Ministers from six provinces and one territory signed a Memorandum of Understanding in Calgary today pledging to adopt a passport model for securities regulation within the next 12 months.

The MOU provides for a passport model for securities regulatory reform to co-ordinate the work and decision-making of 13 regulators. Companies could register to sell securities in one province or territory and all other provinces and territories would recognize their credentials. But each province and territory would still have its own regulator, enact its own laws and levy its own fees.

Ontario declined to sign the MOU, saying that it maintains that a single regulator remains a far better option for reform. It complains that pursuing the passport model won’t deliver sufficient progress, and that it distracts the provinces from the real job of meaningful reform.

“The proposed MOU will not significantly improve investor protection or enforcement measures, nor will it reduce the confusion resulting from 13 different sets of rules,” Gerry Phillips, chairman of Ontario’s Management Board of Cabinet, said.

Ontario supports replacing the current patchwork system of 13 regulators with a common securities regulator. Ontario’s decision not to sign the MOU reflects its belief that the document is not a roadmap to a common regulator.

In June, Ontario released a proposal, which would allow a passport to be put in place as part of a clear transition to a common regulator within a set timeframe.

Nevertheless, three key provinces — Alberta, British Columbia and Quebec — did sign the MOU, along with Manitoba, Saskatchewan, New Brunswick and the Yukon.

Ministers from Nova Scotia, Prince Edward Island, Newfoundland, the Northwest Territories and Nunavut have agreed in principle to sign the MOU or to present it to their Cabinet for a decision this fall.

The MOU states the passport system will be implemented by August 2005, providing a single access point for registrants and issuers in the participating jurisdictions.

The MOU also:

  • contemplates highly harmonized, streamlined and simplified securities laws to be implemented by the end of 2006;
  • implements a Council of Ministers to facilitate change and ongoing cooperation;
  • pledges to review regulatory fees charged in the context of the passport system; and
  • provides a commitment to explore options for further reform.

“All jurisdictions have a strong commitment to real regulatory reform,” said Alberta’s Revenue Minister Greg Melchin. “We are confident we can implement improvements that will result in a regulatory structure that is efficient, streamlined and effective, while providing a high standard of investor protection across Canada.”

Quebec’s Yves Seguin said that his province would never agree to a single federal regulator, and he suggested that Alberta likely feels much the same.

David Wilson, chairman and CEO of Scotia Capital said his firm supports Ontario’s position on the passport model.

“To the extent that some provincial governments see the passport model as a substitute for a single regulator, we think that these provinces are settling for second best. The passport system would continue to create international perceptions of Canada as a splintered and slow to respond capital market,” Wilson said in a release.

“The reality is that we need one single Canadian regulator that serves both the users of capital – our businesses – and investors of capital,” he added