Common sense and efficiency dictate that Canada should have a single national securities regulator. But, in the short term, the price of achieving that long-held ambition will be uncertainty.

The latest effort to create a national regulator is plugging along. Draft securities legislation for the new authority is slated to be proposed by the federal government in the spring, and the Canadian Securities Transition Office is to deliver its transition plan by July, with an eye to creating the new regulator by 2012.

Of course, there’s a long way to go before that becomes a reality. The entire project depends on the political will of the current government, whose own future is by no means certain. The project also faces constitutional challenges in Alberta and Quebec. And then there’s the question of just which jurisdictions will participate if the effort really does get off the ground.

All of which is to say that the creation of a national regulator is still not a sure thing.

In the meantime, the uncertain prospect of a national regulator is the elephant in the room at the existing provincial regulators. If the national regulator does materialize, it is not going to be created from whole cloth. It will be composed only of personnel from the regulators of the participating provinces. Any regulatory organization facing the possibility of a merger in a couple years — with as many as 10 possible participants — will surely find itself distracted by this prospect. With such a major shift on the horizon, strategic planning, policy priorities, staffing and operations could all be affected.

One of the biggest unknown staffing questions is who is going to head up the country’s largest regulator, the Ontario Securities Commission, over the next couple of years. The original, five-year term of the current head of the OSC, David Wilson, ends in November, and no announcement has been made about his future.

Ontario is the only major jurisdiction that doesn’t have a clear leader for its regulator in the period leading up to the potential transition to a national securities regulator. British Columbia recently named a new chairman, after its longtime chairman, Doug Hyndman, left to lead the CSTO. Alberta and Quebec are determined not to participate in a national regulator. Among the smaller provinces, Manitoba isn’t participating in the CSTO, either, at this point. New Brunswick appointed a new chairman to a five-year term last summer. And the other jurisdictions have either recently appointed heads or long-serving ones.

Ontario can either ask Wilson to stay on through the presumed transition or it can look for a new chairman. Scott Blodgett, spokesman for the provincial ministry of finance, says that the government hasn’t decided what it’s going to do: “This is obviously something that the government will need to discuss with [Wilson] in due course — and any speculation at this point would be premature.”

Nevertheless, speculation is what the Street does best. And the consensus among some members of the regulatory community is that no one is expecting Wilson to stay beyond his present term. Says one former OSC staffer: “I would be really surprised if he stayed one day after Oct. 31.”

If that proves to be the case, it strains credulity to believe Ontario’s line that it hasn’t considered a replacement. When the leadership of the OSC last changed hands, it took seven months from the time that Wilson’s predecessor, David Brown, announced that he would be leaving for the government to name a replacement. Assuming that it takes at least that long to recruit a candidate this time around, it seems unlikely that the government will be able to find someone suitable by November. That’s particularly so, given the added uncertainty of whether the OSC is destined to be folded into a national regulator in a couple of years.

Again, the sense on the Street is that the Ontario government is likely to appoint a “caretaker chairman” to shepherd the OSC for the next couple of years. This has happened in the past, when former vice chairman Jack Geller served as acting chairman for a time, before Brown was appointed. And former vice chairwoman Susan Wolburgh Jenah was also acting head for a few months between the Brown and Wilson administrations.

@page_break@A further complication this time around is that the OSC really has only one vice chairman as it is. One of its two current vice chairmen, Larry Ritchie, has been seconded to the CSTO to work on the national regulator initiative, leaving Jim Turner as the sole person in a vice chairman’s position for now. That situation has Street speculation focused on the OSC’s executive director, Peggy Dowdall-Logie, as the next logical candidate to take over as chairwoman.

Asked for comment on whether Wilson may stay on at the OSC, or the possibility that Dowdall-Logie could be named as his replacement, OSC director of communications, Wendy Dey, notes that the decision lies with the minister of finance: “While the minister makes a determination, David and Peggy are focused on driving the organization forward with an extremely busy agenda that includes delivering on a new statement of priorities.”

That new agenda, for the OSC’s fiscal year ended March 31, 2011, was out for comment until Feb. 15. The OSC’s staff are reviewing the comments, and intend to submit a final version to the OSC for approval by mid-March.

Submissions call on the OSC to tackle a variety of significant issues. The comment from TMX Group Inc., for example, says that the OSC should be taking a “leading role in supporting the capital formation of domestic companies.” That includes developing a regulatory framework that lowers the cost of capital for issuers.

Among other things, the Invest-ment Funds Institute of Canada recommends that the OSC rethink the proposed new point-of-sale disclosure requirements for investment funds and modernize fund disclosure rules. (There is an effort underway to revise those rules to reflect exemptions that are routinely granted, which is due to be published for comment in March.)

A variety of submissions from investor advocates also call on the OSC to defend retail inves-tors’ interests more aggressively. The Canadian Foundation for Advancement of Investor Rights (known colloquially as FAIR Canada), for example, calls for the addition of a commissioner with a background in retail investor issues to provide that perspective to the OSC’s decision-making and policy-formulation efforts.

However, given the uncertainty surrounding the top job at the OSC, and the possibility that whoever ends up in the position will face a national commission merger, it will be tricky for the OSC to set any kind of bold agenda.

“It’s a lot easier to get things done on the investor side if you have a strong chair with a focus on, and an interest in, investor-related issues,” says Ilana Singer, associate director of FAIR Canada. “And, often during restructurings, a lot of other issues get put on the back burner, so we hope that does not happen on investor-related initiatives.”

Nevertheless, on Feb. 26, the OSC did announce the creation of an investor advisory panel to provide input on regulatory issues. This had been one FAIR Canada’s central recommendations. Still, it remains to be seen if that effort proves useful.

“We really hope that whoever comes on [as the next chairperson of the OSC],” Singer adds, “is a strong chair who’s visible and interested in investor-related issues and willing to move things forward, even in the absence of certainty regarding the national regulator issue.”

Nevertheless, the Ontario Mini-stry of Finance insists that the uncertainty over a national regulator will not play a major role in the province’s choice for the next head of the OSC. Says Blodgett: “Ontario has long advocated for a strong, national securities regulator to improve the efficiency of the capital markets and better co-ordinate enforcement and investor protection. While we know that this is still several years away from implementation, it is not a factor which will heavily influence the possible appointment of a new OSC chair or the reappointment of the current chairman.”

Nor is the ministry waiting for the outcome of the constitutional challenges to federal authority over securities regulation to make a decision, adds Blodgett: “The legal issue is but one issue of many that still needs to be worked out.”

Ontario is looking forward to gaining clarity on the question of jurisdiction over securities regulation. “We are looking at this issue carefully,” Blodgett says, “to consider the implications for Ontario of a [national regulator] and the broader implications for the federal/provincial division of powers, as well as any role the province may play in the reference process.” IE