Securities regulators agree to disagree, seek uniformity instead of national body
PAULA ARAB
Canadian Press
Ed Waitzer, a former member of the Ontario Securities Commission, is not optimistic that the securities industry will change its system of 13 separate regulators. (CP/Bill Becker)
TORONTO (CP) - The securities industry agrees on this: Canada's system of 13 separate regulators is outdated, costly and in need of reform.
But how should it be changed? The answer has the provinces tugging in different directions, leading observers to conclude that this long-running issue - once again the debate du jour - is unlikely to be resolved anytime soon by the provinces, territories and Ottawa. "I'm not all that optimistic," said Ed Waitzer, a former member of the Ontario Securities Commission.
"This debate has been going on ever since I started at the stock exchange in the mid-'70s," he said recently. "There's lots of good ideas, but not a lot of political will or incentive."
So instead of trying to come up with a national regulator - a concept that works almost everywhere else in the world - the Canadian securities industry will be satisfied for now with national uniformity.
The Canadian Securities Administrators - the umbrella group for the provincial and territorial commissions - has announced a two-year initiative to create a standard securities act that could win approval in all jurisdictions.
While keen to have one law, which will eliminate redundancies and remove duplicate costs for companies doing business in more than one province, the provincial securities commissions are otherwise in disagreement.
Ontario likes the idea of a single regulator for all financial services, chosen and run by the provinces.
But British Columbia, Alberta and Quebec fear such an approach will potentially have 13 bosses and be too Toronto-centred. British Columbia wants to move away from detailed regulation towards a system with greater emphasis on broad principles.
Quebec wants uniform laws across Canada and a single regulator in Quebec for the province's financial system - including insurance, banking and securities regulations.
"We don't think a national regulator is the solution," said Denis Dube, a spokesman for the Quebec Securities Commission.
"A national commission would be based in Toronto with a Toronto point of view. I think it's important that a commission must be grounded with its market. It's important to pay attention to the needs of the regions."
Dube said the province is open to working with the other commissions but added:"Working together is not a piece of cake."
British Columbia wants to go further than the Canadian Securities Administrators' call for harmonized laws, saying the system needs to be deregulated at the same time.
"You're not going to relieve regulatory burden that people are concerned with unless you also simplify the rules," said B.C. commissioner Brent Aitken, the head of the deregulation committee who just got back from a road trip to major Canadian cities.
Aitken met with members of the securities industry for comment on the province's radical approach, which includes eliminating prospectuses - the detailed company reports for investors.
None of the ideas was "rejected outright," he said.
From an investors' point of view, the British Columbia approach raises eyebrows. It would mean less information regarding a firm's plans, such as what it will do with funds it raises on stock markets.
Some view the move as a step backward at a time when financial disclosure is at the forefront of investors' concerns, with one scandal after another - including the dramatic fall of U.S. energy giant Enron Corp.
Investor activists argue that a national regulator would have more clout to punish those who break securities laws.
At the very least, a more efficient regulator would free up resources for enforcement, said Steve Foerster, a stock market expert who teaches finance at the University of Western Ontario in London, Ont.
"Let's be clear, we won't eliminate scandals simply by moving to one national body but if we can devote more resources to enforcement we will have a better shot."
From an economic point of view, the regulatory system is costing the country money. Our capital markets are less competitive because the system is complicated and expensive, said Waitzer, the former OSC member.
"No one is being attracted to the Canadian capital markets on the basis that it's the most efficient or the best-regulated in the way that people are attracted to other financial centres," he said.
"Being second-best is not a good option and clearly our securities regulation system is at best a second-best system."
Countries around the world have bridged regional differences and reformed their systems.
In Australia, all local stock exchanges were recently brought together under one national exchange. State regulation was consolidated into a national system that continues to have regional commissions that deal with local matters.
In February, Europe legislated a single market with a two-level regulatory system - broader principles are dealt with at the European level while member states are responsible for enforcement.
"Canada is probably unique worldwide in that we don't have a national body that's overseeing securities but rather relying on the provinces," said business professor Foerster.
"It's probably a reflection of the uniqueness of Canada, in particular the Quebec situation," he said, referring to "power struggle issues" between the provinces and Ottawa.
Ultimately, reform lies with politicians, prompting Barbara Stymiest, president of the Toronto Stock Exchange, to call for the premiers to put it on the agenda when they meet for their annual summit this summer.
She and other securities industry leaders have been speaking out about the pressing need for a simpler, cheaper system amid globalization.
"I think we will talk about this as an issue, but until we can get co-operation between provinces and the federal government - in particular between Quebec and the federal government - then nothing is going to happen," said Foerster.
"I don't think anything is likely to happen in the foreseeable future. Everybody wants to protect their own turf." |
