It’s clear that ottawa must play a critical role if a single Canadian securities commission is ever going to be realized. Proponents of one regulator can only be encouraged, therefore, by the fact that the new federal Conservative government stated its preference for change in its first budget.

Along with the budget, the government released a discussion paper entitled “Restoring Fiscal Balance in Canada,” which pledges to study equalization issues and explore “ways to enhance tax harmonization and establish a common securities regulator.”

A fundamental obstacle to having a single regulator has been the fact that securities regulation comes under provincial jurisdiction. In the past few years, the federal government has contemplated whether it could claim jurisdiction, if need be, in order to develop a national regulator.

The wise persons committee went so far as to obtain several legal opinions confirming that Ottawa could indeed claim such jurisdiction. The government, however, never forced the issue nor tested the validity of those opinions.

Is it possible that the new effort to sort out federal responsibilities from those of the provinces could lead to resolution of the debate over a single regulator in one way or another? It is possible, albeit unlikely.

Apart from the reference to securities regulation in the budget, there doesn’t appear to be a powerful push for it behind the scenes. According to federal Finance officials, the mention in the budget indicates the government’s interest in the matter, and sets out its preference for the kind of design it envisages. But there is no grand strategy for getting there.

Notably, the design sketched out in the budget resembles the model proposed by the Ontario government’s Crawford panel in late 2005. “The government believes Canadians would be best served by a common securities regulator that administers a single code, is responsive to regional needs and has a governance structure that ensures broad provincial participation,” the budget document states.

It remains to be seen whether Ottawa has the political will to follow through and solve a problem that has dogged the Canadian securities industry for the past 40 years.

Federal Finance Minister Jim Flaherty plans to meet with the provincial finance ministers this month to begin discussions on restoring the fiscal balance. A first ministers’ meeting will be held in the fall, and Flaherty says next year’s budget will propose the funding and legislation to implement any proposals that come out of the initiative.

Last year, the previous federal government also promised significant progress toward an improved regulatory system. It went so far as to hold a few meetings on the issue between the federal Finance department and the provinces, but the talks went nowhere.

With the exception of Ontario, the provinces have continued to work toward implementing a “passport” model. The federal budget recognizes the provincial passport initiative, but indicates that Ottawa would prefer something more uniform still.

“The provinces and territories have made progress in improving the current system of securities regulation in Canada by narrowing regulatory differences and streamlining the administration of securities laws,” it states. “To maximize benefits for investors and issuers and strengthen the federation, intensified efforts are required.”

It remains to be seen whether the Tory minority government will make an effort for the good of investors, the industry and the country. IE