Federal Finance Minister Jim Flaherty rolled through Vancouver in August, the latest federal finance minister to push for a national securities regulator. Most of his predecessors emphasized potential efficiencies for issuers, but Flaherty is playing the enforcement card.

Following the acquittal of former Bre-X Minerals Ltd. geologist John Felderhof in Ontario and the successful prosecution of Conrad Black in Chicago this past summer, Flaherty called Canada’s record of securities enforcement “an international embarrassment.

“We need to protect investors against breaches of securities law. We need to do that in our country and not rely on other countries to do it for us,” he told Canadian Press.

He reiterated that sentiment on his visit to Vancouver. But, really, a national commission would not have helped in these cases. The Felderhof case was not an administrative proceeding. The Ontario Securities Commission prosecuted the case in a Canadian court, in which the deck is enormously stacked in favour of defendants.

Black, too, was prosecuted in court; but it was a U.S. court, which provides much rougher justice than its Canadian counterpart. A national securities commission is not going to change that.

Similarly, a national regulator in Canada is not going to jolt the RCMP’s integrated market enforcement teams out of their slumber. The team in British Columbia has been operating for almost four years and has charged and convicted only one person. Teams in Calgary, Montreal and Toronto have also underperformed.

Similarly, a national regulator won’t be able to get Crown prosecutors to appreciate the nuances of securities fraud, or the judiciary (as already noted) to hand out meaningful sentences. And it won’t do anything to mitigate the unreasonable impediments to effective prosecution and adjudication that are imbedded in Canada’s Constitution.

Flaherty noted in Vancouver that Ottawa has committed more money to the RCMP. He talks about specialized prosecutors and judges who are schooled in securities matters. But we have heard this talk before — without results.

National regulation could provide material benefits when it comes to administrative enforcement action (cases that go to commission hearings rather than court). A market suspension in B.C., for example, would automatically become effective in Ontario.

A national commission and new personnel may also revitalize administrative enforcement efforts, speed up regulatory actions and squeeze out some of the absurdly liberal sanctions that have marred the hearing process — especially in B.C.

Throw in administrative efficiencies for issuers, and you have a compelling argument for a national system. But politics seem to be getting in the way of good sense. Politicians do not want to be seen giving up what is constitutionally and historically provincial jurisdiction.

Another roadblock is the securities commissions’ self-interest. Provincial regulators — many of whom have enormous influence over their political masters — do not want to upset their fiefdoms, in which many of the top guys, including B.C. Securities Commission chairman Doug Hyndman, make more than $500,000 a year.

So, we have an endless merry-go-round, with finance ministers and special committees pushing for national regulation, and the provinces — particularly B.C., Alberta and Quebec — digging in their heels.

Flaherty says he can assert authority on the basis that trade and commerce is a federal responsibility. He says if the provinces want Ottawa to enhance trade arrangements — such as implications of the softwood lumber deal for B.C. — they’ll have to play ball on other matters in the national interest.

Will this pry provincial politicians out of their ruts? My bet is Flaherty and succeeding finance ministers will be riding this merry-go-round for years to come. IE