I have said on other occasions that we have reasonably good securities laws in Canada and we are blessed with good securities regulators. In my view, our securities laws and the calibre of our regulators compare favourably with the United States.
Historically, we have not been aggressive enough in enforcing our laws. This seems to be changing at the provincial level, and the initiative in the recent federal budget to allocate funds to set up special white-collar crime units across Canada to work co-operatively with the provincial authorities will bring additional muscle to this area.
The one area where our capital markets have a significant deficiency is in the lack of one securities regulator for Canada. Canada is the only G-7 nation not to have a single securities regulator. The Canadian Securities Administrators (CSA), comprised of the 13 Canadian regulators that regulate our one small market, have performed very credibly in developing initiatives to harmonize procedures and some rules, as illustrated by the voluntary mutual reliance system.
Nevertheless, the CSA is cumbersome and slow to respond to initiatives since a consensus is required, following which a process for provincial approval must be observed. As well, the CSA is not accountable to any elected officials and the system is starting to fragment.
In the latter context, the CSA is working on a uniform securities act, British Columbia is working on a simplified principles-based approach to regulation and, in Ontario, we have the five-year review committee with its proposed recommendations. All of these initiatives on their own are laudatory but unity of purpose is lacking. A single Canadian securities regulator is needed.
As we move towards a single securities regulator, we should take steps to make the voluntary mutual reliance system mandatory. Provincial regulators should be given, and should use, the power to delegate authority to a securities regulator in another province so that only one provincial authority would be involved in regulating the delegated activity.
This type of delegation of authority is necessary if a "passport system" is to be adopted whereby regulatory approval by one CSA member would be recognized by all CSA members. We should also amend securities laws to provide for mutual recognition, whereby the rules of the jurisdiction having the closest connection to a transaction or market participant will govern.
These two approaches will not solve many of our problems but they would be important steps along the way to a single regulator.
There are many important economic factors involved in making Canada a desirable place in which to invest. One significant consideration for both Canadian and foreign investors is the existence of one securities regulator for Canada.
Canada has a great future if we get our public policy right. One regulator is an important step in this direction.
© The Globe and Mail
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