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| Canada’s Flaherty to Move Ahead With
Common Regulator |
By Christopher Donville and Theophilos Argitis
Jan. 12 (Bloomberg) -- Canadian Finance Minister Jim Flaherty said he
plans to move ahead with a common securities regulator to help the
world’s eighth-largest economy cope with turmoil in financial markets,
only hours after a government- appointed panel recommended he impose a
national watchdog.
The government will unveil further steps toward a common financial
regulator in its Jan. 27 budget, Flaherty said, without providing
details. The plan will be “comprehensive” and “voluntary,” he said.
“The global financial crisis has thrust the role of regulation and the
lack of it into the limelight,” Flaherty, 59, told reporters today in
Vancouver.
“This is not the time for business as usual,” he said.
Flaherty’s announcement comes just hours after the government-appointed
panel said Canada should set up a national securities regulator and
harmonize provinces’ rules for investors. The federal government has a
“constitutional” right to impose a regulator that would have authority
to pre-empt existing provincial agencies, the seven-member panel said in
its report.
“Canadians are ill-served by such a Balkanized system,” Thomas Hockin,
the panel’s chair, said in a foreword attached to the report. “We are
assured by our constitutional adviser the federal Parliament has the
constitutional authority to enact legislation that would provide for
comprehensive capital markets regulations in Canada.”
Only Country Without
Canada is the only member of the Group of Seven industrialized nations
without a national securities watchdog. Flaherty has been pushing for 2
1/2 years for a single regulator to replace 13 provincial and
territorial agencies that monitor financial markets, arguing it would
cut costs and improve efficiency.
Flaherty appointed the panel last February.
Canada loses about C$10 billion ($8.22 billion) in economic output each
year and 65,000 jobs because of its fragmented securities regulation,
according to a 2007 government- commissioned reported by John Coffee, a
Columbia University Law School professor.
The current framework also doesn’t include safeguards against “systemic
risk,” the panel said, making financial markets across the country
vulnerable to a bad decision by one of the provinces.
Mutual-fund management fees in Canada, among the world’s highest, would
also fall if the proposed single regulator is established, Hockin told
reporters in Vancouver.
Largest Capital Market
While the federal government’s efforts have won backing from Ontario,
the most populous province and home to the country’s largest capital
market, other provinces have sought to harmonize their rules while
stopping short of a centralized system.
Officials from securities regulators in the provinces of British
Columbia, Alberta and Quebec have said in the past they prefer the
current “passport” system which is slated to soon let companies apply
for approval in one province instead of 13.
Such a system is insufficient for today’s circumstances, the panel
concluded.
“Although the passport system is a major step forward, most stakeholders
told us that its application is limited and it still falls short of what
is required in today’s global marketplace” Hockin said in the foreword.
Ontario ‘Pleased’
British Columbia Finance Minister Colin Hansen said in an interview his
province is now prepared to drop its opposition to the idea of a single
regulator. Ontario Finance Minister Dwight Duncan said in a statement
he’s “pleased” the report endorses his province’s position.
Alberta Finance Minister Iris Evans, meanwhile, said her province
continues to back the passport system, and threatened legal action
should the federal government impose a national watchdog.
“We will continue to oppose, through all available avenues, including
legal action if necessary, any move toward establishing a single
national regulator,” Evans said in a statement.
Quebec Finance Minister Monique Jerome-Forget isn’t likely to comment
until tomorrow, according to Catherine Poulin, a spokeswoman. Quebec
Premier Jean Charest was quoted by Canadian Press as saying securities
regulation falls under provincial jurisdiction.
Opposition to the plan has been strongest in Quebec, Canada’s only
French-speaking province, where politicians say a common regulator might
shift more financial power away from Montreal, the province’s biggest
city, to Toronto, Ontario’s capital and the country’s financial hub.
Two-Year Transition
Under the system proposed by the panel, the federal government would
start negotiations with provinces and prepare a bill to set up a
regulator. There would be a transition of about two years after the
law’s passage before the system came into effect. The new securities
commission would be accountable to the federal finance minister.
Investors and brokers in non-participating provinces would be allowed to
“opt-in” to the system after a “reasonable period of time,” the report
said.
“The opportunities are too great, and the stakes too high, to simply
muddle through as usual,” Hockin said today in a speech in Vancouver.
The panel recommended that the regulator set up regional offices to
provide the “high level of local service” currently offered by
provincial regulators, and published a draft Securities Act as a road
map for lawmakers.
Hockin said the panel’s proposal for a single regulator recognizes “the
distinct needs” of smaller securities markets outside the umbrella of
the Ontario Securities Commission, or the OSC.
“We don’t want an OSC on steroids,” Hockin said in a speech today.
“That’s why we’re proposing a national regulator with a decentralized
structure.”
To contact the reporter on this story: Christopher Donville in Vancouver
at
cjdonville@bloomberg.net ; Theophilos Argitis in Ottawa at
targitis@bloomberg.net
Last Updated: January 12, 2009 20:29 EST |
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