Feds create co-operative securities regulator

Under an agreement in principle that was unveiled today, the proposed regulator would have its executive head office in Toronto and a “nationally integrated” executive management team. The provinces would retain jurisdiction for regulation but would rely on a common uniform securities act, and complementary federal legislation would be introduced to address certain national issues, such as criminal matters, systemic risk, and national data collection.

The proposed regulator would operate a regulatory division and an adjudicative tribunal that would administer the provincial and federal legislation, and a single set of regulations under delegated authority from the provinces that participate. A Council of Ministers from each participating province would oversee the new authority, and there would be a regulatory office in each participating province.

The new body would be self-funded from a single, simplified fee structure that, the government says will “not impose unnecessary or disproportionate costs on market participants.”

B.C. and Ontario promised to reach out to the other provinces and “use their best efforts and work together” to get the other jurisdictions to sign on.

The announcement follows a pledge by the federal government in its latest budget that it would either move forward with a co-operative regulator, or that it would take jurisdiction over areas of regulation that the Supreme Court of Canada indicated could be considered federal issues in its December 2011 decision that rejected the government’s most recent effort at creating a national regulator.

Ontario has long been on board with a national regulator, and B.C. was initially onside with the most recent federal effort, but later backed away, indicating that it preferred a more co-operative structure.

It remains to be seen if any other provinces buy in, and whether the structure proposed today meets those objectives, without surrendering too much provincial power. Earlier this year, the provinces (apart from Ontario) announced that they planned to create an agreement for more co-operative regulation based on uniform legislation that may formalize the existing Canadian Securities Administrators (CSA) and they are slated to finalize that agreement at a meeting on Sept. 23.

“B.C. has consistently supported the concept of a co-operative securities regulatory system that respects constitutional jurisdiction, builds on the strong foundation of the current system, improves enforcement, and is responsive to regional markets such as B.C.’s venture capital markets,” said Michael de Jong, B.C.’s minister of finance.

“This agreement meets those principles and priorities. I hope other jurisdictions give serious consideration to joining the co-operative system,” he said.

“A co-operative securities regulator based in Toronto will provide increased protection for investors, strengthen the competitiveness of Canada’s economy, lower costs and enhance the reputation of Canada’s financial services sector leading to more jobs and growth,” added Charles Sousa, Ontario’s minister of finance.

“This is a commendable example of co-operative federalism working to address today’s market realities,” said federal Finance Minister, Jim Flaherty, who has along championed a national regulator.

“All of us listened and we came together, putting aside our differences to focus on a common goal: to modernize our capital markets and to make them more competitive,” Flaherty added.