In the past five years, Jean St-Gelais and Quebec’s Autorité des marchés financiers have experienced growing pains, including weathering investment scandals. Along the way, St-Gelais has also played a central role in controversial, ongoing initiatives to reform Canada’s securities regulatory system.

The former Quebec bureaucrat was recently appointed to a second five-year term as head of Quebec’s securities regulator. St-Gelais now intends to push ahead with the next stage of harmonizing Canada’s securities regulations. He also wants more progress on white-collar crime enforcement — especially from Ottawa.

St-Gelais, also chairman of the Canadian Securities Ad-mini-strators, which brings together all the provincial regulators, since 2005, says the final big element in harmonizing Canada’s securities regulations is adopting one-stop registration for financial services firms and their advisors.

The CSA recently released for comment its draft national requirements, designed to permit registration in one participating province to be recognized by other participating provinces. This follows a similar process as the “passport system” for registration of company prospectuses and other disclosure documents.

St-Gelais, 49, is reluctant to say whether he believes these efforts will be sufficient to defeat a determined campaign by Ottawa and Ontario for a national securities commission. But he will say that the provinces participating in the passport system — all provinces and territories except Ontario — have made significant headway in addressing the principal argument used by proponents of a single national regulator.

“It’s difficult for me to comment on the political aspects [or] at what point Ottawa and Ontario will be satisfied and give up on the idea of a common regulator,” he says. “Perhaps it will never happen. I don’t know. But it’s clear that the harmonization efforts — the passport being No. 1 — are making everyone’s life easier. And when the national regulator debate began, the principal argument was that the system was too complicated, people had to deal with 13 commissions and there was a lack of harmonization. We’ve made a lot of progress.”

On enforcement, the priority has to be for Ottawa and the RCMP to step up their game on criminal prosecutions, says St-Gelais: “The provincial securities commissions have received a lot of criticism for not doing their work. We’re willing to shoulder some of the responsibility. But we believe a lot of responsibility has to go to the police forces and Ottawa.”

A working group co-chaired by Ontario Securities Commission chairman David Wilson and Louis Dionne, director of criminal and penal prosecutions for Quebec’s Justice Department, has made a series of recommendations to Canada’s federal and provincial justice ministers on how to improve fraud enforcement. Nicholas Le Pan, formerly the superintendent of financial institutions, has also tabled a report looking at problems within the RCMP’s integrated market enforcement teams, which were established to go after white-collar crime.

“We’ve had a lot of speeches about this in Canada,” St-Gelais says. “The time has come to act.”

There was no shortage of doubters when, in 2003, the soft-spoken St-Gelais was named to the top job at the newly created AMF, which merged five provincial regulatory agencies, including the Quebec Securities Commission.

He was Quebec’s top civil servant, with no hands-on securities industry experience, when, at 44, he was appointed AMF president as one of the last acts of the Parti Québécois government of premier Bernard Landry. In a strange bureaucratic twist, St-Gelais actually signed the order appointing himself to the job.

At the time, Quebec had a reputation for being soft on financial crime; St-Gelais promised to make getting tough on wrongdoing a top priority. But just a year and a half later, he found himself embroiled in the province’s highest-profile financial services scandal when it emerged that mutual funds managed by Norbourg Asset Management Inc. had been looted of tens of millions of dollars. St-Gelais was showered with criticism and named in a class-action lawsuit that accused Quebec regulators of allowing blatant fraud to go on under their noses.

There were other major scandals, most notably involving Norshield Financial Group and Mount Real Corp. It seemed that nothing had changed in the world of financial services regulation in Quebec.

But slowly, over the last year or so, perceptions have been changing. The AMF has scored some impressive victories and appears to have found its footing.

@page_break@Most notably, the agency won a landmark conviction this year against Vincent Lacroix, former CEO of Norbourg. Lacroix was sentenced to 12 years in prison, the longest jail sentence for a securities fraud conviction in Canadian history.

In another prominent case, Benoît Laliberté, former CEO of scandal-plagued Jitec Inc., was found guilty of committing 41 securities violations involving his high-tech company in 2000.

“There was a lot of pressure on the [AMF], and St-Gelais has played his cards well,” says Jean Martel, a former chairman of the QSC who is now a securities lawyer in Montreal. “He’s brought in a lot of new people — talented people. He’s done a good job.”

St-Gelais has more than doubled the AMF’s enforcement staff, with the number of inspectors, investigators and lawyers rising to 85 from 40 in 2004. The AMF has also made liberal use of outside lawyers from major Montreal law offices, forensic accountants and chartered accounting firms. The number of prosecutions has been soaring.

St-Gelais has further raised his profile in Quebec by recently chairing public hearings on the friendly takeover of the Montreal Exchange by TSX Group Inc.

After the hearings, the AMF quickly approved the takeover in a well-received decision that was made over the objections of some Quebec nationalists.

St-Gelais did come in for some criticism when it was revealed he gave a heads-up about the TSX/MX decision in the hours before it was publicly announced to the Caisse de dépôt et placement du Québec, National Bank of Canada, Desjardins Group and Industrial Alliance Insurance and Financial Services Inc.

St-Gelais defends that move, saying the AMF’s market-monitoring unit had detected no unusual trading in either TSX or MX shares that day. He says the AMF had consulted with the institutions and it was a question of courtesy to give them advance warning of the decision: “In English, we say, ‘It was in the normal course of business’.”

St-Gelais is an economist by training, having studied at Université de Laval and Queen’s University. He landed a job as a research assistant at the Bank of Canada before joining Quebec’s Finance Department.

In Quebec, St-Gelais’ pre-AMF rise through the ranks culminated in his appointment as secretary general and clerk of the Conseil exécutif, the pinnacle of the provincial civil service.

He is married, with two children, and splits his time more or less evenly between Montreal and Quebec City, where his family still lives.

In St-Gelais’ second career as a securities regulator, his skills as a civil servant have served him well in hammering out the passport system.

Companies can now clear a prospectus or obtain a discretionary exemption from the regulator in their home province and have it apply automatically in all other provinces and territories.

The sole exception — and it’s a big one — is Ontario, which opted out of the passport system as a way of pushing for a single national regulator.

Alberta Securities Commissionchairman William Rice praises St-Gelais for playing an important role in the passport negotiations: “Jean’s talents are probably on the diplomatic side. He seems to do a good job of getting people to see other points of view and not get too rigid in their own entrenched views. He’s quite persistent in trying to push people to reach common positions.”

St-Gelais himself believes the AMF is “taking flight.” IE