Policy-makers may talk a good game about the superiority of a single national regulator. But when actually creating rules, the existing regulators appear to covet the flexibility afforded by the current structure.
Take, for example, the divergent approaches that the provinces are taking to the emerging phenomenon of equity crowdfunding. Three of the five provinces that are participating in the federally led effort to create a co-operative capital markets regulator (CCMR) are introducing a new so-called “startup” exemption that would allow fledgling issuers to raise small amounts from individual investors through online portals. Yet, the regulators in Ontario – which also is a charter member of the CCMR initiative – have decided that a different approach makes sense for its market.
The Ontario Securities Commission is planning to introduce its own exemption later this year that would allow companies to raise financing via crowdfunding. But the province favours an approach that would require the portals that match investors with issuers to be registered. The proposal also would set higher maximums on both the amounts that companies can raise via crowdfunding and the amounts that investors can risk.
Harmonizing the provinces’ approaches would make more sense. The online world barely recognizes national borders, let alone provincial ones. Yet, regulators apparently have genuine philosophical differences on this issue. And, on a topic such as this – for which there is very little established regulation anywhere in the world, let alone in Canada – this sort of policy plasticity does appear to be truly valuable.
Indeed, policy flexibility often is cited as a strength of the current system in Canada, which falls under the purview under the Canadian Securities Administrators. And, in this case, that claim is borne out in practice.
There’s clearly a trade-off to be had between harmonization and flexibility. Given that Canadian regulators continue to use the current system’s capacity to take different directions on certain issues, it’s important that this strength not be surrendered to a rhetorical ideal of uniformity – whether the CCMR comes into being or not.
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