A study by Charles River Associates suggests that the greatest savings from moving to a national securities regulator would come on the policy and administrative side, not from nationalizing enforcement.

Assuming the new regulatory structure has one head office in Ontario and branch offices in British Columbia, Alberta, Manitoba, Quebec and Nova Scotia — as recommended by the Wise Person’s Committee report released today — the study estimates that economies of scale would bring about $1.8 million in annual savings for enforcement. But that is 8% of the amount that is currently spent on enforcement by the 13 commissions.

The real savings come from the consolidation of the regulators’ non-enforcement activities. CRA estimates savings of $44.8 million, or 42%of the amount currently spent by the 13 commissions on non-enforcement activity, if the proposed model is implemented.

“Our estimated total annual savings in improved economies of scale from moving to the regulatory structure noted above are robust to various sensitivity tests, ranging from an average lower bound of $16 million to an average upper bound of $57 million,” it says.

The CRA study concludes: “Of the models being considered to resolve the identified problems due to the multiplicity of regulators, a national regulator with multiple branch offices would be more economical for regulators, intermediaries and issuers compared to the current system while also incorporating regional interests and allowing for local enforcement.”

However, CRA suggests that any new regulatory structure should recognize that enforcement has a strong local component, both in terms of implementation and allocation of resources. “A model that is able to retain the efficiency benefits from centralizing other regulatory activities should allow for relatively decentralized enforcement to the extent possible.”

“While the economies of scale savings in enforcement are modest, the estimated savings in non-enforcement budgets of moving to a model with a national regulator and multiple branch offices dwarf total current enforcement budgets. As a result, these non-enforcement savings should factor prominently in considering reform options.” the study says. “Moreover, any move to increased centralization of regulators will also eliminate or greatly reduce the current differences between commissions in enforcement activity that are unexplained by differences in socio-economic conditions.”