Faced with competing visions for the structure of securities regulation, and diverging regulatory philosophies, it’s become harder to achieve harmonization within the existing system, notes the country’s top regulator, Bill Rice.

In the Alberta Securities Commission’s (ASC) new 2014 Annual Report, Rice, who is both chairman and CEO of the ASC and chairman of the Canadian Securities Administrators (CSA), indicates that the tussle over the regulatory structure has made it tougher on the existing system.

“Already stressed by the ongoing structural debate and contest for national control, harmonization has become an even greater challenge in an environment where securities laws are seen to be appropriate for differing purposes,” he notes in the report’s message from the chair.

Without specifically citing Ontario’s initiative to encourage gender diversity in public companies, which was recently joined by several other provinces, the report points to increased differences in regulatory philosophy between provincial authorities.

“The ASC has been reluctant to insert itself, through the use of its powers to require stipulated disclosure, into the setting of standards for corporate conduct, provided that conduct is fair to all participants,” it notes. “In our view, corporate law provides the means by which shareholders may influence corporate conduct and goals; securities laws provide the requirements that allow shareholders to have access to all relevant information, in a timely manner, to make informed investment decisions. These views are not held or demonstrated consistently by securities regulators or provincial governments in other jurisdictions.”

This difference in philosophy comes against a background of disagreement over the proper structure for securities regulation in Canada, too. Alberta, which is the second-biggest securities market in Canada, has long argued against national regulation; and, it has resisted the latest effort to create a cooperative regulator, which recently added Saskatchewan and New Brunswick to an existing agreement between Ontario, British Columbia and the federal government. Indeed, Rice notes that Alberta now advocates an alternative model that would include the creation of a national enforcement agency, a national adjudicative tribunal, and a council of ministers to oversee the CSA.

Still, “despite ongoing structural challenges and heightened philosophical differences,” the report notes that the ASC accomplished “a great deal” within the existing CSA in the past year; including making progress in several policy areas and compliance efforts.

The ASC also reports that it had its best year ever in collecting enforcement penalties, including fines, disgorgement and costs orders, by collecting more than $2.5 million during the year; compared with less than $250,000 in 2013. It notes that the improved performance came “through compelling of the financial statements of debtor, issuance of garnishee orders, conduct of debtor examinations and liquidation of seized assets.”

A court challenge has been launched in connection within $2.1 million of this amount, the report says, although the ASC says that it believes that its order will be upheld in court.

The ASC says that it is also pursuing jail sentences in particularly serious cases. It notes that it initiated four new quasi-criminal prosecutions in provincial court over the past year, and that it now has 13 cases on the provincial court docket. “These prosecutions have generated a number of constitutional challenges to our legislation and processes, and procedural delays. Nevertheless, we are determined that our considerable efforts are warranted to address the most egregious of behaviour,” it says.

Looking ahead, it suggests that it will be stepping up its compliance and enforcement efforts in the exempt market in the year ahead, noting that “Participants in the exempt market can expect heightened engagement by the ASC in the exempt market in the coming months.”

In terms of its financials, the ASC reports that it lost $470,000 in fiscal 2014, which was much better than the $7.2 million loss it budgeted for, and better than its loss of $3.9 million in fiscal 2013. The 2014 loss was much less than expected as its revenues exceeded budget by $3.0 million (due to stronger penalty collections, improved investment income and higher fees driven by strong markets), and costs were $3.7 million less than budget because of staff vacancies, operational cost control, and a budget contingency of $1.5 million that was not required.

The ASC continues to forecast budget losses for the next three years, noting that fee increases are unlikely as it has adequate accumulated funds to sustain the shortfall. For fiscal 2015, it is forecasting revenues of $32.4 million, which assumes that fee revenues and other income will remain consistent with the 2014 budget. Expenses are budgeted at $40.4 million, which would represent an increase of $4.6 million over actual expenses of $35.8 million in 2014 due to compensation increases, new hires, and training costs of $2.3 million; $1.3 million for increases in leased space operating costs, investor education and professional services; and, a $1.0 million contingency provision. It forecasts an operating loss of $8.0 million that assumes full use of the $1.0 million contingency.