Source: The Canadian Press

Finance Minister Jim Flaherty admits a national securities regulator would be more effective if all 13 provinces and territories were on board, but says he intends to move forward with or without the support of Alberta and Quebec.

“I’m satisfied that we have the support of a critical mass to move forward, which we are doing,” Flaherty said Thursday on a conference call from Peru.

Legislation proposing a national regulator was announced Wednesday, to the consternation of Alberta and Quebec, which have both launched constitutional challenges arguing that securities should fall under the purview of the provinces. Flaherty has asked the Supreme Court to rule on the matter.

The finance minister said he hopes pressure from publicly traded companies will eventually push Alberta and Quebec to opt into the voluntary organization.

“The capital requirements in the world today do not obey provincial or territorial boundaries. In fact, they extend even beyond national boundaries given the global movement of capital in the world,” Flaherty said.

Heather Zordel, a securities lawyer with Cassels Brock, said resistance from Alberta and Quebec might put a few kinks in the scheme, but is unlikely to scuttle it.

She agreed with Flaherty that it’s likely individuals and companies will eventually pressure the non-participating provinces to join.

“We’re hoping that people like the pensions, the individual shareholders, the individual companies will start looking at this thing as it comes up and will see that it’s not a horrible monster, that people will say to their own elected officials, ‘You really should be part of this,”’ she said.

Canada is the only country in the G20 without a national securities regulator.

Currently, all 13 provinces and territories have their own securities regulators who police financial markets for signs of fraud and other financial misdoings.

The new body would operate under one set of rules and policies, not 13. In theory at least, it would be more efficient and effective in regulating financial markets and investment, and more vigorous in investigating and prosecuting abuses and fraud.

The new act would give police expanded powers to probe insider trading and would be able to compel market players to supply information on suspicious trades. Regulators would also have greater ability to scrutinize such complex investment instruments as derivatives and hedge funds.

If Alberta and Quebec decide to opt out of the voluntary organization it will mean an added level of bureaucracy, said Zordel, who was a member of the expert panel that advised Ottawa on the creation of a national regulator.

Currently, if an Alberta oil company submitted a prospectus, it would be reviewed by both Alberta _ the jurisdiction in which the company operates _ and Ontario, where the Toronto Stock Exchange is located. If Alberta and Quebec didn’t join the national regulator, this process would continue under a memorandum of understanding between the two organizations, she said.

However, Flaherty said Wednesday the current passport system, in which regulatory approvals in one province are recognized by others, would cease to exist once the national office is in place.

Zordel said fears by Alberta and Quebec about losing control to an organization that will probably be based in Toronto are overblown.

“Nobody is saying we should pick up regulation of the oil and gas sector and put it in downtown Toronto,” she said. “That just doesn’t make a whole lot of sense, because your expertise and understanding of that industry is based in Calgary and we’d like to see that continue.”

The expert panel recommended the national regulator continue to operate as a decentralized system with offices in every province and territory, and Flaherty confirmed Wednesday that this is the government’s plan. If a province opts in, it will replace its existing provincial legislation with the new federal legislation.

The Supreme Court ruling on the legislation is expected to take some time _ between 10 months and a year _ but Flaherty said he is confident of victory.

However, Quebec Premier Jean Charest said Wednesday the provinces will “defend our jurisdictions with plenty of vigour.”

And Alberta Finance Minister Ted Morton called the federal move an “unprecedented power grab” without justification.

Manitoba has also voiced opposition to the concept, although it has not launched any court challenges. Meanwhile, British Columbia said Wednesday it is on-side only if provincial jurisdiction is respected.