In its opinion to the Wise Persons’ Committee on securities regulation, the B.C. Securities Commission calls for a mutual reliance passport model of securities regulation.
BCSC chair, Doug Hyndman, sent a letter to WPC chair, Michael Phelps, Monday, providing the BCSC’s views on regulatory reform.
In the letter, Hyndman declares that the BCSC doesn’t take a position on whether there should be a national regulator, writing that it is up for government to decide the issuee. However, Hyndman goes on to argue that the current system is pretty good, and that centralizing regulatory power wouldn’t necessarily solve the problems that do exist in the current system.
Hyndman writes that the WPC should look beyond structure, and that it should consider its drive to simplify and streamline regulation by moving to a more principles-based approach to regulation. He reiterates BC’s position that our system should be designed to give Canada a competitive advantage, not merely to mimic the United States.
Hyndman also warns that a national regulator would be very difficult to achieve. “It raises thorny constitutional and political issues and would require agreement among a large number of parties on complex and contentious issues. For your report to have real value, therefore, you should examine other alternatives and make at least an alternative recommendation on how to improve efficiency and effectiveness within the decentralized regulatory structure,” he writes. “We submit that the best way to achieve significant, timely improvement in Canadian securities regulation is to adopt a regulatory passport system based on the concept of mutual recognition among jurisdictions.”
Hyndman also defends the BCSC’s innovative efforts to reform regulation. Writing that, while it is criticized for hurting harmonization, “it has been the source of important leaps forward, like stronger statutory prohibitions on fraud, manipulation and misrepresentation, broader and more effective investigative and enforcement powers, reduced resale restrictions on private placements by issuers that provide more continuous disclosure, the new private placement exemptions to facilitate capital raising, and the capital pool financing technique.”
Hyndman argues that a passport system makes the best sense. He notes that uniform laws are not necessary for it to work, and that it can work in the current environment.
“Unlike other reform proposals, a passport system will actually work in the real world of Canada today. We do not have to wait for quasi-constitutional negotiations on a national commission or for every province to adopt identical legislation,” it says. “It would address the concern about duplication and overlapping securities regimes – each market participant would be regulated, for most purposes, by a single regulator and a single set of rules. It would accommodate regulatory innovation.”