Canadian Finance Minister Readying Draft Securities Act Creating Federal Securities Regulator

Noting that 13 provincial securities regulators for Canada is a regulatory anomaly, Finance Minister Jim Flaherty said that the government will move forward quickly to establish a Canadian securities regulator. In recent remarks in Toronto, he said the lack of a national securities regulator is a source of awkwardness if not embarrassment internationally, when you look at the Canadian financial system, the strength of its financial institutions, and the overall integrity of the financial system, and then realize that that there are 13 securities regulators. There is even a Financial Consumer Agency of Canada, a type of agency the U.S. is trying to implement in financial reform legislation.

The government will have the draft Securities Act ready by spring, noted the Minister, and will then refer the bill to the Supreme Court of Canada for an opinion on the constitutional jurisdiction of the federal government on this issue. Subject to the direction of the Court, the government will move forward with the Canadian securities regulator. A lot of work is being done on this, he noted, and most of the provinces and territories are working with the government to accomplish the design and goal of a Canadian securities regulator. A transition team has been formed, which is headed by Doug Hyndman, the past Chair of the British Columbia Securities Commission.

Canada is the only industrialized country without a common securities regulator. And the present system of thirteen provincial regulators is seen by many as cumbersome, fragmented, and lacking the proper tools of enforcement. In earlier remarks, the Minister has emphasized that one great advantage of a common regulator would be the establishment of a national enforcement strategy. Currently, some provinces lack sufficient expertise to investigate and prosecute complex cases.

The Minister also believes that moving to a common securities regulator with a new common securities act would provide a unique opportunity to introduce more principles-based, proportionate regulation. This would help establish a regulatory regime that is more flexible and more responsive.

The current passport system is viewed as inadequate in allowing Canada to compete successfully at the international level. For example, with the passport system, investors deal with 13 securities regulators, with 13 sets of laws, however harmonized, and with 13 sets of fees. Further, the passport system does not have a national coordination of enforcement activities, nor does it address the need to improve policy making. It is still necessary to obtain agreement from 13 regulators to make changes to the rules.

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