Financial industry members gathered in Toronto Wednesday to weigh the pros and cons of a national securities regulator in Canada — a timely topic in the wake of this week’s meeting of the Provincial-Territorial Council of Ministers of Securities Regulation in Quebec City.

With the second phase of a national passport system having come into effect in March, the ongoing national regulator debate is facing new questions as to the effectiveness of the regulation changes made so far, and the shortfalls that remain.

The passport system — essentially a free trade agreement based on mutual recognition of regulatory systems — kicked off with phase one in September 2005, and phase two is set to be fully implemented by mid-2009.

“The passport system is a positive step in our capital markets,” said Ian Russell, president and CEO of the Investment Industry Association of Canada, who argued for a national securities regulator in Wednesday’s debate. “But the passport system is not the panacea for needed capital market reform.”

He pointed to the fact that Ontario — the largest capital market in the country — is not a participant of the passport system. The system also fails to achieve uniformity in several areas, Russell said.

But with European countries moving towards a similar passport system, Pierre Lortie, senior business advisor for Fraser Milner Casgrain, said it’s a model that should be applauded.

“This is where the game is going to be played to a large extent,” he said.

Arguing against a national securities regulator, Lortie said the debate wastes time that should be spent on a more important priority: getting Canadians access to key foreign markets.

The centralized Securities and Exchange Commission in the United States, Lortie noted, has made U.S. markets uncompetitive in the international realm.

Russell pointed to high costs that businesses currently face as a key reason a national system would be beneficial in Canada. With some businesses having to pay registration fees in more than once province, in addition to compliance fees, he said companies have a disadvantage to those in other countries.

Lortie countered with research showing that the costs faced by comparable companies in the U.S. are not, in fact, very different.

On the topic of enforcement, Russell argued that Canada’s “poor record” of securities enforcement can be largely traced back to the multi-jurisdictional system.

“Most illegal schemes in capital markets in Canada are inter-jurisdictional in nature,” he added.

But according to Lortie, Canada’s enforcement record is the result of legal restrictions — not securities regulators.

Tomorrow, followers of the hot topic will be looking to the Council of Ministers of Securities Regulation as their three-day meeting wraps up. The Council is working to develop a provincial/territorial framework that harmonizes and streamlines regulation in Canada.

IE