A research study by professor Mary Condon on behalf of the Wise Persons’ Committee has found that regulatory enforcement should be decentralized — even if there is a single, national regulator.

Condon’s study — which was released with the WPC’s report today — looks at the implications of multiple securities regulators for the enforcement of securities law in Canada by examining how the various securities regulators use their discretionary enforcement powers.

While the study found certain inconsistencies in focus, application and sanctions from regulator to regulator, it did find a consistent dedication to working in the public interest.

For example, Condron wrote, there is: “significant variation in emphasis across the provinces in relation to infractions pursued to an enforcement hearing. Some provinces focussed, for example, on illegal distributions of securities and others on acting as a broker or advisor without registration. Local regulators appear to play a significant role in the setting of enforcement priorities.”

However, it also found “notable consistency across the provinces in the articulation of the public interest that was the basis for making orders. There was almost no expression of unique provincial objectives in making public interest orders, suggesting a high degree of consistency in the philosophical underpinnings of regulatory intervention.”

When it came to applying sanctions, regulators were again inconsistent with what consistency there is coming from following two British Columbia and Ontario precedents. “Some consistency did result from reliance on two regulatory precedents — one each from B.C. and Ontario — enumerating factors relevant to the individual sanctioning decision. The bigger provinces tended to make use of the multiple sanctions at their disposal in sanctioning respondents,” the study reports.

Condon concludes that the current regulatory system “would be enhanced by additional transparency about the setting of provincial enforcement priorities and coordination among the provinces with respect to the mitigating/aggravating factors that structure sanctioning discretion.” And, similar attempts at coordination would be beneficial under a passport system. “If this model is adopted, care should be taken not to lose the benefit of local provincial knowledge about dubious market participants.”

Finally, “Under a single regulator, a decentralized enforcement model allowing for local enforcement offices across the country would be preferable to a more centralized enforcement model. Local input into the setting of national enforcement priorities and the development of a consistent approach to dealing with the factors influencing the quantum and type of penalty should be preserved.”

Condon has been a faculty member at Osgoode Hall Law School in Toronto for 10 years. She is also an adjunct faculty member at the centre of criminology at the University of Toronto and is the director of Osgoode Hall’s part-time LLM program specializing in securities law. She currently has a Social Sciences and Humanities Research Council research grant to examine the governance of pension funds and mutual funds and a University of Toronto centre for innovation law and policy research grant on the regulation of alternative trading systems in securities markets.