In a breakfast speech to the Economic Club of Toronto today, Stephen Sibold, chairman of both the Alberta Securities Commission and the Canadian Securities Administrators, called for regulatory reform to take the shape of a passport model with uniform securities legislation.

“Do we renovate or rebuild? I believe the combination of harmonized securities legislation and the passport system are the tools needed to provide substantial renovation and significant improvement within the confines of existing securities regulation in Canada,” he said.

Sibold argued that the USL ensures inter-provincial harmonization and develops a national standard. “One that knits nicely with the U.S. requirements, but recognizes the reality that our capital markets are composed predominantly of small and very small companies,” he said.

He added that the proposed passport model has the advantage of ensuring that each market player only answers to one decision-maker, but allows each region to maintain local expertise. “Operated within the recently restructured CSA, we can have confidence that these various local decision-makers will continue to coordinate their efforts, working together to set priorities and develop strategic policy and allowing Canada to speak with a unified voice,” he said.

Sibold suggested that a national regulator isn’t politically viable. “In the absence of constitutional reform or, at least, significant and protracted political negotiation — that just doesn’t seem a realistic alternative. And I am not sure industry has the stomach or patience to endure a constitutional debate,” he said. “I believe meaningful change in the near term can only be accomplished through a series of incremental practical and achievable steps.”

He also pointed to the importance of maintaining similar rules to the U.S. “Because of our proximity to the U.S., Canadian markets and regulators do not have the luxury afforded to European and Asian markets, to develop a regulatory regime distinct from that of the U.S.”

But that doesn’t men we must adopt U.S. rules wholesale, Sibold argued, pointing out how small the Canadian market is relative to the U.S. He noted that approximately 71% of all publicly listed companies in Canada would be small by U.S. standards, including 29% of those listed on the TSX. “Tiered or proportionate regulation is just common sense. The system we develop must provide a harmonized regime that continues to be able to accommodate these companies,” he said.

“Finally, our regulatory response, although it must set harmonization as the most important priority, cannot stifle local innovation,” he insisted. “Regionalism in Canada has given rise to various innovations at the local level. In some cases, certain jurisdictions have acted as something of a pilot project, trying out new ideas that are later exported across Canada. In other cases, certain jurisdictions, being more attuned to issues that face the industries that are predominant in their own region, have developed regulatory initiatives to address those particular industries.”