The case for a national securities regulator in Canada has not been made, and the existing provincial system is suffering as a result of this latest push for from the federal government, argues a new paper released Tuesday by the University of Calgary’s School of Public Policy.

Written by Pierre Lortie, senior business advisor at Fraser Milner Casgrain LLP, the paper warns that a centralized system of securities regulation, “runs the risk of turning into a disruptive, costly and regrettable initiative that will not give Canadians what they expect, while erasing many of the benefits achieved so far.”

The paper argues that the current provincial system of securities regulation has demonstrated flexibility, a capacity to adapt to changing circumstances, and the ability to respond to particular industry or regional needs.

“It has also provided strong assurances against the hasty adoption of disruptive and costly regulations because it is less susceptible to the imposition of politically expedient or faddish requirements or the influence of a dominant industry or interest groups,” it says.

The paper concludes that the arguments made to justify the federal government taking jurisdiction over securities regulation “lack a solid foundation and, too often, misrepresent the situation”, and it argues that the existing regulatory system is suffering as a result.

“It is regrettable that the actions of the Canadian government, taken in the pursuit of narrow corporate and bureaucratic interests that are presented as Canada’s interest, are putting in jeopardy a national effort that was achieving substantial success at relatively little cost,” the paper says.

The paper warns that in the short term, the national regulator initiative undermines the efforts required to sustain the existing system, diverts regulatory resources, and disrupts ongoing initiatives including the review of current derivatives regulation, the development of new point-of-sale disclosure requirements for mutual funds, and the development of a proposal for hedge fund regulation.

Moreover, in the long term, the paper says that a centralized regime “would lack the dynamic efficiency and the responsiveness to the particular characteristics of regions, industries and categories of issuers. It would also fall short in providing safeguards against fads, political expediency and influence of the dominant industry participants, which constitute the strength and the main advantages of the current Canadian securities regulatory regime.”

“The Canadian government could have chosen to build on the enviable record of our securities regulatory regime to enhance its position and influence in international forums. Instead, it chose to denigrate and undermine the reputation of Canadian capital markets and to commit substantial funding to duplicate what already exists, at a time when public finances are stressed everywhere,” the paper adds.

“In the end, the vainglorious attempt by the federal government to assert its dominion over securities legislation will most likely turn into a disruptive, costly and regrettable initiative, with results contrary to what is purported to be sought.”

IE