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Canada to maybe get a single securities regulator, sort of

by Greg Klein | September 19, 2013

Canada to get a single securities regulator, sort of

Michael de Jong, Jim Flaherty and Charles Sousa, finance ministers for B.C., Canada and Ontario,
give each other self-congratulatory handshakes. (Photo: Government of Canada)


Alberta and Manitoba were taken by surprise, while Quebec threatened a court battle. But the governments of British Columbia, Ontario and Canada claimed a major step towards creating a single national securities regulator on September 19. Initially run by B.C. and Ontario, the “co-operative” regulator would “better protect investors, enhance Canada’s financial services sector, support efficient capital markets and manage systemic risk,” according to a federal statement. Currently each of Canada’s 13 provinces and territories has its own agency, making Canada the only developed nation without a federal regulator.

The proposal—which has hurdles to clear before implementation—follows a previous federal effort that was rejected by a 2011 Supreme Court decision. At the time judges unanimously decided the proposal would usurp the provinces’ constitutional powers over property and civil rights. The ruling did leave open the possibility of “a co-operative approach that permits a scheme that recognizes the essentially provincial nature of securities regulation while allowing Parliament to deal with genuinely national concerns.”

[For those who reject participation, the regulator would negotiate] an interface mechanism… such that the co-operative capital markets regulatory system contemplated by this agreement is, effectively, of national application.

The feds now emphasize that “each of the participating jurisdictions is addressing matters within its constitutional jurisdiction and is neither surrendering nor impairing any of its jurisdiction, with respect to which it remains sovereign.”

The new agency would have a board of directors, a regulatory division and an adjudicative tribunal, and would administer “the provincial and federal legislation and a single set of regulations under authority delegated by the participating jurisdictions.” With headquarters in Toronto, offices in each participating province (there are no plans for territorial offices) would provide “the same range of services that are currently provided in those offices.” The appropriate minister from each jurisdiction would join the federal finance minister in overseeing the new regulator. To participate, provinces and territories would have to pass matching legislation.

An optimistic timeline that includes a public comments process and somehow winning the support of other jurisdictions sees the regulator starting work by July 1, 2015. For those who reject participation, the regulator would negotiate “an interface mechanism… such that the co-operative capital markets regulatory system contemplated by this agreement is, effectively, of national application.”

But the Globe and Mail reported Quebec Finance Minister Nicolas Marceau saying his province wouldn’t “hesitate to bring the matter in front of the courts.”

In an e-mail to the G&M, Alberta Finance Minister Doug Horner wrote, “I am only learning of this agreement now and will need time to review it before understanding its full implications. I am surprised that all the provinces were not consulted on this proposal before it was announced.”

Manitoba Finance Minister Stan Struthers also learned about the proposal through media, according to the Financial Post.

Referring to Ermanno Pascutto of FAIR, the Canadian Foundation for Advancement of Investor Rights, the G&M stated, “He said the proposal for a national enforcement body to investigate securities crimes—including fraud and insider trading—is a huge step forward toward streamlining the cumbersome current process for investigating crimes that often stretch across provincial and even national borders. He said the organization could even potentially replace the RCMP’s current fraud investigative unit known as the Integrated Market Enforcement Team, which has had a poor track record in laying charges and winning its cases in court.”

Queen’s School of Business professor Steven Salterio praised the idea of separating enforcement from adjudication, the FP reported. It’s “something that has worked well in Quebec, which currently has the most effective system in Canada,” he told the paper.

The proposal goes to a meeting of provincial and territorial ministers in Quebec City next week, the FP added.

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