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Abstract:
The UK securities regulator, the Financial Services Authority, claims that its principles-based approach to securities regulation is simply better than what it characterizes as the prescriptive, rules-based American approach. The striking shift in financial sector business from New York to London over the last two years has brought the question of the wisdom of principles-based regulation into sharp relief. In fact, an FSA-style regulatory approach may also be taking hold in Canada, through the agency of the province of British Columbia. This paper examines BC's innovative proposals for a principles-based securities regime through the lens of New Governance theory. I argue that the BC approach is significant in that its outcome-oriented, collaborative, pragmatic, and open-ended methods share features with promising New Governance approaches to regulation and public problem-solving more generally. Principles-based regulation is especially noteworthy with regard to firm compliance processes, because it seeks to engage firms in their own endogenous learning about compliance. Moreover, New Governance is a necessary complement to principles-based securities regulation. It provides a rational, systematic means through which industry learning and the input of third party stakeholders can fill in the content of otherwise vague principles. This paper identifies, and develops provisional responses to, some of the challenges arising from applying New Governance theory to the specific context of securities regulation. Those challenges include justifying imposing on industry the costs of articulating the content of principles ex post (as opposed to rules, which impose costs on regulators/legislators ex ante); reconciling light touch regulation with a rolling best practices rulemaking regime; confirming that industry has incentives to innovate, particularly in compliance processes; and identifying means for addressing capacity issues associated with requiring diverse industry actors to interpret principles for themselves.

new governance, securities regulation, compliance, corporate governance, rules, principles, canada, tripartism, democratic experimentalism

Abstract:
This paper examines a significant shift in enforcement practice at the United States Securities and Exchange Commission, originating under the Chairmanship of William Donaldson but likely to continue beyond it. This shift is a response to a crisis of corporate governance, exemplified by recent scandals among various public corporations and financial services institutions, and to the demonstrated inadequacy of SEC enforcement tools to respond to that crisis. While the SEC's new approach, which I call the Reform Undertaking, is incomplete, I argue that if properly implemented it may have the potential to spur institutional reform not only in corporate governance, but also within Enforcement practice itself. I use the Reform Undertaking as a springboard for developing a larger theoretical model, focusing on the ways in which forward-looking, reform-minded enforcement improves on more traditional, retrospective, nontransparent approaches as a mechanism for addressing systemic problems in corporate governance. I conclude that the Reform Undertaking is a version of what is becoming known as new governance, or experimentalist, regulation. Further, the new enforcement model I describe - which I call the True Reform Undertaking - is a novel elaboration on existing experimentalist theory. Experimentalism is typically associated with a decentralized, data-driven, highly participatory regulatory model, but my work considers its application to the securities law enforcement context. As such, the True Reform Undertaking responds to one of the hardest problems for New Governance: what to do with worst actors. The model considers how to stimulate reform within corporations that for public welfare or other reasons should not simply be shut down, but whose dysfunction or internal culture makes them resistant to experimentalist incentives.

Securities, enforcement, experimentalism, new governance, corporate governance, reform, regulatory design, cooperation, compliance

Abstract:
Over the past few years the Securities Exchange Commission (SEC) and Department of Justice (DOJ) have finally started making serious efforts at enforcing the United States' anti-bribery laws against corporations. These efforts will not be effective against the worst offenders, however, if they do not address the issue of corporate ethical culture. Over time, the use of improper payments can become embedded in a corporation's culture. The organizational actors treat payments of bribes, or the use of agents the company suspects of paying bribes, solely as economic issues and not as legal and ethical issues. Through the DOJ's use of deferred prosecution and non-prosecution agreements and the SEC's use of settlement agreements, these agencies are attempting to address these root causes of corruption in many corporations. These agreements typically require corporations to adopt more effective compliance programs and to retain independent corporate monitors to oversee the implementation process. This article analyzes the potential effectiveness of these agreements through a New Governance perspective and develops the idea of a Reform Undertaking. Based on the essential features for effectiveness that this article identifies, Reform Undertakings have a lot in common with the currently used deferred prosecution agreements and SEC settlements, but there are also significant differences. Of primary importance is the role of the third party independent monitor. This Third Party should serve not as a simple monitor or as an all-powerful czar, but must take on facilitating and problem solving roles. These are roles which require significantly different sets of skills and characteristics than someone serving a monitoring role or a czar role. Overall, through the use of a New Governance perspective, this article identifies essential features of Reform Undertakings that can more effectively tackle the root cause of persistent corrupt behavior by corporations - the corporation's ethical culture - than alternative regulatory mechanisms.

Bribery, Compliance Programs, Corporate Culture, Corruption, Deferred Prosecution Agreements, FCPA, New Governance, Organizational Ethics

Abstract:
Book Review

Abstract:
Over the last few years, prosecutors and SEC enforcement attorneys have increasingly relied on settlement agreements (such as deferred prosecution agreements) to combat securities violations and other corporate criminal acts. Many of these agreements require the use of corporate monitors to oversee the corporation's compliance with the settlement and its implementation of a compliance program to prevent future violations of the law. Although these agreements have received significant attention from legislators and scholars, there has been no investigation into the critically important question of whether or not the use of corporate monitors achieves its intended goals. Based primarily on interviews with individuals directly involved in monitorships, we look at the entire monitorship process - including the selection of the monitor, how the monitor conducts his or her work, and what happens after a monitorship - and find that decisions at critical points during this process lead to monitorships that are significantly less ambitious than government pronouncements behind them and seem unlikely to achieve their goals on any consistent basis. After identifying these problems, we suggest measures for reform.

Compliance Programs, Corporate Crime, Corporate Culture, Corruption, Deferred Prosecution Agreements, FCPA, Monitors, Organizational Ethics

Abstract:
This article attempts to marry direct democratic deliberation with the enforcement of important constitutional norms in the context of a real-life policy question.

The question is the secession of Quebec from Canada. The article argues that a referendum is neither the most legitimate nor the most effective way to address the issue. The debate over Quebec's future must be reoriented by reference to the broad normative framework set out by the Supreme Court of Canada in the Reference Re Secession of Quebec, [1998] 2 S.C.R. 217, combined with a new democratic process. This article introduces an innovative constitutional model called democratic experimentalism, which seeks to ensure legitimacy, participation, and accountability within heterogenous, complex democratic systems, as a fresh perspective on Canada's troubled federalism debate.

The article concludes that democratic experimentalism is compatible with Canada's constitutional values and traditions, and with the standard of the clear qualitative majority vote set down by the Supreme Court of Canada. Equally, the Secession Reference approach contains within it an important new understanding of how pluralist democracies globally should approach fundamental constitutional questions.