Quebec to create independent securities adjudicator

(July 24, 2003) In an effort to alleviate conflict of interest concerns, Quebec is setting up an independent adjudicator for the province’s securities industry. The securities decision and revision office will exercise powers provided under Quebec’s securities act, says Jean Lorrain, director of market intermediary oversight at the Commission des valeurs mobilières du Québec (CVMQ).

The office will inherit the tribunal functions of the CVMQ, Lorrain said yesterday at a compliance conference in Toronto, sponsored by the Strategy Institute. “The appearance of conflict should be settled with this kind of structure,” he stated.

The structure of some securities commissions, like Quebec and Ontario, has come under fire from critics, who argue that combining investigative and quasi-judicial functions within a single organization is an inherent conflict of interest.

“There’s been a lot of discussion about the structure of quasi-judicial tribunals like the Ontario Securities Commission (OSC),” Lorrain said. “There’s been criticism that there may be a conflict of interest between the enforcement branch and the decision makers when they are sitting on a tribunal. We’ve also had a lot of criticism of that issue in Quebec and we’ve even had a few challenges in court.”

Earlier this year, Purdy Crawford’s Five-Year Review Committee, set up to suggest changes to Ontario’s securities laws, recommended that the OSC study “on a priority basis” its overlapping roles of making policy, conducting investigations and holding administrative tribunals. Although the OSC’s structure has been upheld by the courts, the committee said there remains a question of whether it “gives rise to perceptions of potential for conflict or abuse.”

Quebec’s securities decision and revision office was created under Bill 107, a wide-ranging financial services bill passed last year. Under the legislation, the province’s four main financial regulators, including the CVMQ, will be merged into a single regulatory body, known as L’agence nationale d’encradrement du secteur financier, or the Agency.

As well as regulating securities, pensions and insurance and providing a consumer complaint service, the Agency will deal with enforcement issues, and assume the regulatory responsibilities of Quebec’s financial planning institute, the IQPF.

Jean St-Gelais will assume office as the Agency’s chief executive officer in September, although the regulatory body is not expected to be officially operational until February 2004, Lorrain explained.

As well as a CEO, the Agency will have five superintendents, each responsible for a separate division, as well as an advisory council, although Lorrain stressed the exact structure is still being worked out. The Agency’s head office will be in Quebec City, with offices in Montreal.

Bill 107 also extends the Agency’s regulatory powers and includes prison terms of up to five years for certain market-related offences, similar to recent measures introduced in Ontario.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca