The plan for a national regulator recently released by the Canadian Securities Transition Office reflects a creative solution to the vexing problem of how to regulate the capital markets in this country effectively.

The proposed regulator is a real and significant change to the status quo. It will integrate multiple regulators into a single body with a common governance structure; harmonize legislation, policy, enforcement and fees to an extent not achievable under the current system; and provide unified representation on the world stage.

Over the years, Canada’s securities regulators, working under their umbrella organization, the Canadian Securities Administrators, have achieved a lot to lessen the negative impact of 13 regulators. Nevertheless, we are left in a position in which:

>  The CSA works on a consensus basis, which has resulted in inordinate delays because of the inability of the CSA members to reach a consensus and, to some extent, in policy being formulated based on the views of the lowest common denominator.

> Enforcement could be strengthened across Canada under unity of command.

> More and more securities regulation is going global, and Canada needs unified representation on the world stage.

> Much of the rest of the world sees our structure as a negative, with a resulting reluctance to do business in Canada or only doing so in a limited number of jurisdictions.

The STO’s proposal builds on the strengths of the provincial system while avoiding the negatives referred to above, including the inefficiencies of the current consensus-based CSA model for achieving harmonization.

The transition plan, at its core, provides for an integrated national governance structure that connects service-driven local offices. Unlike the current system, the organization will be overseen by a single management team led by a chief regulator, the final decision-maker for the regulatory division of the organization. It will also be accountable to an expertise-driven board of directors and, ultimately, to Parliament, providing for strong, streamlined governance and decision-making. More important, the organization will apply consistent regulation across Canada, to provide co-ordinated enforcement and speak with one voice internationally.

Politically, local offices are crucial to obtaining the buy-in of all jurisdictions. Practically, these local offices ensure that the system is able to respond effectively to local issues, adequately service small and medium-sized issuers and draw on the expertise that has developed among provincial regulators. The extensive consultations with governments and market participants held by the Crawford Panel on a Single Securities Regulator, which I chaired in 2005-06, confirmed that these were widely shared concerns.

Contrary to some recent commentary, including an editorial published in this paper, there is no suggestion in the transition plan of a “virtual head office.” Indeed, the STO has stated publicly that there will be a head or executive office. However, the integrated governance structure and national accountability so clearly built into the proposed system make the debate about the head office beside the point.

With the STO’s plan, Canada is closer than ever to the creation of a national regulator. This is an enormous step forward. IE

Purdy Crawford, C.C., is counsel with Osler Hoskin & Harcourt LLP.