Yet another blue-print for a single Canadian securities regulator has been drafted, but to get off the drawing board, it will need a master builder who can realize a national vision.

The chief architect of the latest plan is Purdy Crawford, counsel at Osler Hoskin & Harcourt LLP. Crawford headed the committee that produced a discussion paper sketching out a possible way to craft a common regulator out of the patchwork that currently exists.

The model is not very pretty from an esthetic point of view. It is a somewhat tortuous exercise in provincial appeasement that goes to great lengths to ensure that a single regulator would not be dominated by one province, namely Ontario. The reality on the ground may be that Ontario is home to the majority of capital markets activity in Canada, but the fear is that few of the other provinces would go along with a single regulator that is seen to be dominated by Bay Street.

In the interests of getting the project built, the Crawford Panel proposes a model that aims to keep all prospective participants on an equal footing — with the regulator overseen by a Council of Ministers in which each minister has an equal vote in selecting the regulator’s board and approving its rules. The board candidates would be proposed by an arm’s length nominating committee that would be, in turn, appointed by the Council. The board would oversee the regulator and select its chief executive.

Such a contorted attempt to soothe regional fears conceals the rather clever way the panel imagines the single regulator can be created. One province would adopt a new securities act, and the others could merely repeal their acts and incorporate the new one by reference. This allows the new commission to come into being in those jurisdictions that agree to go along, and it makes it fairly easy for others to opt in over time.

The opt-in model avoids the chore of trying to craft a deal that a large number of jurisdictions can agree to right out of the gate. The provinces have been close to such a deal in the past, only to have it fall apart at the 11th hour. This way, a core group of provinces could agree to move ahead from the start, with the hope that most of the others would eventually see the wisdom of a single regulator.

The arguments in favour of a single regulator are familiar: it would cut the cost and complexity of compliance, hopefully reducing the cost of capital as a result, and possibly provide more resources for enforcement. At the same time, a single regulator would help Canada attract more foreign capital, as the system would be easier for outsiders to navigate, making market access less of a chore.

Although it is easy to see how the common good would be served by having a single regulator, it is harder to imagine many provinces willingly giving up their turf, no matter how ruthlessly egalitarian the governance model may be.

So far, reaction to the Crawford Panel’s recommendations seems to run along those lines — admiration of the effort tempered by skepticism of the provinces’ willingness to come together and make it happen.

Ed Waitzer, former chairman of the Ontario Securities Commission and chairman of Stikeman Elliott LLP in Toronto, says the Crawford proposals make “good sense.’’

The sentiment is echoed by Harold MacKay, counsel with MacPherson Leslie Tyerman LLP in Regina, who was vice chairman of the wise person’s committee that recommended a single regulatory model in December 2003.

Glorianne Stromberg, a former OSC commissioner and now an independent industry commentator, also likes the plan. “My initial reaction is that the panel has put forward a viable proposal. It has cut through the rhetoric and has come up with a simple, functional model that is sensible, fair and balanced,” she says. “I hope the provinces move quickly to implement the proposal.”

But such rapid approval seems improbable. Earlier this year, the federal government tried to bring the provinces together on the single regulator issue, and seemingly made little progress. Quebec has made no secret of its open hostility to the idea and some of the other provinces have been lukewarm, at best. Indeed, all provinces except Ontario have signed on to the so-called “passport” model, which preserves much of the current system but aims to ease the compliance burden through greater harmonization and co-operation.

@page_break@Ontario is the only jurisdiction that has doggedly clung to the idea of founding a single regulator. It commissioned the Crawford Panel early in 2005, ostensibly in response to an all-party legislative committee paper in the fall of 2004 that recommended continued pursuit of a single regulator. The politician responsible for securities regulation in Ontario, Government Services Minister Gerry Phillips, has made it clear that his government is committed to the position.

Starting point

The Crawford paper is meant to serve as a starting point to jump-start discussions with other provinces. To that end, the panel is planning to hold a series of regional roundtable meetings in Vancouver, Calgary, Winnipeg, Toronto, Montreal and Halifax in early 2006. It is also soliciting comments on its Web site (www.crawfordpanel.ca).

“It is a good step the minister has taken to try to get the dialogue going,” says David Wilson, the OSC’s new chairman. He calls a single regulator a “worthy objective,” but notes that there have been many attempts to get one in the past. “This is another way to get there, and if we do, that would be great. If we don’t, we’ll continue to do the best with what we have, which is a highly co-operative Canadian Securities Administrators.”

Wilson believes Canada will one day have a single regulator, but he is not willing to predict whether the latest attempt will succeed. “I wouldn’t count Purdy Crawford out,” he says.

In the meantime, Wilson says the OSC is studying Crawford’s report, and will respond to it in due course. Ontario is hoping to get feedback from across the country. “The panel’s paper will require careful consideration by Ontario and, no doubt, by other governments, before any decisions can be made,” Phillips said upon release of the recommendations. “I look forward to discussing the paper with colleagues in other jurisdictions and with interested stakeholders. I am keenly interested in their views.”

Phillips reiterated the sentiments in a Dec. 13 speech to the Canadian Club of Toronto, where he emphasized Ontario’s limited demands for a single regulator, and its willingness to negotiate almost all of the details to get there.

“Ontario has three requirements, and three requirements only: that there be an effective common securities regulator, a common body of securities law and a single fee structure,” he said. “At the end of the day, that provides a lot of flexibility to set up a new framework in a way that will make sense to us and to other governments.”

He noted, for example, that Ontario really doesn’t care whether the single regulator’s head office is in another province. In the U.S., the Securities and Exchange Commission is based in Washington, D.C., despite the fact that the bulk of capital markets business takes place in New York. The U.S. is an anomaly, however, as most other major jurisdictions, such as Britain, have the regulator located close to the market’s major players.

The Crawford Panel’s report was intended to be released in Winnipeg to emphasize Ontario’s willingness to negotiate details such as head office location. But an administrative error resulted in the report’s accidental early release, followed by a hastily called news conference in Toronto.

“We are flexible on specifics regarding all matters that could contribute to a model for a common securities regulator that best serves the needs of investors and businesses, no matter where they are located in Canada,” Phillips told the Canadian Club.

Flexibility is fine but, to be truly impressive, the model must be built with a strong vision and have a strong champion to drive it to completion. IE