The long road to establish a Canadian national securities regulator has been riddled with detours and political inertia. Numerous studies, delayed legislation and a Supreme Court ruling all feature in the 50-plus-year history of the movement. But change may finally be coming in the not-so-distant future.
In the fall of 2016 Canada, the only G20 member lacking a federal body responsible for capital markets regulation, is expected to take a big step toward national regulation with the launch of the Cooperative Capital Markets Authority.
‘We’re closer now than we’ve ever been before,’ says Philip Anisman, a Toronto securities lawyer and principal author of a study commissioned by the federal government entitled Proposals for a securities market law of Canada. The study was published in 1979, and Anisman remains a passionate advocate of the proposed system.
‘The government of Canada regulates major financial institutions and the overall economy, but it has no involvement in the securities market. And the securities market is a national market that transcends provincial boundaries,’ says Anisman, who believes that with a national regulator in place, Canada will be better equipped to address international and systemic issues, like the 2008 financial crisis.
In the past, regional commissions have been slow to act on issues that affected all provinces and territories. Anisman argues that a national regular would increase efficiency across the board, from disclosure issues to fraud detection. But not everyone shares his zeal.
The case against
‘The national securities regulator is a bad idea,’ says Bryce Tingle, the N Murray Edwards Chair in Business Law at the University of Calgary. A member of the securities advisory committee of the Alberta Securities Commission and the exempt markets committee of the Ontario Securities Commission, Tingle is one of many industry professionals who have expressed disapproval of the Cooperative Capital Markets Regulatory System (CCMRS).
He believes Canadian capital markets are best served by the current passport system as each individual region has salient differences. Take, for instance, Alberta and Ontario: the capital markets within Alberta include a larger amount of smaller issuers than Ontario, and Alberta has a preponderance of oil and gas companies, whereas Ontario is heavily weighted in the financial sector.
‘One concern, therefore, about a national regulator, is that it would regulate in a way that makes sense in one part of the country, but create problems in another,’ says Tingle, who sees no evidence of systemic risk issues in the Canadian securities market. He notes that the US, which has the SEC as its federal regulator, fared far worse than Canada did during the 2008 financial crisis.
In the other camp, Andrew Cheatle, executive director of the Prospectors & Developers Association of Canada, welcomes the CCMRS. He hopes it will reduce costs, foster a wider base of investors and offer superior investor protection. ‘The time has come for it to be necessary. Certainly on the international stage, to have one voice is very important,’ he says.
Cheatle claims the passport system deters foreign investment because multiple commissions can appear complicated to outsiders, as opposed to one unified regulator. His sentiment is echoed by Greg Pollock, president and CEO of Advocis, the Financial Advisors Association of Canada.
‘Canada originally adopted the passport system from the EU,’ he says. ‘Similar to the EU experience, we’ve noticed that different jurisdictions within a passport system continue to have slightly different laws, local instruments and interpretations. This creates confusion and adds costs to operating within the capital markets, which are assumed by the end-consumer.’
What’s next?
For now, the CCMRS remains quasi-national. Only British Columbia, New Brunswick, Ontario (home to around 80 percent of Canada’s capital markets activity), Prince Edward Island, Saskatchewan and the Yukon have committed to joining the co-operative. The remaining territories and eastern provinces are expected to likely follow suit later, after careful due diligence. That leaves Quebec, Alberta and Manitoba on the outside looking in. All three provinces have made it clear they will not be participating in the new system.
Canada is more than a year away from the regulator becoming operational. Before that can happen, the Provincial Capital Markets Act must be passed and enacted by the participating provincial and territorial legislatures ‒ no small feat. The latest estimate for establishment of the regulator is fall 2016, but keep in mind this deadline has been extended in the past. For the latest updates and additional information on the proposed new system, check the CCMRS website.
Ciaran Ryan is a newsroom editor at Business Wire Toronto
