Canada to set up new markets watchdog but scope limited

Thu Sep 19, 2013 6:57pm EDT
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By Randall Palmer and Louise Egan

OTTAWA (Reuters) - Canada's federal government and two of its provinces will set up a common securities regulator as a first step toward their ultimate goal of replacing the current patchwork of provincial agencies with a more efficient national markets watchdog.

The federal finance minister, Jim Flaherty, and his counterparts from Ontario and British Columbia unveiled details of the plan on Thursday. Together, Ontario and British Columbia are home to about two-thirds of the country's capital markets.

Ottawa has tried for decades to persuade Canada's 10, mostly reluctant, provinces and three territories to create a national regulator similar to the U.S. Securities and Exchange Commission. Flaherty himself has lobbied hard for it since he became finance minister in 2006 with the election of the Conservative government.

The federal government hopes the new commission will improve Canada's reputation for being lax on white-collar crime. Recently, regulators were criticized for their oversight of Sino-Forest Corp, one of several North American-listed companies with Chinese operations whose accounting disclosure practices came under scrutiny.

In the infamous Bre-X scandal of the late 1990s, investors lost billions of dollars after a massive gold find turned out to have been a fake. No one was ever charged with fraud, and the lone figure who was charged with insider trading was acquitted.

Canada has been criticized by the International Monetary Fund for being the only advanced economy without a national capital markets regulator.

The version of the plan revealed on Thursday is less ambitious than earlier efforts, but is designed to win over additional provinces before its 2015 launch. Still, the French-speaking province of Quebec, led by a separatist government, rejected the plan and hinted at fighting it in court.

Flaherty said the agreement "represents the best of what can be achieved when a shared responsibility becomes a mutual goal." He expects others to join the plan quickly, but the intention is to push ahead with the initiative even if there are holdouts.   Continued...

Canada's Finance Minister Jim Flaherty steps out of a recreational vehicle after making an announcement in Ottawa September 9, 2013. REUTERS/Blair Gable