How are businesses allowed to raise funds from investors? What should investors be told about these businesses or about the many different types of financial products that are now on offer? What corporate governance rules must public corporations live up to? What must they disclose about how they are addressing the need for gender balance in the boardroom and among senior officers, or about how they are managing climate-related risk? What protections need to be in place to protect minority shareholders? For the last quarter-century provincial securities commissions have typically answered these questions – and others equally important to Canadian businesses – by enacting rules that have the force of law. For Professor Robert Yalden, it’s time to examine whether the way in which the rule-making process has unfolded has lived up to expectations. He is working on the first research project to engage in an in-depth review of the consequences of governments granting rule-making power to Canadian securities commissions.
“The last 25 years have seen a profound change in the balance of power between institutions that shape Canadian business law,” says Yalden, the Stephen Sigurdson Professor in Corporate Law and Finance. “Once an area that was largely the domain of federal and provincial legislatures, today it is officials in a handful of provincial securities commissions that drive the evolution of significant parts of Canada’s business law.”
This “tectonic shift” can be traced to a development that took place in the mid-’90s, he explains. In 1995, the Ontario Securities Commission (OSC) was granted rulemaking power, a power that was subsequently provided to other securities commissions in Canada. “The constant and methodical use of this power has led to an explosion in the breadth and complexity of our securities law, which has in turn fundamentally redefined the relationship between corporate and securities law and between legislature and regulator,” he says.
Noting that the OSC alone has adopted some 120 rules to date, Yalden says, “Rulemaking is now of considerable importance because it has become the vehicle through which Canadian securities commissions enact all new binding provisions. It has also meant that legislatures that use to have sole jurisdiction over enacting securities law now play almost no role in regulating the wide range of matters that securities commissions focus on.”
Until Yalden’s project, there had been no detailed study of how the rulemaking process has worked in practice since governments first granted rulemaking power to securities commissions. Yalden’s greatest concern with the lack of such scrutiny is that there has been no attempt to assess whether the rulemaking process is capturing the range of voices that should be heard as part of this process or whether, because of the way in which this process is structured, it results in some voices being missed, marginalized, or excluded altogether.
In particular, he is interested in better understanding what groups typically participate and whether groups such as unions and organizations representing pensioners that participate in parliamentary hearings concerning corporate law reform are meaningful participants in the process that securities regulators use to formulate rules. Also of interest to him are groups like those representing Indigenous businesses that have not historically been brought into discussions about how business law might be more responsive to their needs.
“Given the extraordinary range of matters that Canadian securities commissions now regulate, it is critical that we better understand whether the rulemaking process is capturing the range of voices that it should,” he says.
To deepen that understanding, Canada’s Social Sciences and Humanities Research Council has awarded Yalden a $59,140 Insight Development Grant for his two-year research project “Rulemaking in Canadian securities law: structures of deliberation and their implications for democratic legitimation.”
“With a focus on what voices are heard as part of the rulemaking process, this project will assess the extent to which the rulemaking process has provided a deliberative forum capable of capturing a sufficient range of voices to confer legitimacy on the rules that are ultimately adopted,” Yalden explains.
This project is not only connected to Yalden’s ongoing interest in how Canadian securities law is evolving, but it will also allow him to explore the lesser studied intersection between securities law and administrative law.
“For over three decades my research has been focused on the different approaches that Canadian corporate and securities law take to fundamental issues in business law,” he says. “I have been especially concerned about the growth of securities law in such areas as mergers and acquisitions where it is not only poorly integrated with corporate law, but where it has often been rooted in principles that are inconsistent with those that have shaped corporate law.
“The intersection between securities law and administrative law is an area that has not got the attention in academic literature that it deserves,” he continues. “Public law, including administrative law, was one of my passions as a young lawyer and has continued to fascinate me, so this project will see me connect that area of interest with the world of business law that I have been so much a part of for the last 30 years.”
Yalden has earmarked almost all his research funds for research assistants. “This is a project that will call for detailed research from a mix of JD and graduate students, since we will be engaged in a comprehensive review of the administrative law theory underlying the granting of rule-making power, as well as a thorough review of the rules that Canadian securities commissions have enacted over the last 25 years,” he says.
For this project, Yalden expects to write one or more substantial articles presenting his team’s research and analysis, as well as any recommendations for reform that emerge from the study. He’ll also make presentations on the research and central conclusions emerging from the study to securities regulators, policy-makers, other stakeholders, and academics. That’s a vital part of this project he notes, saying, “I’m looking forward to fostering a discussion that is long overdue about the evolution of rule-making power.”