Optimism over national regulator

Yet, the April 30 deadline has come and gone, with no draft legislation and no commitments from any of the other provinces to join the effort.

That same day, new federal Finance Minister Joe Oliver hinted that an announcement was imminent: “There has been progress [on a national regulator], but it’s been behind the scenes. I expect fairly soon that there will be news. There’s work on the draft of the proposed regulations and legislation.”

Still, as Investment Executive’s June 2014 issue went to press in mid-May, that promised announcement hasn’t materialized. And the Department of Finance Canada says it has “nothing to add” to Oliver’s comments.

Given the litany of failed attempts to create a national securities regulator in Canada, it’s only natural to suspect this latest effort is destined to follow the others into oblivion. This time around, though, there seems to be plenty of optimism that the delay reflects a political strategy designed to keep the initiative moving forward.

“I am confident that the legislation is close and am hoping that good news regarding other jurisdictions is in the offing,” says Anita Anand, a law professor at the University of Toronto. “We are dealing with a question of when, not if, in terms of the establishment of this important regulator.”

There are logical reasons for the governments that are driving concept of a co-operative regulator to remain mum on the issue for now.

For one, the recent provincial election call in Ontario changes the political climate. That government presented its latest budget on May 1, in which the Liberals reiterated their support for a co-operative national regulator. However, the budget failed to win favour with the New Democratic Party, which was keeping the minority Liberal government in power, thus the election call. So, until Ontario goes to the polls on June 12, it makes sense for governments to avoid turning regulatory structure into an election issue.

Ordinarily, securities regulation wouldn’t register on many voters’ radar. But, given the long history of disagreement among the provinces in this area, the vociferous objections from Quebec (and to a lesser extent, Alberta) and the fact that the current effort is trying to navigate toward a solution that respects the Supreme Court of Canada’s (SCC) guidance on the appropriate division of federal and provincial powers when it comes to securities regulation, a national regulator remains a politically sensitive subject.

It’s also hard to see how the goal of getting other provinces to join an initiative that currently has support from only Ontario and B.C. would be helped by becoming an issue in Ontario’s provincial election. There is a risk that the whole project could be derailed if that happened.

“The last thing [the project’s proponents] would want is to accidentally have the common regulator dragged into an election debate,” notes Heather Zordel, a partner with Cassels Brock & Blackwell LLP in Toronto who was a member of the federal Expert Panel on Securities Regulation. “We all assume nobody pays attention; but there can be collateral damage in elections.”

For now, it appears the Ontario election has thrown a cone of silence over the whole project. Scott Blodgett, senior media relations advisor with Ontario’s Ministry of Finance, maintains that “progress has been made” on the initiative, but adds that it would be “inappropriate to comment any further.”

Similarly, some of the other provinces that have been touted as possible participants in the initiative – such as Saskatchewan and Nova Scotia – aren’t saying anything publicly either.

For now, it appears that this deafening quiet represents political caution rather than any signal of faltering political will. Of course, there are risks in delaying. One of the primary reasons for setting aggressive deadlines in the first place was to focus attention and to not let the debate drag on interminably.

The former federal finance minister, the late Jim Flaherty, who had championed this latest effort to create a national regulator, stressed that he would not wait forever for the provinces to decide whether to join the initiative. And if a co-operative venture couldn’t be achieved, the feds’ plan was to create their own authority to oversee the aspects of securities regulation that the SCC suggested did fall under federal jurisdiction, such as the monitoring of systemic risk.

So, as deadlines are missed repeatedly, it appears that the risk of delay is growing, too. In fact, when the governments first pushed the deadline for introducing draft legislation to April from January, they also pushed out other key milestones. As a result, draft regulations for the new authority now are due on June 30 and integration agreements among participating provinces are slated for Aug. 29.

At the time the initial deadlines were revised, the goal of launching the new authority by July 1, 2015, remained unchanged. However, that objective appears imperilled if the necessary groundwork continues to be interrupted and delayed.

Ermanno Pascutto, director with the Canadian Foundation for Advancement of Investor Rights (a.k.a. FAIR Canada), says that the original launch date was “never realistic.”

And although Oliver hasn’t committed to sticking to the original timetable, he has endorsed the co-operative approach: “We believe that there’s a better way to go, but this is entirely voluntary.” Furthermore, provinces that decide not to participate “will still have an opportunity to co-operate with [the new regulator].”

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