Canada’s current patchwork of regulation is inconsistent and inefficient for financial advisors, and a single regulator is crucial to level the playing field, a panel of financial industry stakeholders said on Friday.

Speaking at the Toronto Board of Trade, the speakers emphasized that the single regulator proposed in the report by the Expert Panel on Securities Regulation is a necessary change that is long overdue.

Greg Pollock, president and CEO of Advocis, the Financial Advisors Association of Canada, said the current system is unfair for financial advisors.

As an example, he pointed to rules in certain provinces that allow individual financial planners to incorporate, which permits fees and commissions from the dealer to flow to the corporation, instead of directly to the individual, resulting in tax benefits.

“Not all provinces allow this,” Pollock said. “We have a patchwork of regulation for advisors nation-wide.”

Pollock added that it is challenging to work as an advisor in more than one province.

Advocis has dealt with the regulators extensively, seeking consistent rules and regulations for advisors in all provinces, Pollock said. “This has often been a painstaking, time-consuming and frustrating exercise.”

He applauds the initiative proposed by the expert panel. “This will go a long way in dealing with the practical aspects of securities reform to give advisors and other market participants the comfort that one set of rules will exist across Canada.”

A single regulator would also improve the image of the Canadian financial system in the international realm, according to Janet Ecker, president of the Toronto Financial Services Alliance.

“At a time when the entire international financial system is racing to create seamless, coordinated global regulatory systems, we can’t even establish a national one,” Ecker said. “If Canada expects to be a serious player on the international financial scene, then a national system is the way to go.”

Addressing concerns that changing the regulatory system would be too complex, expert panel member Heather Zordel said the proposal was designed to be easy to implement.

“We wanted to make sure that the structure we came up with would be very accessible, very usable and very familiar to people,” said Zordel, a partner of the securities group at Cassels Brock. “The idea is that this would be really easy to adopt.”

She added that provinces would maintain distinct voices under the proposed system, since both regional and local offices would exist.

“We’re in a modern world, and we can decentralize,” Zordel said.

But Pollock warned that if the outcome of the proposal simply adds a federal layer of regulation to the existing provincial layer, the result will lack sufficient consistency. Complete harmonization, he said, is crucial.

The panelists also support the proposal for a principles-based approach to regulation. Such an approach adds flexibility and makes it more difficult for market participants to avoid rules, according to Pollock.

He added that the one-size-fits-all approach to regulation falls short. In particular, small dealers and their advisors require a different regulatory approach than large, vertically integrated financial institutions, Pollock said.

“Too often, smaller players do not have the resources to adhere to an onerous compliance regime,” he said, adding that many small operators have left the market for this reason. “This, in the end, hurts only the consumer, who is left with less choice and increased cost.”

While the proposed system is very promising, its implementation will require widespread support from Canada’s financial services industry, according to Paul Halpern, a finance professor at the University of Toronto’s Rotman School of Management.

“It won’t happen without a lot of support in the community,” Halpern said.

IE