January 13, 2009 / 1:16 AM / 9 years ago

Federal panel urges national securities regulator

OTTAWA (Reuters) - Canada should push ahead with efforts to create a national securities regulator without necessarily waiting for consent from provinces opposed to the idea, a government-commissioned panel recommended on Monday.

The panel said the global financial crisis highlights the need for a single Canadian regulator that can move with greater speed to address financial instability.

“This is a report that speaks the language of modern financial markets,” said Finance Minister Jim Flaherty, who created the panel in February 2008..

Canada is the only developed nation in the world that does not have an overarching regulatory body that oversees capital markets.

Instead, it has a patchwork system of 13 provincial and territorial regulators that requires companies to file documents such as prospectuses and financial statements in each jurisdiction separately.

Provincial opposition, particularly from French-speaking Quebec, has traditionally hindered efforts to reform the system.

“It’s time to give investors a stronger voice with better enforcement and quicker response. It’s time to create a common securities regulator, applying one set of principles, one set of rules, one set of fees,” the panel’s chairman, Tom Hockin, told a Vancouver business group.

Critics of the current provincial-regulation system, including Flaherty, argue it adds unfair costs to investors and makes it harder from companies to raise capital.


The panel’s report contained model legislation for the creation of a national securities regulator with “willing” provinces, even if there is no unanimous agreement.

The panel stressed that such a structure would be strictly temporary.

However, it suggests that if after an unspecified period of time, a “sufficient” number of jurisdictions still do not join in, that Ottawa could allow market participants to join the single national regime directly.

For example, a company operating in Quebec could choose to be regulated by the national regulator even if Quebec is not participating in the regime and continues to regulate on a provincial basis.

Once a market participant has “opted in” to the national regulator, it would be able to undertake a prospectus distribution in any province or territory.

If some provinces are still holding out after a two-year transition period has passed following parliamentary passage of the new law, the panel recommends the federal government take unilateral action to impose a new regime.

Hockin and Flaherty defended the measures on Monday as good for the whole country, and predicted provinces would sign on.

“This is about market participants, about investors. This is not about provincial governments,” Hockin said.

The panel cited constitutional experts saying the federal government has the constitutional authority to regulate markets.

The report was welcomed by several financial industry groups, which see the current system as needlessly costly and inefficient.

“At least it’s defined and it’s feasible. It puts a little discipline into the process it won’t just fizzle out into nothing,” said Ian Russell, president and chief executive of the Investment Industry Association of Canada.

“The trick is we have to get the large provinces into this thing.”

Ontario -- which accounts for about 80 percent of all securities transactions -- reiterated its support for a single regulator on Monday. British Columbia gave preliminary support.

But the oil-rich Western Canadian province of Alberta said it was remained “steadfastly opposed to a single federal regulator”, which it said would intrude on its jurisdiction.

“If this is going to work, the regional differences, different attitudes toward business, different attitudes toward regulation they’re going to have to be ironed out,” said Eric Kirzner, a finance professor at the University of Toronto’s Rotman School of Management.

With additional reporting by Allan Dowd, Natalie Armstrong, writing by Jeffrey Hodgson; editing by Carol Bishopric

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