Canada does not need a new national securities regulator to replace the current system of provincial and territorial regulators, a report by the Institute for Research on Public Policy suggests.
The report released Thursday by Pierre Lortie says the current system compares favourably with those of other countries and can cater to regional economic differences within the country.
“Notwithstanding critiques of certain details in the functioning of the system, the fact remains that the federal government’s absence from the field of securities regulation has not led to a ‘race to the bottom’ with regard to quality and effectiveness,” Lortie wrote in the report.
“There exists no evidence whatsoever to support the notion that a national securities regulator would better serve Canada’s needs and interests.”
A spokeswoman for Finance Minister Jim Flaherty — who has championed the cause for a national regulator — noted in an email that the Organization for Economic Co-Operation and Development and the International Monetary Fund have come out in favour of a Canadian federal regulator.
Advocates in favour of a single national regulator, including the IMF and OECD, have said it would be more efficient than the current system of 13 provincial and territorial regulatory bodies.
Defenders of the current system say it reflects the regional differences of Canada’s capital markets and argue it would be better to increase co-operation while retaining control at the provincial level.
The federal government has referred its proposed legislation to create a national regulator to the Supreme Court, which held two days of hearings in April and is expected to rule on the case later this year.
Lortie’s report did not address the constitutional issues regarding whether Ottawa could create a national regulator, but rather focused on if the federal government should create a national regulator.
A total of six provinces, led by Alberta and Quebec, are seeking to block the proposed legislation which would allow each province and territory to voluntarily opt into a federal regulatory scheme.
Ontario has been the only province vocally supportive of the plan.
Proponents of a national body criticize the current system for its lack of cohesiveness, including that it prevents the ability to compel all provinces to act uniformly when it comes to enforcing stock market rules. They say a national regulator is critical to safeguard the overall economy and quickly respond to a financial crisis.
Under the current structure, the provincial and three territorial regulators co-operate through a passport system in which regulatory approvals in one province are recognized by others.
The legal issue is whether trading in securities is a matter of contractual, property and civil rights, or can be considered to come under the federal power to regulate matters of trade and commerce.
Canada is the only country in the G20 that does not have a national securities regulator.