Wednesday, August 18, 2004
By James Langton
Gerry Phillips, chairman of Ontario’s
Management Board Secretariat, has repeated his call for the creation of a
single securities regulator.
In late June, Phillips, who is acting
minister with responsibility for the Ontario Securities Commission,
released a proposal for a creating a provincially led single regulator. On
Wednesday, he reiterated that approach, saying that there is a fair bit of
momentum for this in other provinces. He also suggested that there’s some
feeling that a single regulator is “inevitable”, it’s just a question of
when we get there.
In prepared remarks to the legislative
committee considering the Five Year Review Committee, Phillips criticized
other initiatives such as a provincial passport model, and the Uniform
Securities Law project as inadequate. Notwithstanding the momentum for a
single regulator, Phillips noted that there’s a proposed memorandum of
understanding being circulated among the provinces for implementing the
passport model. He submitted the MOU to the committee for its
As for the other big issue up for
consideration at the hearings, Phillips declined to give a definitive
opinion on whether the OSC’s adjudicative function should be split out.
This issue was raised in the Five Year committee’s report, and this
afternoon the OSC is expected to release an independent report it
commissioned to study the issue.
Phillips said that he received a copy of
that report, carried out by a committee chaired by Ontario’s integrity
Osborne, just last week. The OSC received the report
in the spring.
Phillips said that a decision on that
issue hasn’t been made, but that there are some “fairly good arguments” in
favour of splitting out some of the OSC’s adjudicative functions. But, he
suggested that it would wait for the committee’s response to the report
and public reaction.
In response to questions from the other
committee members, Phillips noted that the OSC’s proposed merger with the
Financial Services Commission of Ontario is off the table as it focuses on
getting to a single securities regulator.
He also called for the committee to weigh
in on issues such as new enforcement powers for the OSC, fund governance,
secondary market civil liability, enhancing shareholder rights, raising
capital and improving investor protection, among other things.
Later Wednesday, an Ontario finance
ministry official suggested the provinces should create a single national
regulator and that the federal government doesn’t really want the job.
Speaking to the committee, Phil Howell,
assistant deputy minister, Office of Economic Policy, suggested Ottawa
doesn’t really want to take jurisdiction for securities regulation. He
noted that the federal government’s main interest in a national regulator
is that the current system is unnecessarily impeding economic growth by
being too costly and too duplicative.
He said that his discussions with federal
officials lead him to believe that the feds would be satisfied with a
provincially led single regulator that made securities regulation more
efficient and presented less of a barrier to economic growth.
Howell said that while the Wise Persons’
Committee sought three legal opinions that suggested that the feds could
claim jurisdiction for securities regulation, Ottawa isn’t really seeking
that responsibility. He suggested that while the feds are interested in
the efficiency gains that could be had with a single regulator, they are
“ambivalent about its design”.
Instead, he said, the provinces should
tackle the problem, a solution which would preserve their turf, too. He
said that Ontario must continue making the case for a national regulator
because it is, “so much in our interest”.
Foreshadowing the conclusion of the
Osborne report (regarding the possibility of splitting out the Ontario
Securities Commission’s adjudicative function) to be released Wednesday
afternoon, Howell said the current structure is definitely legally
supported, the question is whether the perception of conflict is
compelling enough to motivate restructuring of the commission. He said
that there is clearly a public perception of conflict in the OSC having
multiple roles as investigator, prosecutor and judge.
He also suggested that the splitting of
the commission’s adjudicative function might work best on a national
level, under the single regulator it envisions. A national tribunal would
probably have enough work to justify the hassle of splitting off the
adjudicative role, he argued.
That said, he pointed out that this issue
will have big implications not just for securities industry tribunals, but
for all tribunals. Howell also noted that the courts have recognized the
value of the expertise of administrative tribunals.