The prospect of creating one national securities regulator for Canada appears as fanciful now as ever. A recent series of round-table talks to discuss Ontario’s pet project highlights just how little appetite there is for the concept in the rest of the country.

The Crawford panel issued a discussion paper this past December proposing yet another model for a single regulator: one organized under provincial jurisdiction. The paper was intended to be a starting point, in hopes that it would attract support from across Canada and generate momentum toward a provincially led single regulator. The panel was organized on behalf of Gerry Phillips, Ontario’s minister of government services, and led by Purdy Crawford, counsel at Osler Hoskin & Harcourt LLP in Toronto.

Six round-table discussions were convened from February to April in major cities across the country to canvass input on the model proposed by the panel. Witnesses included corporate executives from the financial services industry and other sectors, lawyers, academics and assorted lobbyists. The paper is now being revised to reflect that input, and a final version is expected to be released in early June.

Whether the latest initiative goes anywhere remains to be seen, but a report summarizing the round-table discussions offers little hope to proponents of a single regulator. Prepared by the public policy forum, which held the meetings on behalf of the panel, the report puts an encouraging spin on the effort yet conveys the sense that there is little interest in a single regulator outside Ontario. Witnesses from other provinces appear to be preoccupied with regional concerns rather than exploring structural reform to enhance market efficiency and competitiveness or improve investor protection.

The report notes that some of the round table’s participants spoke against the concept of a single regulator, while others suggested that the case for a single regulator has not been well made. Still others said that, while there is a compelling case in favour of a single regulator, such as lowering systemic costs, they aren’t convinced the savings will be realized.

“There is a general sense that Canada has made progress in the past few years on harmonization,” the report notes. Indeed, with new leadership atop the regulators in Alberta and Ontario, British Columbia’s decision to drop its new legislation and the effort to create the “passport model” among the ministers of every province except Ontario, increased harmonization continues to look like a more achievable reform.

The report notes that there was plenty of talk in favour of the passport model in the five round tables that occurred outside Ontario, and that Ontario’s refusal to sign on to the model disappointed the other provinces.

Round-table participants reportedly don’t see the passport model as a diversion from a single regulator, but rather as an interim step in that direction. Others have argued, however, that the passport model actually helps perpetuate fragmentation and preserves the provinces’ ability to deviate from harmonized national rules, which also nullifies the efficiency advantages of harmonization and makes a single regulator somewhat pointless.

Regulatory efficiency appears to take a back seat to regional concerns for some round-table participants, particularly outside Ontario. Indeed, the report generally confirms that the philosophical divide between Ontario and the rest of the country persists. In some ways, it also confirms the worst suspicions about the entrenched interests and self-serving agendas that tend to retard progress in the existing system.

The Crawford model bends over backward to build in mechanisms for regional input, in both its organizational structure and its governance model. Yet regional concerns continued to dominate some of the round tables, notwithstanding the fact that there is no evidence that geography is at all relevant to securities regulation.

Small-cap companies will certainly have different concerns than larger firms, and some industries, such as mining and energy, may have sector-specific issues in certain areas, such as how they classify and disclose reserves. Such considerations aren’t dictated by geography; sector and size are the distinguishing features.

Nevertheless, it seems that much of Canada remains hung up on rather mundane regional concerns. For example, the Halifax round table suggested that some provinces are opposing a national body because securities regulation is currently a profit centre for them, local regulators fear losing jobs and regional legal and accounting firms would lose business. Although job creation is a legitimate issue for any jurisdiction, surely provinces shouldn’t be looking at regulatory bureaucracy as a growth industry.

@page_break@The preference for putting narrow self-interest ahead of market efficiency and regulatory effectiveness is typified by the outsized concern expressed about symbolic details such as head office location. In Halifax, the spectre of a base in Toronto was cited as a “particular concern.” Some would entertain Ottawa as a possibility, but others warned that “Ottawa also has a particular place in the Canadian psyche and might not be ideal.” The Winnipeg meeting concluded that the head office should be in Edmonton or Calgary.

The Vancouver round table also fretted: “With the current critical mass of the industry in Toronto, participants raised some concerns that the head office would be located there.” But rather than capitalizing on that critical mass to maximize efficiency, “participants were of the opinion that the head office should be located outside Ontario to ensure the proper checks and balances for the new system.”

Participants at the Montreal meeting unanimously agreed that the panel should have stipulated up front in the model that the head office would not be located in Toronto. Such a declaration “would have alleviated many apprehensions regarding the objectives of Minister Phillips and the Ontario Securities Commission. ”

Even the Toronto round table attendees seemed to attribute excessive significance to the issue of head office location, saying that the rest of the country couldn’t possibly be expected to go along with such a model. Instead, they noted that the U.S. Securities and Exchange Commission is located not on Wall Street but in Washington, D.C., which “helps relieve debate about New York in the U.S.” — as if there was a debate about where the SEC should be located.

If the U.S. is to serve as an inspiration, it should be recognized that Washington and New York are not far apart. They share a time zone, and it’s only 360 kilometres from the SEC’s front door to the New York Stock Exchange. Locating a national commission a similar distance from Bay Street would get you just past Kingston, Ont., to the east; not quite to Windsor, Ont., to the west; and as far as North Bay, Ont., to the north.

Moreover, the U.S. is an anomaly. In most major financial centres — London, Tokyo, Frankfurt, Hong Kong, Sydney — the national regulators are based in the city in which the bulk of the industry business is located because it makes sense. Issuers, dealers, lawyers and accountants elsewhere in these countries manage to live with it.

The disproportionate meaning given to head office location, which trumps the prospect of a more efficient and effective system, highlights the lack of genuine desire to reform. As a result, while participants agreed the single regulator issue is important, they could only recommend still more consultation.

Notwithstanding Ontario’s efforts, it seems the federal government remains key to getting a single regulator. Joe Oliver, president and CEO of the Investment Dealers Association of Canada, noted in a speech in mid-May: “Ontario has effectively conceded the head office, a limited role on a ministerial council and meaningful regional centres. There is little more to give. If this proposal doesn’t fly, some may conclude it’s time to make common cause with Ottawa and set in motion an opt-in model.”

Ontario remains outwardly optimistic. In the provincial legislature, Phillips reported that Ontario is hosting the June meeting of the provincial ministers responsible for securities regulation, adding, “I happen to think we’re making progress.”

But, if the sentiments of some attendees at the Crawford panel’s round table are anything to go by, Phillips still has a very long journey ahead of him. IE