In a letter to John Manley, Deputy Prime Minister and Minister of Finance, Harold MacKay recommends a Wise Persons’ Committee be established by the federal government and interested provinces to review the current securities regulatory system.

MacKay also recommends that the committee be mandated to recommend an appropriate model for securities regulation in Canada, and that it be formed as soon as possible in order to submit its report by Sept. 30, 2003.

“Ensuring that Canada has a modern and efficient system of securities regulation is an issue of national importance,” Manley said. “Mr. MacKay’s report provides an excellent starting point for a collaborative effort to ensure a regulatory framework that is flexible and responsive to regional capital markets and emerging public companies while promoting investor protection.”

MacKay said that while he wouldn’t limit the committee’s scope, he does recommend two specific models:

  1. an enhanced version of the present system, which could include the adoption of the single passport model advocated by some market participants, and which builds upon the existing mutual reliance mechanisms of the CSA; or
  2. a single commission model in which governments electing to participate would pool their authorities in a single regulator administering one set of rules.

Mackay also calls on the federal government to provide the committee’s necessary funding.

MacKay was appointed as the Minister’s Special Representative to advise on securities regulation on October 3. In reaching these recommendations, he consulted a wide range of market participants across Canada and found that there was a consensus among stakeholders that while the current system is not without merit, it must be improved significantly and in a timely manner. “This extensive common ground, shared by most I consulted, should offer a platform for the necessary change,” said MacKay.

MacKay said that he discussed the underlying issues with investor advocates, institutional shareholders, investment dealers and other market intermediaries (large and small), representatives of Canadian businesses (again large and small), industry associations, representatives of exchanges and regulatory organizations, professionals who advise both businesses and intermediaries, interested academics, and the existing regulators.

“Some observers have suggested that the best way to proceed would be for the federal government unilaterally to exercise its jurisdiction to the fullest extent to resolve the concerns with the present system mentioned earlier. I do not agree. The problems which exist can best be solved by a collaborative process. There should be active participation from the provinces, who have much to offer and gain,” MacKay said.

He indicated that the goal of the review should be a system that:

  • provides sound protection for investors;
  • efficient capital markets;
  • adopts an approach to regulation, monitoring and enforcement that ensures that market participants, including investors, everywhere in Canada have equal protection;
  • encourages dynamic and innovative capital markets across the country and encourages local innovations to respond to particular local needs and opportunities; and
  • presents international investors, governments and regulators with a positive image and perspective on securities regulation in Canada and with a sense that Canada is able to speak with one voice in international securities regulation discussions.