The challenge for Canadian regulators is to strike the right balance: encouraging beneficial innovation while protecting investors from emerging threats. With the growing influence of generative AI and the rapid evolution of capital markets, the stakes for getting this balance right have never been higher.
Common Law’s Professor Douglas Sarro is taking on this crucial issue with a new research project entitled “Financial Innovation and Regulatory Design,” which is funded by a Social Sciences and Humanities Research Council (SSHRC) Insight Development Grant. Over the next two years, Professor Sarro’s work will explore how securities regulation in Canada can be designed to better respond to both the risks and opportunities created by financial innovation.
At the heart of the project is a timely question: how can Canadian securities regulations be structured to not only detect financial fraud and abuse, but also foster promising innovations? Professor Sarro’s research will probe two important dimensions of regulatory design: the goals that regulators are mandated to pursue, and the procedural rules that guide their policymaking processes. While recent consumer protection failures have revealed gaps in regulatory oversight, overly restrictive policies risk driving innovation away from Canada. This new project will address how law can help regulators navigate these competing priorities.
In addition to examining Canada’s own regulatory experience, the project will map and compare how securities regulators operate in other advanced economies, including the United States, United Kingdom, Australia, Ireland, New Zealand, Singapore, and Hong Kong. This comparative analysis will explore how different countries structure regulatory goals and policymaking procedures, drawing lessons about what design choices could benefit Canada.
Professor Sarro brings deep expertise to this project, drawing on both his scholarly achievements and professional experience. His research on securities law, rulemaking, and financial innovation has appeared in leading Canadian law journals and been cited before the Supreme Court of Canada. Before joining academia, he served as a senior advisor at the Ontario Securities Commission, and he continues to engage with industry practitioners as a member and Past Chair of the Advocacy Council for CFA Societies Canada.
Professor Sarro is also committed to involving law students in this research, including those in the uOttawa Startup Law Clinic, where he serves as Academic Director. This project will expose students in the clinic to cutting-edge debates in financial regulation and policymaking.
SSHRC’s Insight Development Grants support research in its initial stages. These grants enable the development of new research questions, as well as experimentation with new methods, theoretical approaches and ideas.
Congratulations to Professor Sarro!