RE: The CCMR: Retaining flexibility, Investment Executive, June 2015

Your editorial makes a self-contradictory argument. Because different provinces often take “different directions on certain issues,” flexibility is more important than harmonization in rule-making. In fact, these regulatory differences for similar businesses across Canada’s capital markets result in a high price to be paid in terms of market costs and inefficiencies in order to accommodate so-called rule flexibility.

The reality is that the substantive differences referred to in the securities rulebook, such as those that govern advisor and firm registration or prospectus exemption, can be traced more to “philosophic differences” among the provincial regulators than to substantive structural differences in regional markets. The capital needs of small business are similar in all parts of the country, and investor protection standards are the same. There is no sound rationale for substantive rule differences in one province from another. Yet different rules across the regions create unnecessary costs and inefficiencies for transactions that typically span the national market, interfering with capital-raising and securities trading. These costs raise the cost of capital for small business and the transaction fees for investors.

Regulators need to resolve their philosophic differences to find the agreed-upon right balance between financing costs and investor protection. The cooperative securities regulator, with a closely integrated staff placed across the country, a common culture and an overseeing expert Board of Directors, provides the necessary discipline to write harmonized rules — the critical ingredient for efficient, competitive and confident markets.

Ian Russell
President and chief executive officer
Investment Industry Association of Canada