CLEAR 2008 Annual Conference

Anchorage, Alaska

Consistent Decision Making

Robert ChambersAssetRisk Advisory Inc.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Meaning of Consistency

Consistent with other decisions

Consistent with strategyConsistency

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Importance of Consistency

• Strategy implementation

• Effectiveness

• Fairness

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Judgment

• This presentation is concerned with decisions where judgment (or discretion) is required.

• Not all decisions by a regulator require judgment.

• The goal is to guide administrative discretion.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Major Causes of Inconsistency

• Insufficient focus on what is important.

• Silos that exist within the regulator.

• Ineffective and out-of-date processes.

• Inadequate training.

• Overconfident licensee committees (self regulation).

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Indicators of Inconsistency

• Unpredictable outcomes.

• Overturned decisions.

• Allegations of unfairness.

• Non-transparent processes.

• Excessive criticism by the media.

• Tolerance of the ‘likeable rogue’.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Top-Down Implementation

Prioritize RisksMonitor Decision Making

Determine Responsibility

for Control

Articulate Statutory

Objectives

Develop Tools to Guide Decision

Making

Assess Risks to Objectives

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Intended Outcomes

The definition of intended outcomes requires thought and planning before processes are designed to guide decision making.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Tools that Aid Consistency

• Testing using control groups.

• Risk prioritization worksheets.

• Case assessment worksheets.

• Decision trees.

• Sound, documented processes.

• Training.

• Case management systems.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Modeling

• Lack of reliable historical data is a problem in developing decision trees that rely on algorithms.

• ‘Washing’ of historical data can be cost prohibitive and sometimes impossible if all relevant information was not collected originally.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Ongoing Monitoring

• Management oversight by capable professionals who have bought into the process.

• Periodic independent reviews of process and outcomes.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Case Study

• The concern.

• The response.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Corporate Finance

Market Regulation

Executive

Chief Accountant

Self-Regulatory Organizations

CSA, NASAA

Risk Analysis

Risk Prioritization

Alternatives for Risk Control

New Rule

Compliance

EnforcementAction

Guidance

Investor Education

Issuer Education

Registrant Education

Regulator Strategy

Implementation

Evaluation

Case – Regulatory Focus

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Case – Prioritization of Risks

1. Sample worksheet tool ‘A’.

2. Determine responsibility for control.

3. Likelihood.

4. Impact.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Case – Complaint Assessment

1. Sample worksheet tool ‘B’.

2. Evaluate every complaint/referral for regulatory significance.

3. Factors – plus and minus.

4. Quantitative vs. non-quantitative analysis.

5. Assess priority and resource allocation.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Conclusion

Once consistency has been achieved within regulators, the next goal will be increasing consistency among regulators.

CLEAR 2008 Annual ConferenceAnchorage, Alaska

Contact

Robert Chambers, LL.B., CPA, FCA

AssetRisk Advisory Inc.

1402-30 Wellington Street East

Toronto, Canada M5E 1S3

Direct (416) 304-0068

robert.chambers@assetrisk.ca