The Byzantine securities regulatory landscape could get even more complex if the federal government follows through on a promise to take responsibility for aspects of securities regulation with “genuine national importance.”

Thwarted by the Supreme Court of Canada’s December 2011 decision, which rejected the proposed national regulator, the feds are now pursuing an agreement with the provinces that would see the creation of a common regulator.

The 2013 federal budget outlines the model the government would like to see – the feds and a “critical mass” of provinces agreeing to delegate their authority to a new common regulator. Failing that, the budget indicates that the feds plan to go ahead and take control of the aspects of securities regulation that the Supreme Court decision suggests could be considered federal jurisdiction, such as systemic risk.

Neither option is particularly appealing. Under the first, regulation would remain fragmented between the provinces comprising the new “critical mass” regulator and the other provinces that decide to preserve their existing authority. And, under the proposed model, regulatory accountability would be even more uncertain. As well, fitting together provincial and federal bureaucracies within the “critical mass” regulator would surely be tricky and inefficient.

The second option adds yet another player to the already crowded regulatory field. Far from simplifying and streamlining, the litany of regulatory mouths to feed would only grow. And the notion that systemic risk is a national issue that could be regulated in isolation from the day-to-day work of the existing provincial securities regulators seems far-fetched.

There is no hard and fast line between systemic-risk issues and the rest of regulation; it’s all deeply interconnected. Surely, bolstering oversight of systemic risk is best done by the existing regulators, not by an additional layer of bureaucracy.

If history is any guide, none of this will come to fruition – at least, we hope not.

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