Proponents of a national securities regulator are not giving up the dream in the wake of the Supreme Court of Canada’s decision which rejected proposed new federal securities legislation as unconstitutional.
Ian Russell, president and CEO the Investment Industry Association of Canada, welcomes the decision, and says that he hopes it will accelerate the push to create a national authority.
Russell says that he’s optimistic that the drive to create a national regulator will not die with this decision. He points out that, although the court has rejected the proposal that the entire business of securities regulation should come under federal jurisdiction, it does recognize that there are areas of national interest, such as systemic risk. And, with the recognition that there is some room for federal jurisdiction, he hopes that the provinces and the federal government can work together to create a new authority and that the provinces will opt to join the effort.
While Russell concedes that by reaffirming provincial jurisdiction the decision does give the provinces more leverage in any initiative that seeks their participation, he is still hopeful that ultimately most of the provinces will decide to join.
This sense of optimism is echoed by Anita Anand, associate professor at the University of Toronto’s faculty of law and a long-time observer of the national regulator debate, who notes that, “There seems to be room in the judgment for the feds to regulate in areas of truly national concern, including in the area of systemic risk. In addition, the court is supporting a co-operative approach. Perhaps the federal government can move ahead on this basis as it has been.”
Similarly, the trade group for portfolio managers, the Portfolio Management Association of Canada, says that the decision, “clearly paves the way for a more co-operative federalism model if a national regulator is to ever become a reality.”
“There is more work to be done to move towards a national securities regulator, and the ruling provides some principles and boundaries to move in this direction,” says PMAC president, Katie Walmsley, adding that it supports a cooperative approach between the provinces and the feds.
Advocates for a national regulator insist that the need for national authority is undiminished. “Canadian investors deserve enhanced protection. Just as every Canadian should be entitled to certain consistent standards in transportation and public safety, they should also have equal access and protection within our capital markets — it can only be delivered through harmonized rules and standards,” Walmsley says, adding that market efficiency demands streamlined regulation, too.
Advocis, The Financial Advisors Association of Canada, says the Supreme Court’s decision only slows down efforts to establish a national securities regulator.
“Reports of the death of a national securities regulator have been greatly exaggerated,” said Greg Pollock, president and CEO of Advocis.
“We expect that discussions between the Canadian Securities Transition Office, the federal, and provincial governments will resume shortly on this issue,” he added.
The CFA Institute, the global association of investment professionals, says it remains optimistic that the creation of a national securities regulator is possible.
“We are pleased to see that the court’s decision urged a co-operative approach that would ‘allow Parliament to deal with genuine national concerns,’ and are hopeful that the federal and provincial governments will work together to establish a single securities regulator that will improve enforcement and increase protections for Canadian investors,” said Beth Hamilton-Keen, member of the Board of Governors of CFA Institute.
The provincial regulators themselves are being very circumspect about the decision. Bill Rice, chair of the umbrella group of provincial commissions, the Canadian Securities Administrators, and chair and CEO of the Alberta Securities Commission, says, “We welcome the clarity that the Supreme Court of Canada has now brought to the question of constitutional jurisdiction.”
Rice notes that the structure of Canadian securities regulation has been in doubt for the past couple of years, now, he says the system’s future is in the hands of the provinces. “It will be up to the provincial governments in Canada to determine the future structure of securities regulation in this country and the relationships that will exist among securities regulators,” he says. In the meantime, he notes, the provincial commissions are on the job.
Dwight Duncan, finance minister for Ontario, the only province that explicitly advocates the creation of a national regulator, says that it remains committed to the initiative, and that the government is carefully reviewing the decision to assess its implications.
“The court has noted that a national regulator can still be attained through joint government action, and Ontario remains committed to working with other governments to find a way to achieve that outcome,” he adds.
Howard Wetston, chair and CEO of the Ontario Securities Commission, indicates that the OSC will take time to review the decision.
In the meantime, the country’s largest securities regulator has its hands full with a variety of important issues, such as evaluating the proposed Maple transaction that would remake Canadian securities markets, reviewing emerging market issuers, and contemplating the adoption of new enforcement tools.
“We remain focused on regulating Ontario’s capital markets in the best interests of the province’s investors and market participants. We are currently dealing with important policy, enforcement, market infrastructure and other matters that will require our full commitment,” Wetston says.
“With respect to national regulatory initiatives, we will continue to work with other provincial and territorial securities regulators,” he adds.
The Toronto Financial Services Alliance expressed disappointment with the court’s decision, but said it was hopeful that the federal government can reach a compromise with the provincial and territorial governments.
Janet Ecker, president of the TFSA, said the multiplicity of securities regulators in Canada and the attendant costs to businesses is a tangible impediment to attracting international businesses to Canada. “We have a great reputation internationally in financial services, but the one negative that keeps being raised is the lack of a national securities regulator and our inability, as a nation, to speak with one voice on matters of securities regulation,” she said.
Ecker noted, however, that she is confident that the provinces will move quickly to find a solution with the federal government.