Barbara Shecter, David Akin and Claudio Cattaneo , with files from Canwest News Service
Monday, January 12, 2009

 

Glenn Baglo/Canwest News Service Thomas Hockin, chair of the Expert Panel on Securities Regulation releases the panel's Final Report and Recommendations for a national regulatory system during a speech to the Vancouver Board of Trade.		A blue-chip panel Monday proposed a decentralized single national securities regulator it says Canada needs to better protect investors and operate in the global business world. However, despite nods to provincial expertise and promises to maintain a presence in regions across the country, the Finance Ministers of Alberta, Manitoba and Quebec immediately objected to the plan, threatening legal action because they would lose their jurisdiction over regulation. "We don't think we should have to cede jurisdiction," said Greg Selinger, Manitoba's Finance Minister. He said Manitoba would hope to avoid a legal confrontation but would consider joining a challenge led by another province.

Alberta's Finance Minister, Iris Evans, said her province "will continue to oppose, through all available avenues, including legal action if necessary, any move toward establishing a single national regulator."

Jean Charest, the Quebec Premier, reiterated Quebec's longstanding opposition to a national securities watchdog. He stressed that such regulation is provincial jurisdiction regardless of legal opinions obtained by the panel that said the federal government could act because, under the Constitution, Ottawa is allowed to regulate trade and commerce.

"We're going to wait and see what their proposal is going to be exactly and we intend to defend our jurisdictions," Mr. Charest said, noting he hasn't read the report. "No matter what the report says, it doesn't change a thing about the jurisdiction. This is a provincial jurisdiction."

According to the road map commissioned by federal finance minister Jim Flaherty and unveiled Monday by the Expert Panel on Securities Regulation, if provinces opt not to sign on with the new national regulator, the federal government should simply bypass the commissions and invite market players -- pension funds, publicly traded companies and others -- to ignore provincial commissions and sign up with the national regulator.

"The recent turmoil in capital markets has made it even clearer that Canada needs a single securities regulator that can move with greater speed alongside other domestic and international regulators to address financial instability," said the panel's chairman Tom Hockin.

Mr. Hockin released a 100-page report and some draft legislation for Ottawa to consider.

Some observers hailed it as the closest Canada has come to replacing its patchwork system of 13 provincial and territorial securities commission since the idea was first considered in he 1960s.

"The opportunities are too great [and the] stakes too high to simply muddle through again," Mr. Hockin said in a speech in Vancouver. "We can have paralysis by analysis or we can have reform and action now."

The proposal calls for a de-centralized approach that would distribute vice-chairmen across regional centres and maintain provincial specialties such as mining in British Columbia.

"We don't want an OSC on steroids," said Mr. Hockin, adding that the consolidated regulatory regime would nonetheless result in better enforcement, quicker response to problems. and a single set of fees.

Ian Russell, president of the Investment Industry Association of Canada, said a single regulator appears closer to reality than at any time in the four decades leading up to Mr. Hockin's report. However, he conceded that a confrontation over opting in or out of the regulator lead to a drawn out court ruling.

"At the end of the day, they may seek a ruling from the Supreme Court of Canada," said Mr. Russell, whose group lobbies for the investment industry.

Ontario has long supported the creation of a national regulator, and did not join a "passport" system along with other provinces based on mutual recognition of regulatory systems.

Monday, Dwight Duncan, Ontario's Minister of Finance, applauded the Hockin Report and said the Ontario government expects the regulator's headquarters to be in Toronto, home to most of Canada's investment and mutual fund dealers and the third-largest financial centre in North America.

The Hockin panel proposals also won support from industry groups including the Canadian Bankers Association (CBA) and the Canadian Council of Chief Executives.

"The Expert Panel has put forward a realistic and workable plan that we strongly support, said Nancy Hughes Anthony, president of the CBA. "We have been debating securities regulation in Canada for decades: enough is enough. With this report the debate is over, it's time to get this done."

She said the CBA was pleased with the panel's conclusion that the current fragmented structure makes it difficult for Canadian securities regulators to react quickly and decisively to capital market events and makes Canada vulnerable to market and reputational risks.

Big fund managers who back the plan said the proposed national regulator would lead to much tougher enforcement of securities laws with more prosecutions and heavier penalties.

"Certainly one of the hopes is that enforcement will be better. Canada has at times been a bit of a joke," said Wayne Kozun, who manages $30-billion in public equities investments for the Ontario Teachers Pension Plan.

The pension manager said the current regime lacked "teeth" and created a perverse incentive to commit financial crime, "if you think you can get embezzle a million dollars and get away with a slap on the wrist."

Mr. Kozun said the balkanized structure of securities oversight in Canada created a "risk premium" on the country's stocks and undermined investor confidence.

Financial Post

bshecter@nationalpost.com

With files from Eoin Callan, Financial Post