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Compensation likely in regulator plan

Barbara Shecter
Friday, January 30, 2009


Shoring up support among the provinces for the creation of a national securities regulator is likely to include direct compensation for lost fee revenue, and could see the head office based wherever the current chairman resides.


Tyler Anderson/National Post


Heather Zordel, Member of the Expert Panel on Securities Regulation & Partner with Cassels Brock's Securities Group, speaks during a panel discussion about the right securities regulation model for Canada in Toronto, Canada


Compensation would come from the $154-million set aside in this week's federal budget to ease the transition to a national regulator from the country's 13 provincial and territorial securities stock watchdogs, people close to the process say.

Heather Zordel, a partner at the law firm Cassels Brock who was a member of the panel chaired by Tom Hockin that laid out a plan this month for the federal government to establish a national securities regulator, noted that compensation payments were made to states and territories that lost fee revenue when Australia moved toward a national regulator for a wide range of financial services providers and products in 2002.


"Everything's open for negotiation," she said, adding that she now speaks as a lawyer in private practice, rather than as a member of the Expert Panel on Securities Regulation in Canada.

Three provinces, Quebec, Alberta and Manitoba, have objected strenuously to the creation of a national regulator, threatening to take their complaints of lost jurisdiction to the Supreme Court of Canada.

But observers say some provinces are also eager to protect the surpluses they receive from the annual fees provincial and territorial securities commissions collect from companies and brokers.

According to figures compiled by the Investment Industry Association of Canada based on provincial securities commission annual reports, five provinces, including Alberta and Manitoba, recorded a combined surplus of $28-million in the past fiscal year.

"This is a major budget item," for some provincial governments, says Ian Russell, president and chief executive of IIAC.

"Some of that [federally budgeted] $154-million is earmarked to pay the provinces... as a quid pro quo for stepping into the national securities regulator," he said. "It will fund the infrastructure of this regulator, but it will also fund the terms and conditions of some of the provinces."

Greg Selinger, Manitoba's minister of finance, said Friday that the money is a "non-issue" in his province's objection to a national securities regulator. He maintains that the real fight is over jurisdiction, and that the desire of some provinces to continue developing the 'passport' system that recognizes regulations of other provinces across the country. All provinces except Ontario participate in the 'passport' system.

The loss of fee revenue "wasn't the issue at all," said Mr. Selinger. "That wasn't at the heart of it."

There are other inducements aimed at luring the provinces into a national regulator, including a decentralized structure that could result in the headquarters being based wherever the current chairman resides.

That option was raised by Ms. Zordel, the partner at Cassels Brock, during a panel discussion Friday at the Toronto Board of Trade.

"It's an idea and it's worth considering because it addresses one of the core perceived weaknesses" in previous proposals that selected Ottawa for the headquarters, Ms. Zordel said in an interview following the gathering.

"It used to be that you had to get on a plane and fly to a head office somewhere. Now you can do this by video conference, you can do a lot by e-mail," she said, adding that it can be more productive to "multi-task" with e-mail than to try to track down a colleague who sits 10 feet away.

Allowing the head office to shift around the country would also deepen the talent pool, she said, because it would "allow somebody who's a really qualified person [but] who doesn't want to move cities apply for the job."