OTTAWA – Finance Minister Jim Flaherty took a major step toward the establishment of a national securities regulator on Monday, creating an advisory office to draft legislation for the change.
But high hurdles remain.
The minister conceded not all the provinces are on board – particularly Quebec, Alberta and Manitoba, which support the current system allowing each province and territory to set the ground rules and regulations for securities trading and investment.
And, the federal Liberals are asking for a Supreme Court reference to determine jurisdiction, something Flaherty dismissed.
“No province or territory is compelled to join … (and) we are closing the door on nobody,” he said.
The government will announce a list of “core provinces and territories that will serve on an advisory council in the next few weeks, but the big new fish in the group will be British Columbia, which along with Ontario, comprises over 80 per cent of securities trading in Canada.”
A clear indication of B.C.’s change of mind on the issue came Monday when Flaherty appointed Doug Hyndman, the head of the province’s securities commission since 1987, to head the transition office for the next three years.
Bryan Davies, who has been chairman of the Canada Deposit Insurance Corp. since 2006 and who held a number of senior positions in the Ontario provincial bureaucracy prior to that, was named vice-chairman.
The transition team is charged with drafting legislation for a Canadian regulator within a year, but it is still uncertain how long after a law is drafted that one will be up and running, and how large a territory the new institution will govern.
Flaherty said a Canadian national securities regulator has been a priority for the Conservatives since they formed their first minority government in 2006.
“The appointment of such experienced individuals will ensure that the transition office has the expertise in securities regulation and financial stability that is required to launch this critical project for Canada’s capital markets,” Flaherty said.
The concept also has widespread support from the private sector, who would rather deal with one set of rules and regulations than 13.
“If the country is going to attract foreign capital, which it is going to need, a streamline, efficient system that dovetails into some of the other securities regulators around the world is critically important,” explained Brian Porter, the executive vice-president of risk and treasury with the Bank of Nova Scotia.
But Liberal finance critic John McCallum accused the government of exaggerating the benefits, saying the current passport system, which while adhering to individual jurisdictions also includes a great degree of co-operation and information-sharing between provinces and territories, is working.
“I think it is a good thing to have, but I also think the government has overhyped it. The countries with single regulators like the United States and the United Kingdom were the source and did very poorly in this financial crisis, so I don’t think it’s crucial for financial stability.”
Bloc Quebecois House leader Pierre Paquette called the move “pure provocation,” accusing the government of trying to isolate Quebec.
McCallum said given the staunch resistance by some provinces, it was important to establish if Ottawa has the constitutional authority to intervene in the issue.
But the finance minister characterized the reform as part of Canada’s work with other countries to fill regulatory gaps that triggered the global credit crisis that erupted last year.
“We have learned from the experience of other countries that systemic risk can arise from all parts of the financial sector, not just banking. Obviously that includes capital markets,” Flaherty said.