Financial markets

The regulation of financial markets is changing. In Canada, we are witnessing a process of harmonization - of uniformity perhaps - of securities regulation that may even culminate in the creation of one national regulator. This process is accompanied by a consolidation of the rules, providing the regulators with the opportunity to adopt and implement reforms within the current systems. The regulation on private investments is a telling recent example. The Chair will oversee the effective implementation of this harmonization and uniformity process by staying abreast of the pending reforms, which will serve to better understand the nature and scope of the peculiarities of financial markets and Quebec law.

The recent transformation also manifests itself in an increased overlapping between corporate and securities law. This convergence raises questions about the coherence and the coordination of regulatory stances put forth by each of these fields of law in order to structure these highly correlated operations. If inefficiently managed, the incoherence of the regulatory frameworks will most likely result in wasteful transaction costs. In addition, an absence of coordination, could lead to gaps in the system, resulting in abusive behavior. Within this perspective, the Chair will examine both the reconcilable and irreconcilable aspects between corporate and securities law in the monitoring of financial market operations.

Finally, the transformation is the result of new findings and a more advanced knowledge and understanding of financial economics and behavioral finance, as well as innovations in legal practices. Securities regulation has always gravitated around the basis of a paradigm, which was, partly or entirely, the product of financial information coming from outdated information on the efficiency of the markets. Furthermore, this regulation was designed for public companies. Since then, progress has been astonishing in both financial theory and practice. The income trust fund has also surfaced as a new legal mechanism used to carry on businesses that have gone public. It is important to assess whether or not securities law still dictates relevant rules given this new knowledge. Also, we must consider regulation for the new financial and legal tools as well as its effectiveness.

In its work, The Chair will use the classical legal analysis method while incorporating elements from comparative law. Classical legal analysis will be used while keeping in mind the bijuralist aspect of Canadian business law. A significant part of the formal sources of business stems from federal law, which has been greatly influenced by common law solutions. The linking of federal business law with civil law generates inconsistencies that can create uncertainty or incoherence that threaten the integrity of transactions. Thus, the Chair will integrate the federal dimension of this bijuralist aspect of business law so as to promote the emergence of solutions that respect the civil law tradition.

The classical legal analysis will be supplemented by the economic analysis based on the premise that individuals, presumed rational, make choices in function of the costs and rewards that these choices generate, and in such a way as to optimize their well-being. In the perspective of a predictive approach, the Chair's work will try to identify the factors most likely to influence the behavior of the various participants, who seek the most beneficial option to satisfy their personal interests. In a normative approach, researchers will also set out determine how the legal and institutional environment can encourage the implicated participants to act in a manner that would promote mutual gain for each of them. The economic approach to law will be supplemented by work from behavioral psychology and from the theory of social norms, which suggests enhancements for the rational choice model at the base of the economic approach to law.