The single securities regulator concept is moving ahead, but for it to be worth the effort, the industry must be involved with the process says the head of Canada’s securities industry trade association.

Speaking to the Calgary Chamber of Commerce on Thursday, Ian Russell, president and CEO of the Investment Industry Association of Canada, noted that the global financial market crisis has hit the Canadian securities industry hard — total industry revenue was down 15% in 2008, and profits were down 40%.

Moreover, if fourth quarter trends carry throughout 2009, revenue could be down another 15% and profits down another 50% in the coming year, he suggested.

Retail firms have been particularly hard hit, Russell noted. “Operating profit is down 60% year-over-year, as retail firms have had trouble controlling costs as revenue has plummeted,” he said.

And, if financial conditions fail to improve, all of this will lead to industry consolidation, he said.

Getting the markets and the economy to revive will largely turn on the success of U.S. efforts to stimulate its economy and repair its banking system, Russell said, but there is a role for Canadian policymakers too. He said that efforts to provide fiscal stimulus and restart credit markets in Canada are important steps in the short-term, and regulatory reform could help in the long term.

“Regardless of how one feels about it, the single regulator concept is gaining momentum,” Russell said. “It could bring significant benefits to Canadian markets — but only if the structure is cost-efficient, and responsive to market development.”

However, he warned that the process of achieving a single regulator is fraught with potential pitfalls, as the federal government expects to negotiate and compromise with the provinces to gain their participation. The result, he worries, could be a complicated regulatory structure “that is as inefficient, costly and time-consuming as the one we have now.”

“The last thing we want to do is trade one cumbersome structure for another,” he said. To prevent that, the industry has to be involved in its creation, Russell suggested. “We have to decide what kind of structure we want to see — what kind of structure will lead to the results we need. We have to shape a vision of a regulatory structure that will be conducive to wealth creation,” he stressed, adding that “We have to look at the actual regulatory content we need in terms of rules and regulations — and what kind of structure will help shape it.”

“The industry needs a seat at the table,” Russell concluded. “The IIAC will be involved. The process of creating an effective single regulator is important to our future – we have to make our presence known.”

IE