman suggests, it will issue common rules, such as a rule standardizing exemption requirements. Other candidates for this sort of treatment include a national registration rule, prospectus requirements and takeover and issuer bid requirements.

The registration rule is some way off, Hyndman notes, with regulators disagreeing over issues such as whether it should take a more principles-based approach, as the BCSC advocates, or a detailed prescriptive approach, and whether proficiency requirements should be raised.