The Ontario Securities Commissions cannot support the new principal regulator system developed by the Canadian Securities Administrators, it says in a statement. It allows too much local difference and undermines existing uniformity and investor protection.

The OSC says the CSA proposals “endorse the idea of different regulatory standards for market participants depending on where their head office is located, undermining the CSA harmonization efforts that the OSC continues to strongly support.”

OSC vice-chairman Susan Wolburgh Jenah says that although the OSC had worked with other CSA members to come up with a system that would further harmonize and simplify Canada’s regulatory regime, the commission believes the current proposal falls short of this objective. “The proposal moves Canada’s capital market further away from achieving the important objective of establishing a single, consistent set of securities laws,” says Wolburgh Jenah. “The principal regulator system would allow different standards for public companies doing business in Ontario, creating a competitive disadvantage across Canada.”

The intent of the proposed regime is to create a single window of access for market participants so they can comply with a single set of securities laws and deal with one regulator. However, Wolburgh Jenah says, the system is not based on a single securities code — instead, it permits market participants to comply with different laws based on the location of their head office and, for the first time, would allow regulators to export these different standards into other jurisdictions. The OSC believes this creates inefficiency, an unlevel playing field and will result in increased complexity and confusion for market participants.

Wolburgh Jenah adds that the proposed system also introduces investor protection risks that appear to outweigh any incremental benefits or improvements to the current system. And it may also effectively limit the OSC’s ability to protect investors in Ontario in situations in which public companies based in other jurisdictions fail to meet the OSC’s disclosure standards, she says.

“The OSC continues to champion the need for a uniform and streamlined regulatory system in Canada and will continue to work with other CSA members to achieve a single code, a fair fee structure, and streamlined access to the capital markets for all participants,” she says.

The OSC has published its position on the principal regulator system on its Web site and invites public comment by July 27.