As part of our 2008 federal election coverage, Investment Executive explores the positions of the major federal political parties on the top issues affecting the financial services industry.

Here we look at where the parties stand on securities regulation.

Despite their vast differences on many issues, the Liberal Party of Canada, the Conservative Party of Canada and the Green Party of Canada are all on the same page when it comes to establishing a national securities regulator: they all think is a good idea.

Canada is currently the only G-7 country without a unified securities regulatory body. But it moved closer in that direction in September 2005 when the “passport model” of securities regulation came into effect.

The passport model can be thought of as a free-trade agreement between the provinces and territories that ensures everyone respects each other’s securities laws. This means market participants can operate in any jurisdiction provided they have been approved by their home province’s regulator. However, Ontario — the country’s largest jurisdiction and home to the Toronto Stock Exchange — has refused to participate, as it remains philosophically committed to a national securities regulator.

“In a global economy, there’s no reason to have multiple sets of rules across the country,” says John Bennett, director of communications for the Green Party. “A single set of rules would make it easier for Canadians to identify who’s doing what and whether it’s fair or not.”

But the New Democratic Party of Canada disagrees. The party believes that a national securities regulator would only be more cost inefficient and that Canada should stick to the current passport system.

The passport model certainly has its positives. For instance, as long as a company’s documents — such as prospectuses or discretionary exemptions, which exempt a company from disclosing specific financial information — are approved by the firm’s home province’s regulator, they are then accepted by all passport member provinces and territories, says Ian Russell, president and CEO of the Investment Industry Association of Canada.

“It’s a good start, but it doesn’t go far enough,” Russell says. “On the area of broker registration, it’s still not quite a true passport.”

Prior to the implementation of Phase Two of the passport system in March, brokers had to undergo a separate registration process in every province they planned to trade in; although Phase Two has shortened the steps needed for a broker to register in each province, co-ordination could still be improved further, Russell says.

“Another issue is Ontario is not part of the passport at all,” Russell adds. “Again, it’s a good step forward, but it doesn’t achieve the [cost efficiencies] and benefits that a single regulator would.”

It’s for these reasons, among others, that the Ontario Securities Commission continues to advocate for a single regulator.

“Securities regulatory reform should strengthen Canada’s capital markets and improve our competitive position by eliminating fees, costs and duplication arising from 13 provincial and territorial securities regulators,” the OSC stated in a press release issued on March 28. “Although [the passport system] may add incremental administrative improvements and efficiencies to our current regulatory processes, it does not resolve the need to modernize Canada’s securities regulatory structure.”

The governing Conservatives are in agreement with the OSC and, as such, plan to scrap the passport system altogether. Instead, they want to create a new independent national body through which the federal and provincial governments can work together.

And although the Liberals are in favour of a national regulator, their strategy is to improve on the existing passport system and transform it into a national unified partnership between all the provinces and territories.

“We would like to see a national securities regulator, but contrary to the Conservative position, we are not willing to go unilaterally and just ram it down,” says a Liberal Campaign spokesperson. Rather, they want to do it “with all the provinces sitting at the table, integrating and melding their systems together.”