The appointment of Joe Oliver as the new federal finance minister means the investment industry now has a “native son” in one of the most powerful positions in the country. But whether this will translate into any great returns for the industry is a big question.

Given Oliver’s background as both an investment banker and head of the Investment Dealers Association of Canada (IDA, the predecessor of the Investment Industry Regulatory Organization of Canada) back when it was both a self-regulatory organization and a trade association, he brings a deep understanding of financial markets, policy and regulation to his new post.

“I think the prime minister made an outstanding choice in asking Joe to take on this responsibility,” says Howard Wetston, chairman and CEO of the Ontario Securities Commission. “I can’t think of anyone who has better experience and a greater knowledge of the capital markets, from both a practical and a regulatory perspective.”

At the very least, Oliver’s appointment should mean that the industry will now have a sympathetic ear in Ottawa. That could not always be said of Oliver’s predecessor, Jim Flaherty. Indeed, Flaherty initially was considered a villain by some on Bay Street when he pulled the plug on income trusts with no advance warning in 2006. That image dissipated after Canada came through the global financial crisis and subsequent recession in relatively good shape. Flaherty’s efforts to champion a national securities regulator were also appreciated by the Street.

Next: National regulator
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National regulator

Yet, as Flaherty exits the stage and Oliver steps in, the prospects for a national regulator remain as uncertain as ever. Last autumn, British Columbia, Ontario and the federal government announced an agreement to create a new, co-operative regulator, in the hope that at least some of the other provinces would sign on. None of them did by the initial deadline of Jan. 31, which since been extended to April 30. The two major provinces that weren’t part of the initial deal – Alberta and Quebec – remain entrenched against the idea, and most of the other provinces have yet to declare their position.

Although Oliver will certainly understand the industry’s hunger for a national regulator, that understanding won’t necessarily help make it a reality. Flaherty never had a problem acknowledging the need or making the case for a national regulator. The impediment has always been in getting the provinces to go along.

Oliver told the standing Senate committee on banking, trade and commerce in 2002: “The problem is not an absence of goodwill or even an absence of good ideas; the fundamental problem is one of priority and political will.”

But securities regulation is rarely a high priority. “People will go to the barricades for bread or liberty,” Oliver told the committee. “But, alas, they will not go to the barricades for a national securities commission.”

And that lack of political will remains the central issue today.

So, while Oliver may understand the value of a national regulator even more deeply than Flaherty did, it is, absent the political will, no more is likely to be achieved with Oliver at the helm.

Where the industry might get a little more traction with the Department of Finance Canada is in fiscal policy. The Investment Industry Association of Canada (IIAC) has advocated a number of policy measures in recent months designed to stoke small-business financing that have seemingly fallen on deaf ears in Ottawa. IIAC president and CEO Ian Russell hopes that may change with a finance minister who is well acquainted with the capital markets and their role in economic growth.

Russell hopes some of the proposals that the IIAC put forth, unsuccessfully, to the previous administration may now be better received in Ottawa. In addition to policies targeting small-business growth, Russell says, the IIAC also will be advocating the expansion of tax-free savings account limits, more flexibility in RRIF conversion rules and fairer treatment of group RRSPs, among other issues.

Whether those items make their way into the next federal budget remains to be seen. In general, however, while Oliver was at the IDA, he did advocate for free markets and vibrant competition.

When Oliver appeared before the Senate banking committee in 1998, he supported efforts to bolster foreign competition in the banking industry, and indicated that the IDA was generally supportive of recommendations that banks be allowed to sell insurance in their branches.

Oliver also argued in favour of minimal regulation, saying that the onus should be on regulators to justify any new rules that would curb business.

Oliver also has championed other ideas, including the creation of special courts to deal with complex white-collar crimes and more integrated regulatory and criminal market enforcement.

It’s not clear how well these ideals have held up over the years since Oliver first expressed them, but Bay Street should have no doubt that there’s now a finance minister in Ottawa that understands it.

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