The latest committee to recommend the adoption of a single securities regulator for Canada has delivered its final report outlining its recommended model and sketching a possible path forward.

The report, issued Monday afternoon by the so-called Expert Panel on Securities Regulation chaired by Tom Hockin, calls for the establishment of the Canadian Securities Commission (CSC), which would administer a single securities act for Canada.

The CSC would be responsible for policymaking and the investigation and prosecution of regulatory offences. However, these charges would be heard by an independent adjudicative tribunal, rather than the commission itself, although the commission would still hear exemption requests and takeover bid matters.

The proposed commission would answer to a governance board that would oversee its management and provide strategic guidance. Additionally, a Council of Ministers from each participating jurisdiction would be established to discuss the development of policy and the ongoing administration of the system. The model also preserves the role of self-regulatory organizations, which would now be overseen by the new national commission.

In addition, the report says that as establishing the CSC will take time to negotiate and implement, and recommends, “immediate action should be taken to establish a strong national presence in securities regulation.”

The report urges the immediate establishment of a capital markets oversight office reporting to the federal minister of finance. It also calls for the creation of two independent panels; one to represent the views of investors and the other to represent small reporting issuers to the CSC.

As well, the report recommends an examination of structural reforms to strengthen enforcement in Canada, including an assessment of the merits of a national enforcement branch that consolidates administrative and criminal enforcement functions.

For the proposed system itself, the recommends “a more principles-based and risk-based approach;” establishing the power and means to compensate investors in the case of a violation of securities law; and, that the regulation of exchange-traded derivatives be prescribed in securities legislation.

Calls for a single regulator have been around for over 40 years in Canada, and it has long been observed that Canada is one of the few countries in the world without a national regulator. However, most provinces have been unwilling to relinquish jurisdiction, and the federal government has been reluctant to impose a national body.

It remains to be seen if this latest initiative will be any more successful. Certain provinces, most notably Quebec, have unwaveringly opposed the creation of a national regulator.

This latest effort recommends the adoption of a national securities act “with the willing participation of provinces”. Provinces that are on board would negotiate their participation, and a transition team would be created that would be expected to negotiate a memorandum of understanding with the provinces.

In the event that a sufficient number of provinces do not participate, the panel also recommends that the federal government consider including a market participant opt-in feature, allowing market participants that are not based in a participating province the right to opt-in and be governed by federal securities legislation alone.

If neither of these mechanisms work, it says, “we suggest that the federal government consider unilateral action to implement such a regime.”

As of Monday afternoon, only one province has come out in support of the plan — Ontario, which has long supported the creation of a national regulator. Ontario’s Finance Minister Dwight Duncan said that he is “pleased that it has endorsed Ontario’s long-standing support for a single regulator enforcing a single securities act and charging a single fee.”

“Our government supports a common securities regulator,” he added. “Given the significant role Ontario’s financial sector plays in Canada’s capital markets, we would expect to see the headquarters located in Toronto.”

“The report provides a basis for interested parties to work together to achieve a common securities regulator. We look forward to engaging with the federal government and the other provinces and territories to address important details and finalize a structure that makes economic sense for all participants and enhances the competitiveness of Canadian capital markets,” Duncan concluded.

Alberta and Quebec said they oppose any measures to move securities regulation away from provincial juristiction.

In the meantime, the Investment Industry Association of Canada said it supports the recommendations. “The recent financial crisis demonstrates the need for a single regulator”, said Ian Russell, president and CEO, IIAC. “A single securities regulator for Canada will facilitate cooperation among domestic and international financial sector regulators to monitor market trends and identify systemic risk. The single regulator will implement timely regulation in response to market developments,” Russell concluded.

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