Canada to weigh single regulator, existing alternatives

OTTAWA — In a confusing compromise, federal Finance Minister Jim Flaherty and his peers from the provinces and territories agreed last Tuesday that the feds would set up a panel to study the creation of a single Canadian securities regulator.
But the expert panel also would judge the effectiveness of existing arrangements, including the “passport” system involving harmonized but separate provincial security regulations and, for good measure, enforcement, and the adoption of United Kingdom-style principles-based rules.
At present, securities legislation and regulation is handled by the provinces and territories.
Some of the duties that other countries’ national securities bodies perform are handled by the Canadian Securities Administrators in Montreal.
The mandate reached during a six-hour ministerial meeting is a long way from what Mr. Flaherty told reporters after testifying to the Senate Finance Committee last Monday: “What I’m going to put forward is a six-month plan where we would have a group of experts … examine for us and show us what a national securities act would look like in Canada so that we can start to be constructive and move forward on the issue.”
But he obviously ran into roadblocks. “If you’re looking for an agreement we came to today to solve the issue of securities regulation in Canada, you’ll be disappointed,” Mr. Flaherty told reporters at the close of the meeting, held at federal government facility at Meech Lake in Chelsea, Quebec.
“What we have been able to do is have a full and thorough discussion on the issues, to talk about accelerating the process, and talk about some of the alternatives that are available,” he said.
IMF weighs in
The very day of the meeting, the Washington-based International Monetary Fund weighed in.
“Canada can encourage domestic and foreign investment by strengthening its investment framework and supporting legislation,” IMF managing director Rodrigo de Rato said in a speech delivered to The Economic Club of Toronto. “One important element of this would be to update the regulation of securities.”
Most of corporate Canada concurs. Last June, the high-powered Crawford Panel on a Single Canadian Securities Regulator presented a report proposing a new model for such an entity (InvestmentNews, June 12, 2006).
The new federal panel’s mandate is all over the map.
The goal of the Ottawa-based independent panel will be the “the pursuit of a Canadian advantage in global capital markets,” according to a press release from the Department of Finance Canada.
To achieve that, the panel also will consider how Canada can best promote and advance proportionate, more principles-based regulation and how such an approach to regulation can be implemented under a passport or a common securities act and a common securities regulator.
The panel’s mandate is ambivalent about the need for a national securities regulator, giving credence to a “passport” system which involves harmonized but separate security regulations, promoted by some provinces except for Ontario.
“Before we get into any national regulator, we should be harmonizing our laws so that we have uniform regulations across the country, so that an investor who invests in one province can have a remedy in another province,” Wally Oppal, attorney general of British Columbia, told reporters after the ministerial meeting.
“If we can find that road map to a common regulator, we can participate in a passport,” Gerry Phillips, Ontario government services minister, said after the meeting. “But my concern has been that if it simply means that we never get to a common regulator, then Ontario’s got some difficulty with it.”
Ontario accounts for approximately 85% of the Canadian securities market.
The expert group is to deliver an interim report by December and a final report by the end of March.