Canada’s proposed new securities regulator is due to be rolled out next year, and named the Capital Markets Regulatory Authority (CMRA). But the regulator is not ready for launch, according to a report by the C.D. Howe Institute. Author Harvey Naglie argues that in its current form, the proposed regulator suffers key flaws.
The federal government, together with five provinces (Ontario, British Columbia, Saskatchewan, Prince Edward Island and New Brunswick) and one territory (Yukon) are currently developing a securities regulator. But there’s no assurance or even likelihood that the key provinces of Quebec and Alberta would join the regulator, writes Naglie.
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The CRMA is meant to streamline Canada’s capital markets regulatory framework to better protect investors, foster more efficient capital markets and manage systemic risk. So it makes sense that Canadians expect the CMRA would offer many of the benefits of a single, national regulator.
“Unfortunately, these expectations are destined to be disappointed, if not betrayed, because the CMRA in its current form is not, and will not be able to operate as a single national regulator,” says Naglie, a former senior policy advisor with the Ontario Ministry of Finance.
While the original objective of this recent securities regulatory reform initiative was the creation of a single national regulator, adds Naglie, a combination of constitutional imperatives and political choices preclude that outcome. So the CMRA is a significantly compromised Plan B, he notes, that will lack the ability to unilaterally impose its regulatory authority across the country.
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Further, in its current form, it is not obvious that the CMRA will constitute an improvement to Canada’s existing system, he adds. Provincial securities regulators have, in recent years, collaborated to create a relatively high degree of harmonization, which has fostered vibrant and resilient capital-market growth in Canada.
With so much at stake, it’s vital that the participating jurisdictions provide better information about what exactly the Canadian public will be getting and sacrificing, adds Naglie. “The participating jurisdictions need to put the brakes on the current initiative and defer its launch pending an independent review and analysis of the CMRA.”