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A cornerstone of the governance of financial regulators is their legislated mandates. But does anyone care?

The Ontario Securities Commission (OSC) has provided a clear example of a regulator ignoring its mandate with its diversity rules. Mandates set out the responsibilities of regulatory agencies. Mandates ensure regulators operate efficiently in achieving their objectives without wasting their own resources or the resources of those they regulate. But when regulators start giving themselves added responsibilities, often no one tries to stop them. Interest groups commonly lobby for regulators to exceed their mandates when it suits their own interests or agendas. In some cases, regulators are tacitly endorsed or even encouraged by the governments that they are responsible to. Even those being regulated usually stay quiet, rather than stick their necks out.

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The OSC, whose members include a highly diverse group of corporate lawyers and accountants, led other provincial securities regulators in setting new rules in 2014 regarding women on corporate boards of TSX-listed companies. The rules included disclosure of the number of women on the board and in executive officer positions, and internal policies regarding representation of women on boards. Although it is unlikely that many investors actually read these disclosures (as is the case with most regulatory disclosure), the rules appear to have produced results. The percentage of directors that are women rose more than 21 per cent in the second year following implementation of the rules, and the percentage of boards with at least one woman had increased by 18 per cent over the same period. Despite this success, the OSC is considering options for further strengthening these rules, such as adding guidelines or disclosure enhancements.