The Globe and Mail recently published an opinion piece titled Too long has the Toronto Stock Exchange been shrunken and battered. No more.

It’s written by Bryce Tingle. Here are some extracts:

• The TSX has two interlocking problems. First, it has a regulatory regime (much of which is generated by Canada’s securities commissions and other third parties) that is regarded with considerable dislike by Canadian entrepreneurs considering whether to pursue a public listing. (Polls regularly show that even the directors of established public companies have a low regard for the corporate governance regime we impose upon them.)
• Second, this unpopular regulatory regime is, in some ways, worse than the one in the U.S. In that country, 90 per cent of new listings have staggered boards, making it hard to replace all directors quickly. Ninety-four per cent do not have majority voting, which means directors can often stay even if most shareholders oppose them. Eight-four per cent don’t permit shareholders to call special elections, which prevent them from causing disruptions between annual meetings. And almost all IPO companies have poison pills or other types of takeover defences in place.
• These measures heavily insulate companies from undue shareholder influence or hostile takeovers. Without exception, none of these choices by newly listed companies in America would be permitted in Canada. (This) would make sense if empirical studies showed that companies (not subject to) such measures performed better than their peers. But the evidence doesn’t show this. In fact, it shows the opposite.
• The public markets in Canada are filled with long lists of best practices to be observed by boards and managers in everything from the kind of people they hire, to the ways they pay are paid. Board processes that once were the site of experimentation and firm-specific adjustments are now one-size-fits-all practices imposed on directors by outside actors.
• Again, none of these best practices are supported by empirical studies as benefiting public companies’ operational performance. The U.S. has, for this reason, preserved greater heterogeneity in their governance regime…
• ….For most of the past few decades, Canada has diligently copied reforms in the U.S., even mandating best policies that remain voluntary in that country. Any attempt to improve the TSX’s competitive fortunes will require differentiating the two countries’ regulatory regimes, almost certainly in ways that remove the pain points for companies considering listing their shares.

Plenty of that can be debated of course – in general, the notion of the chaotic U.S. markets as being self-evidently superior seems somewhat shopworn – but it’s a stimulating read. We could note that Canadian securities regulators have recently been rolling back a few laws, for example by doing away with the requirement (from which many companies were exempt anyway) of having to provide audited financial statements for the third most recently completed financial year in connection with IPOs and other transactions; they usually spin such concessions as a response to current conditions, although it was obvious years ago that such three-year-old information would never be decision-critical.

Of course, regulators love to tinker with requirements, as their reading of the “public interest” (about as malleable a term as you’ll ever come across) zigs and zags. The problem for me is that their tinkering is seldom explained or justified in more than vague terms. During the Covid-19 epidemic, for instance, Canadian regulators provided a blanket 45-day extension on various filing deadlines, no doubt a popular response to public demand, but an intellectually debatable one: if the CSA was willing to tolerate financial statements not being filed on their usual due dates, then it could hardly say it mattered much if they also failed to be filed 45 days later (by which time they were little more than museum pieces). Put another way: if formal financial information wasn’t necessary to support trading during one of the most volatile and risk-laden periods in memory, then why would it be necessary at any other, calmer time? But the regulators failed to acknowledge the existence of such questions, let alone answer them.

Compared to the U.S. SEC, in which individual Commissioners regularly express their detailed individual opinions on various proposals and aspects of the regime, Canadian regulation is characterized by its terseness: it’s perhaps telling that the Ontario Commission’s flagship “Dialogue” event occupies a single (not overly long) day in the calendar, largely filled by inadequately-tethered speechifying (note for example how the OSC could go from from enthusiastically highlighting the ISSB and its standards at the 2023 Dialogue to all but dumping the sustainability issue two years later). Not that regulators are obliged to respond to everything in the media, but it might have been refreshing if Tingle’s (again, hardly beyond criticism) article had triggered (say) some form of communication engaging with his points and providing a balanced explanation of why current requirements are as they are: of course this didn’t happen. Actually, Canadian securities regulation could really take some lessons from the SEC’s fearsomely eloquent, ideologically-grounded Commissioner Hester Peirce. Even if I’d personally prefer a different grounding ideology…

The opinions expressed are solely those of the author.