As the title of the task force to Modernize Securities Legislation in Canada’s final report, Canada Steps Up, suggests, those of us who were on the Investment Dealers Association of Canada’s task force saw an opportunity for Canada to step up to the challenge and present imaginative regulation to Canada’s capital markets. That meant regulation that’s not only effective, but builds on technology.

We saw our report, with its 65 specific recommendations and 3,000 pages of research, as a call to action. Not only could Canada do better, we were convinced that Canada had to do better. And if we don’t want to be left behind on critical issues — let alone if we would like to lead — we have to move with deliberate speed.

The task force had a positive vision for Canada’s capital markets: a new generation of savvy, informed, empowered investors, a paperless revolution in disclosure that would harness the power of technology to remove barriers between issuers and their markets and a firm, fair and a transparent regulatory and enforcement regime across the country.

So, how well has Canada stepped up to this challenge since we issued our final report last October?

Canadian governments have set up a federal/provincial working group composed of police, securities regulators and prosecutors to review ways to improve enforcement. The working group is scheduled to report to the ministers of justice this fall. More important, the Provincial/Territorial Council of Ministers of Securities Regulation has said that it will explore the task force’s recommendations for future reforms.

In the 2007 Federal Budget, entitled Creating a Canadian Advantage in Global Capital Markets, three of the plan’s four “building blocks” reflect key task force priorities. They include: enhancing regulatory efficiency through principles-based regulation; strengthening market integrity through better enforcement; and improving investor information through national financial literacy programs and more effective disclosure.

The government proposes a “national capital market enforcement strategy bringing together all partners to ensure the effective use of resources and the development and deployment of expert skill and knowledge across the country” as well as a review of the RCMP’s Integrated Market Enforcement Team’s performance (including acceptance of the task force recommendation of appointing a senior expert advisor to the RCMP).

The Senate Committee on Banking, Trade and Commerce sought task force input at its public hearings on hedge funds. Regulators have also been thinking hard about these complex issues on both sides of the border for some time now and the Canadian Securities Administrators’ Registration Reform Project proposal calls for hedge fund manager registration, a recommendation we fully support.

In addition, we welcome the creation of the National Steering Committee on Financial Capability and have offered our assistance and support as it addresses an issue that we in the task force see as a national priority. We also applaud the efforts of the Crawford Panel to stimulate debate and discussion on the quality of securities regulation and enforcement in Canada.

But despite all this activity, there are concerns that some of the task force’s recommendations — which are, in our view, meritorious and critical to regulatory evolution — may get lost in the vortex of enthusiasm for a single commission and enhanced enforcement. And as important as these issues are, we must not lose sight of:

> the need for speedy access of seasoned issuers to capital markets through the creation of a category called Canadian Well-Known Seasoned Issuers;

> The need to do away with paper and fundamentally alter disclosure so that it becomes truly informative.

Canada urgently needs leadership to champion the move to the next-generation electronic disclosure system that our report envisages. The U.S. Securities and Exchange Commission has already taken important steps to invest in interactive, dynamic, real-time data systems, what SEC chairman Christopher Coxe describes as a “quantum leap” over existing disclosure technologies. If the regulatory and business communities act decisively in these areas, investors and issuers will benefit and Canada can be a world leader in true, full and transparent business disclosure for all its stakeholders.

So, Canada has indeed started to “step up” — but the stairs are steep and there are more than a few flights yet to be climbed. IE



Tom Allen, a lawyer with Ogilvy Renault LLP, served as chairman of the IDA’s Task Force to Modernize Securities Legislation in Canada.

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