At a symposium on national securities regulation in Toronto today, Doug Hyndman, chair of the B.C. Securities Commission, argued that the industry must define ideal solutions to Canada’s regulatory problems before jumping into a debate over the creation of a national regulator.

Hyndman defended the existing Canadian system. He said that the current system is increasing cooperation and harmonization, and has the flexibility to respond to regional issues. Hyndman said that a national regulator would have faults of its own.

He also said that securities regulation does not fit neatly at either the national or the provincial level. “A lot of what we do is local. Despite all the talk about money zipping around at the speed of light, what we regulate is the conduct of people, and that requires on-the-ground knowledge.”

“I know that folks in Toronto don’t relate to this national-regional dichotomy because, for you, it’s irrelevant. You are confident your local issues would be well handled by a national regulator,” said Hyndman. Nevertheless, Hyndman stated that he is not dead set against the idea, suggesting that “we should start by identifying and analyzing the main problems in Canadian securities regulation and then consider what solutions are appropriate”.

He suggested that our most significant problem is that the cost and burden of regulation is too high, due to different rules among jurisdictions; multiple decision makers; and the number and complexity of rules. “This might all be justifiable if it contributed to better protection of investors and market integrity, but it doesn’t. In some cases, our excessively detailed and prescriptive requirements actually undermine those goals, as market participants follow the letter but not the spirit of the rules.”

He echoed a recent discussion paper from the BCSC calling for fewer rules on dealer conflicts of interest and other issues; replacing specific rules with more conduct-based regulation.

“With the current focus on the cost and effectiveness of regulation, we have an opportunity to find a new balance, where we carefully identify the problems requiring regulatory attention and craft the most effective solutions using all of the tools at our disposal: rule-making, policy guidance, enforcement of existing rules, compliance examinations, education, and moral suasion. And we have an opportunity to clear away the clutter from decades of legislating and rule making, and to develop a system that is clear, simple, and focused on the goals of securities regulation, not the mechanics of the system.”