OTTAWA (Reuters) - Canadian Finance Minister Jim Flaherty announced the creation of a new office on Monday that has a mandate to help create a single, national securities regulator, possibly within three years.
The "transition office", announced in the January budget and subsequently approved in legislation, will have one year to come up with a plan for replacing the current patchwork system of 13 provincial and territorial regulators with a common regulator for markets across the country.
The transition is envisaged to take three years, but Flaherty could not say precisely when he aimed to have the new regulator up and running.
The move, which is expected to create friction with some provincial governments and opposition political parties in months to come, aims to lower barriers for investors and to bolster regulators' ability to monitor risk throughout the financial system, in compliance with commitments Canada has made to the Group of 20 industrialized nations.
Flaherty said a national regulatory body would eventually become a member of an existing committee that monitors risk in the financial system and has among its members the Bank of Canada, the finance ministry, and the banking regulator OSFI.
"The plan is the Canadian securities regulator would be one of the pillars of the financial stability system ... as you know they have a coordinating committee," he said.
Doug Hyndman, chairman of the British Columbia Securities Commission, will head the office as well as an advisory committee that will eventually have representation from as many provinces and territories that want to participate.
Canada is the only major developed economy that does not have a national regulatory body to oversee capital markets -- a situation that has come under increased scrutiny during the global financial crisis.
Federal governments have tried to change the system for decades without success, running up against opposition from provincial authorities, particularly from French-speaking Quebec, Alberta and Manitoba.
A panel commissioned by the government recommended in January that Ottawa push ahead with efforts to create a national regulator, without necessarily waiting for consent from all provinces.
Ottawa now says it has a "a critical mass" of provinces and territories on board with the idea. Ontario, home to about 80 percent of securities transactions, and British Columbia are known supporters.
But detractors of the plan may also start to push back with more force now that Flaherty is moving ahead.
Thomas Mulcair, legislator for the opposition New Democratic Party, said the voluntary approach would not work and also took issue with the timing of Flaherty's announcement, the first business day after Parliament broke for the summer.
"If Flaherty had the courage of his convictions, he would have done it last week when the House was sitting," Mulcair said.
Additional reporting by Randall Palmer and David Ljunggren; editing by Peter Galloway