Source: The Canadian Press

Finance Minister Jim Flaherty faced a tough crowd Thursday as he sought to make the case for a national market watchdog to a Calgary business audience.

Canada is a regarded as a “star” internationally for its economic performance, but the lack of a central securities regulator is one glaring weakness, he told reporters before speaking to the city’s chamber of commerce.

“This is an embarrassment for Canada. It’s the one area of financial regulation where Canada looks out of step with the rest of the world,” he said.

Alberta and Quebec are challenging the constitutionality of the plan in their respective appeal courts, and the issue is being dealt with in the Supreme Court of Canada. Earlier this week they called on other provinces not to sign development agreements with Ottawa.

Both provinces say the federal government would be overstepping its bounds if it were to form a centralized watchdog to oversee all of Canada’s capital markets. They say the current system, in which 13 provincial and territorial regulators make and enforce their own rules, works well.

The idea for a Canadian securities regulator has been kicking around since 1935, and the world has changed a lot since then, Flaherty said.

“Capital moves around the world in milliseconds now with the touch of a computer,” he said.

“The old idea of regional, provincial securities regulation has, I think, been surpassed by what’s happened in world financial markets.”

Canada is the only country in the G20 without a national securities regulator like the Securities and Exchange Commission in the United States.

Flaherty also says the “exit strategy” for stimulus ending in March of next year stands, but Ottawa won’t be “unreasonable” when it comes to projects that are close to completion.

Earlier Thursday, Toronto-Dominion Bank gave a gloomy forecast for the remainder of 2010. Economists with the bank say the current third-quarter will have produced an anemic 1.5% advance, and the last three months of the year won’t be much better with 2% growth.

TD has also shaved half a point off next year’s growth forecast, saying the economy will only get bigger by 2% in 2011, almost a full point below the Bank of Canada’s prediction.

The bank’s prediction would mark the end of a relatively good run since last fall, in which the Canadian economy posted a healthy 4.3% growth rate.