National securities regulator closer to creation

It’s one of those items in Canadian politics that always vaguely seems like a good idea, but never gets done: establishing a national securities regulator to replace the 13 provincial and territorial ones, or at least replace as many of them as possible. The result would be a more streamlined regulatory environment in Canada on par with competing nations that have highly developed capital markets.

Current federal Finance Minister Joe Oliver is picking up where Jim Flaherty left off, after having the file kick around for at least eight years.

On July 9 Oliver held a news conference to hail Saskatchewan and New Brunswick’s addition to a new national regulatory scheme dubbed the “Co-operative Capital Markets Regulatory System,” joining economic heavyweights Ontario and B.C. (The latter two and the federal government signed an agreement in principle to create a national securities regulator in September 2013.)

Oliver spoke to the media at an event in Ottawa, flanked by Gordon Wyant, Saskatchewan’s Minister of Justice and Attorney General; Troy Lifford, New Brunswick’s Minister of Justice; Michael de Jong, B.C.’s Minister of Finance; and Charles Sousa, Ontario’s Minister of Finance. While four out of 13 jurisdictions doesn’t sound like a lot, the four provinces now on-board represent three quarters of Canadian-listed companies, with a total 53% market capitalization.

Oliver commented that foreign governments looked at Canada’s 13 regulators with “bemusement” and said the current system has added “cost, regulatory uncertainty, weakened enforcement capacity and an uneven oversight of systemic risk.”

The federal government says that a single national regulator “will strengthen Canada’s capital markets by providing better protection to investors, enhancing Canada’s financial services sector and managing systemic risk.”

As envisioned, the national regulator would administer a single set of regulations, reduce red tape for businesses, and be self-funded through a single set of fees. It would be directed by an independent board with extensive capital markets-related expertise, and overseen by a council of ministers from all participating jurisdictions. At the same time, each participating province would have its own regulatory office.

This latest agreement includes an amendment with two more deputy chief regulators to accommodate the participation of smaller jurisdictions in the governance structure: one representing Saskatchewan, Manitoba, the Northwest Territories, Nunavut and Yukon (to the extent that they are participating jurisdictions); and another for New Brunswick, Nova Scotia, Newfoundland and Labrador, and Prince Edward Island (again, to the extent that they are participating). These would be in addition to the deputy chief regulator based in both B.C. and Ontario, as well as Alberta and Quebec, if they participate.

Oliver used the occasion to repeat the invitation to all remaining provinces and territories to join the new single regulator system.

As anyone familiar with the elusive national regulator saga knows, the key holdouts have always been Quebec and Alberta. That hasn’t changed, with representatives from both provincial governments within hours once again dismissing any suggestion they’d come on-board.

Constitutionally, the regulation of capital markets in Canada remains a provincial jurisdiction, hence structuring the national regulator as a voluntary, co-operative effort between the provinces and the federal government, rather than a stand-alone national entity run solely by the federal government, imposed through a constitutional change.

Oliver says a transition plan will help in integrating existing securities regulatory entities into the new Capital Markets Regulatory Authority. He expects to have the office up and running by the third quarter of 2015.