National securities regulator an age-old dream
By MATHEW INGRAM
Globe and Mail Update
A lasting ceasefire in the Middle East — or in Ireland; a miracle cure for spinal-cord paralysis; a single Canadian securities regulator. If this were the game show Jeopardy!, the category would be "Things that people have been wanting for decades but are probably impossible." The latest valiant effort to broach the subject of a national securities regulator comes from David Brown, chairman of the Ontario Securities Commission — and even he seems prepared for the fact that his attempts are doomed to failure, like those of the dozens before him who have pushed the idea.
At a recent meeting of provincial securities regulators, Mr. Brown spoke of the excessive duplication (or triplication, or quadruplication) of effort that corporations and other issuers have to engage in just to file a securities document. It's true that the Canadian Securities Administrators, an umbrella group, has streamlined things to a large extent, but most would agree with Mr. Brown that there is too much red tape.
The OSC chairman even had on hand a man who could discuss the idea in detail: Sir Howard Davies, chairman of Britain's Financial Services Authority, which was created in 1997 by the merger of 11 agencies. "Canada may be the only country in the world that does not have a national securities regulator," Mr. Brown said. "Simply put, there is no justification for imposing on our markets the cost of supporting a multitude of regulators." However, even as he proposed the idea, the OSC chairman watered it down to some extent by saying the provinces could opt out at any time.
Before Mr. Brown came out in favour of the concept of a single regulator, Toronto Stock Exchange president Barbara Stymiest was the one pushing the proposal — using as a rationale that the TSE had assumed all of the responsibility for equities trading in Canada, by absorbing the Canadian Venture Exchange or CDNX, and by taking over equities trading from the Montreal Exchange. Her call fell on deaf ears.
That shouldn't be a surprise, since such proposals have been ignored for the past 35 years. Mr. Brown's comments, in fact, were a carbon copy of comments made by several predecessors, the most notable being Edward Waitzer, who spent much of his tenure pushing the idea of a national regulator. Those proposals were later resisted by Mr. Waitzer's replacement: none other than David Brown. At the time, Mr. Brown said the CSA functioned as a "virtual" national regulator, and that was sufficient.
Even before Mr. Waitzer began his efforts, a draft proposal was circulated by the federal government to the provincial securities agencies in 1994 — but it was strenuously opposed by the Quebec Securities Commission, and to a lesser extent by the B.C. Securities Commission. BCSC chairman Douglas Hyndman, who said after Mr. Brown's recent comments that he didn't like the idea of a single regulator, didn't like it the last three times it was proposed during his tenure either: in 1994, 1992 and 1989.
But the proposal was ancient long before 1989. Law professor Philip Anisman co-authored a report that recommended a single regulator in 1979 — a report that was the culmination of a five-year study by the Consumer and Corporate Affairs department. That study was sparked by a proposal in 1967 by the federal Registrar-general, John Turner (who would later become prime minister) that Ottawa form a national securities agency. This in turn was the result of a task force, which took its cue from the Royal Commission on Banking and Finance, which made the same proposal in 1964.
Why does the idea never seem to fly? Former OSC chairman Stanley Beck may have put it best when he said "No one likes to put themselves out of business." Even though three provinces that used to have their own exchanges no longer have them (Alberta, B.C. and Manitoba) and many others never had one, provincial securities regulators are still convinced that they perform a unique function, and that their specific province requires a unique brand of regulation that would be ruined by a national agency.
"When someone says 'one size fits all,' you have to be sure one size really does fit all," QSC chairwoman Carmen Crepin said earlier this year when the idea came up again. "There are local particularities that continue to lend themselves to regulation at the local level." The same argument has been made several times by Mr. Hyndman during his tenure: that the West has a specific business culture that needs to be handled in a local way (although why this is has never been really been explored).
This rationale may have lost some force with the merger of the CDNX and the TSE, but there still seems to be plenty of regional resistance to the concept. That's why it will probably continue to surface — since it makes eminent sense — only to just as surely be shot down. |
