A landmark Supreme Court of Canada ruling has cleared the way for a whole new model of securities regulation. Now, the provinces must think long and hard about whether throwing their lot in with this novelty makes sense.

Just because the nation’s top court has ruled that the proposed co- operative Capital Markets Regulatory Authority (CMRA) does not violate the Constitution, that doesn’t mean the provinces that have backed the project to date should follow through with it. Before the provinces dismantle their existing regulatory agencies and jump into this new federal/provincial hybrid regulator, they must be certain the cake is worth the candle.

With that in mind, there are a few things to consider. The fact Canada is the only first-world country without a national securities regulator is inevitably cited as a central justification for this structural reform. But Canada still will be alone without a national regulator even if the CMRA project goes ahead. This effort won’t create a truly national authority unless Alberta and Quebec decide to join.

Moreover, the project will involve exchanging the suboptimal but relatively functional current arrangement – the Canadian Securities Administrators – for an untested setup that has yet to be cobbled together.

The opportunities for operational dysfunction may well be amplified in an awkward new model that involves some, but not all provinces and territories, along with the federal government, and a yet to be built interface with the regulators that remain outside the CMRA.

The execution risk associated with this endeavour is large too. The best-managed companies in the world often struggle to make mergers work. Now, imagine a bunch of bureaucrats trying to pull off not just a straightforward two-company deal, but an amalgamation that involves five provincial agencies, one territory and the federal government. If the result were a single, national authority, the turmoil could be worthwhile. But to simply exchange one jury-rigged solution for another is not.

The time seemed right for the CMRA when the late former federal finance minister, Jim Flaherty, first envisioned it. But, even then, it was far from the ideal solution. But the longer the initiative flounders along, the less appealing it looks.