In an unprecedented move, the chairmen of the British Columbia, Alberta, and Manitoba securities commissions, together with the chairman of the Canadian Securities Administrators (also the chairman of the Autorité des marchés financiers) descended on the TSX broadcast centre in Toronto.

Their mission was to pitch their concept of a simpler, cheaper, faster system of securities regulation — known as Passport 2 — to the Ontario-based market participants they had invited to their information session.

Their collective hope was to persuade us to persuade the Ontario government to back off in its support of the single Canadian securities regulator contemplated by the June 2006 Crawford Panel report, entitled Blueprint for a Canadian Securities Commission, and to sign on to the passport system being promoted by the other Canadian provinces and territories.

As a background to their remarks, a banner marched continuously across the TSX broadcast screen promising: “Simpler, cheaper, faster securities regulation coming soon.” It did not take the audience long to note the gap between what was being said and what was being promised.

For most of the audience, the proposed passport methodology was more of the same measures that have been the foundation of streamlining Canadian securities regulation: uniform securities acts, harmonization of rules and approaches, identification of a principal regulator for each issuer or dealer, empowering decision-making by such a principal regulator and one-stop filing.

For years, scores of regulators across Canada have been working on refining and improving these measures. Each refinement (accompanied by its own bureaucracy) helps, but the refinements do not eliminate the fact there are still 13 jurisdictions, with differing resources and priorities that must be dealt with. Ontario has been and continues to be a key player in developing and making these measures work, and it has dedicated huge resources to the effort.

Passport 2 is the latest iteration of these measures. The proposals for Passport 2 are set out in the proposed National Instrument 11-102 and related documents that the CSA (excluding Ontario) published for comment on March 28. On the same day, the Ontario Securities Commission issued Notice 11-904 advising that it will not be adopting Passport 2, adding, “Although the proposals may add incremental administrative improvements and efficiencies to our current regulatory processes, it does not resolve the need to modernize Canada’s securities regulatory structure.”

There were many questions at the latest info session about how Passport 2 would work if the OSC is not a participant. And there were many questions (not satisfactorily answered) about:

> Harmonization. How would this be sustained, particularly as there are exceptions for local rules?

> Principal Regulator. How would the principal regulator be determined?

> Cheaper And Faster. Will Passport 2 really be cheaper, given that fees will still be payable to multiple jurisdictions? And will it be faster?

There were no answers to questions about who would speak for Canada internationally.

A gaping hole in Passport 2 is the issue of enforcement. Passport regulators say they are working separately on enforcement. But what happens in the meantime if, for example, one province is the principal regulator and investors in another province are wronged by issuers or dealers operating in the latter province?

These issues have been raised in multiple reports. Fundamental investor protection is at stake.

The intransigence of the CSA and its political masters is contrary to the public interest. Passport regulators need to fulfil their commitment to a common securities regulator that would interpret, apply and enforce a commom set of securities laws consistently for all market participants, and draw up a reasonable time frame for getting there. That would probably bring Ontario into the fold and break the impasse. IE