Expert panel recommends single securities regulator

The proposed model involves a single securities act and a single set of regulations and rules. It recommends a single point of contact for capital market participants and a single fee structure, with fees set on a cost-recovery basis. It further proposes a head office and functionally empowered regional offices. If implemented, commissioners of the single regulator will be appointed with a view to ensuring geographic balance.

“The shortcomings of the present system are clear: it remains too slow, too cumbersome, and too expensive. At a time when speed counts, policy development is protracted, negatively affecting Canada’s ability to respond in a timely manner to national and global developments,” the report noted.

Canada is currently the only developed country without a national securities regulator.

The move is intended to improve the current system by creating a more coordinated and harmonized securities regulatory environment. The focus is on reducing complexity and compliance costs for market participants.

Joanne De Laurentiis, president and CEO of The Investment Funds Institute of Canada, says she isn’t too concerned about the form of regulation; she cares more about the outcome. “The most important thing is the consistency of the consumer experience across provinces,” she says. “The regulator should be able to allow mutual funds to enhance value for investors, and deliver a consistent consumer experience.”

Federal Finance Minister Jim Flaherty, who commissioned the expert panel, has been pushing for a single regulator with the hope that a single authority would save money and improve enforcement during these recessionary times.

Ian Russell, president and CEO of The Investment Industry Association of Canada, noted in a press release that the recent financial crisis demonstrates the need for a single regulator to help facilitate cooperation among domestic and international financial sector regulators, to monitor market trends, and identify systemic risk. “The single regulator will implement timely regulation in response to market developments.”

This, however, is not a first-of-its-kind report to be commissioned by the government. Similar efforts before — Crawford Panel and the Wise Person’s Committee — have pitched for a national regulator. While the terminology has differed over the years — single, common, Canadian, national, or federal — the conclusion of virtually every study has been the same: Canadians are ill served by such a balkanized system.

In the past, Quebec and Alberta have been the biggest opponents of a single regulator, while Ontario has been a long-time supporter.

Mindful of expected opposition, the seven-member panel suggests that if certain provinces choose to opt out, companies and other market participants should have the option to be regulated by the national body.

“If after a reasonable period of time, some provinces or territories remain outside of the new structure, market participants — issuers and registrants — in those non-participating jurisdictions should have the opportunity to opt-in and reap the benefits of a single, national securities regulator, administering one Act, applying one set of rules, and collecting one set of fees,” according to the report.

In recent months, all of the provinces and territories except Ontario, which supports a common regulator, have been working on their own reforms, called Passport System, to streamline their rules and regulations. The system would allow each jurisdiction to continue setting policies and rules according to local needs while coordinating their efforts nationally.

Although the passport system is a major step forward, the report says its application is limited and it still falls short of what is required in today’s global marketplace.