Uniform securities laws not necessary says BCSC chair

In the second of three speaking engagements for the Fraser Institute, Doug Hyndman, chairman of the B.C. Securities Commission advocated the adoption of a mutual recognition passport system as the solution to harmonize Canada’s13 member approach to securities regulation.

Hyndman told an audience in Toronto that the next step towards mutual recognition requires legislative action on the part of provincial ministers.

Under the proposed model, Hydman says uniform laws would not be required given that fundamental principles underlying securities regulations are the same in all provinces.

The passport system would “allow individual jurisdictions to move forward with reforms and innovation,” he says. “There’s a good opportunity for something to happen here.”

Under the passport systems, companies would only need to comply with the securities regulation of their home province to be in full compliance with the rules set out by other provincial securities commissions. The practice is already in place where regulators from different provinces accept the same filing made to the company’s home province regulator.

In his talk Hyndman dismissed fears that changing this mutual reliance into a system of mutual recognition would set off a “race to the bottom” where provinces undercut regulatory requirements in order to attract business. “I don’t think that would happen.”

He pointed to both the European Union and the Canada-U.S Multi-Jurisdictional Disclosure System (MJDS) as working models of a mutual recognition system. MJDS allows Canadian companies to offer their IPOs in the U.S. using their home filings in an expedited clearing process rather than filing a whole new set of paperwork with the Securities and Exchange Commission. “It’s more a mutual reliance, but they only need to meet Canadian prospectus requirements,” he says.

The Canadian Snowbird exemption, which allows Canadians wintering south of the boarder to deal with their own home brokers, is also included under the MJDS, in recognition that the two countries have similar rules governing the advisor-client relationship.

Hyndman says the passport system likely won’t affect regulatory costs, but will more likely save companies in compliance costs. “There is a real chance of this going forward,” he say, largely because of enthusiasm on the part of different governments, “As long as it doesn’t preclude other discussions” such as talks regarding a national regulator.