The Canadian Securities Transition Office has released its plan for a single securities regulator, which is designed to open for business in July 2012.

Earlier this year the CSTO unveiled draft legislation that sets out much of the structure for the proposed new Canadian Securities Regulatory Authority — including its separate regulatory and adjudication divisions, its governance model, and the introduction of an investor advisory body. On Tuesday, the CSTO it released the blueprint for building that structure with the provinces that want to take part.

Provinces will be invited to sign agreements in September of this year pledging to participate in the process, with a view to agreeing to a memorandum of understanding that will formally commit them to participating in the new regulator by July 1, 2011.

The plan calls for the CSRA’s board to be appointed by October 2011. In 2012, the heads of the regulatory and adjudication divisions are to be appointed by January 1, the executive leadership named by April 1, and the rest of the regulator staffed in time for a July launch.

The CSTO plan sets out governance and organizational details of the proposed move to a single regulator, although some of this will be filled in through negotiations among the various participants.

“The priority during the transition process will be to minimize disruptions and uncertainty and to maintain continuous protection and service for investors and market participants,” the CSTO says.

To that end, while the move to a national regulator will mean plenty of changes, some of the most important aspects likely won’t change much. The rules the CSRA administers will largely be based on existing national rules, and the staffs of the existing regulators will be invited to find work with the new authority, too. The CSRA will largely rely on existing systems technology, and the fee model will be familiar, comprised of market participation fees and activity fees.

The plan also notes that many of the current regulators’ existing business processes will only need to undergo minimal changes to accommodate the creation of the new authority.

Significant changes, however, will be required for handling complaints, initiating and conducting enforcement cases, adjudicating hearings, and managing human resources and other corporate services.

According to the CSTO, the next phase of the transition will focus on developing the human resource, information management and business process aspects of the CSRA.

The CSTO will also work on developing the initial set of regulations, based on existing harmonized national rules; and on the development of regulations and processes to ensure existing enforcement orders are continued, ongoing investigations and proceedings continue, and that the CSRA can prosecute conduct that took place before it was formed.

Federal finance minister Jim Flaherty, who has been pushing for the single regulator for several years now, welcomed the transition plan.

“It is extremely important that the implementation of a Canadian securities regulator will be seamless for financial system professionals and investors alike. The transition plan released today lays out a path to that end,” he said. Once again, Flaherty invited all the provinces to participate.

This initiative still faces legal challenges that have been posed by Alberta and Quebec, both of which have vehemently opposed the creation of a national regulator. As well, the Department of Finance has referred the basic constitutional question of whether it can take jurisdiction over securities regulation to the Supreme Court of Canada.

Ecker advocates for Toronto headquarters

The Toronto Financial Services Alliance welcomed the CSTO report.

“This brings us one step closer to making a national regulator a reality,” said TFSA president Janet Ecker.

While noting the report recommended a decentralized structure for the CSRA, she strongly urged the federal government to consider establishing the agency’s headquarters in Toronto.

“Toronto is Canada’s financial capital. Most securities transactions take place here. Our major financial players are headquartered here. This is where most of the people who work in the securities industry live, “Ecker said.

“While regional offices and local decision-making are important, we remain convinced that the organization needs a head office and it should be located here,” she added.

IE