A national securities regulator could undermine a provincial regulatory regime that ensures markets for small, growing businesses to raise capital, Paul Bourque, executive director of the British Columbia Securities Commission warned Tuesday.

Addressing the Rotary Club in Kelowna, Bourque spoke about the importance of small- and medium-sized enterprises to the Canadian economy overall, and B.C. in particular. He highlighted role that regulators play in ensuring that venues for SMEs to raise capital, such as the exempt market and the venture exchange, are operating well. The creation of a national regulator could spoil some of that success, he suggested.

“The care and feeding of small business is of extraordinary significance not only to British Columbia, but to Canada as a whole. We doubt that any national regulator would intentionally put any of this at risk. However, a national regulator is going to have its hands full on issues affecting primarily senior markets and participants in those markets,” he said. “Things like working with other regulators internationally to deal with systemic risk. Things like writing new rules for over-the-counter derivatives trading, for regulating credit rating agencies, and for a host of other issues that have captured international attention in the wake of the 2008 market crash.”

Bourque said that the risk is that a national regulator “will focus on these issues to the detriment of paying attention to responsible regulation of junior markets”; and that the existing expertise in regulating the junior markets “may be lost, or not heeded, in an organization mostly dealing with new rule initiatives directed at senior markets.”

“If these risks materialize, Canada’s ability to finance small business, the lifeblood of economic growth and employment, will be put in serious jeopardy,” he warned. “It won’t matter then whether it happened through benign neglect, through well-intentioned but misguided intervention, or through the friendly fire of new initiatives aimed at senior markets.”

“Of course that doesn’t have to happen,” he concluded. “We are watching to make sure that the new regulator is structured to ensure the continued success of Canada’s venture markets in raising capital for small businesses. It’s far too important to our future economic well being to let it slip away.”

IE