Investors Scrutinizing the Regulators

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Securities Regulation In CanadA

Fox Guarding the Hen House

Nov. 1, 2004. 05:50 PM
Ontario to hold out for single securities regulator

Ontario will not take "No" for an answer from the other provinces as it pushes for a single national securities commission, the provincial minister responsible for financial regulation said today.

"We are not going to let this drop," Gerry Phillips, chairman of the Ontario government's management board, told an industry conference organized by the Ontario Securities Commission.

All the provinces except Ontario gave at least tentative approval a month ago to a so-called passport system, under which public companies and securities firms would work with their provincial or territorial regulators, and all the commissions would recognize each other's approvals.

Ontario pointedly refused to agree to this. It is holding out for a cross-Canada regulator and a single set of rules a position regarded, especially in the West and Quebec, as a Toronto power grab favouring big companies.

Ontario's position was supported by a federal committee last December, but securities commissions fall under provincial jurisdiction.

The passport model "won't significantly improve investor protection or enforcement measures, and it certainly won't reduce the confusion that comes from 13 sets of rules," Phillips argued in his speech.

"We understand that moving to a common regulator would have to take into consideration the special needs of Quebec," he said. "We understand there must be a strong local regulatory presence. Ontario is flexible on these issues and indeed on all other design elements."

However, "we are going to be persistent" on the single regulator, Phillips added.

"My experience is that if an idea is an important one and right . . . you simply have to stick to it and eventually you make it happen."

Asked by an audience member how he can counteract the "visceral reaction" in the West, Phillips said: "Other jurisdictions say, `We need a little bit more specificity, we need a little better idea of exactly how this thing would work.' "

He added: "We can and should and must show that a common regulator can still reflect the different policy needs of different jurisdictions, can have decisions made quickly on a local basis, can reflect the needs of small business."

What's needed, Phillips suggested, is a more detailed proposal on the single regulator, with input from across the country.

"If it's just seen as `that's Ontario's proposal,' it may carry more baggage than it should," Phillips said.

After his speech, Phillips returned to the legislature where he told the house that "Canada is the only developed country without some form of common regulator, and this is Ontario's No. 1 securities reform priority."

Phillips became the Ontario minister responsible for the Ontario Securities Commission in February after Finance Minister Greg Sorbara declared a conflict of interest relating to the ongoing OSC and RCMP investigation of Royal Group Technologies.

Sorbara had been chair of Royal Group's audit committee until resigning to run in the 2003 provincial election that brought the Liberals to power.

Elsewhere at the Dialogue with the OSC conference, attended by about 400 financial industry players and observers paying $450 each, officials of the commission and the RCMP said they are co-ordinating their enforcement activities but offered assurances that the police do not have access to evidence that the commission gets through its powers of compulsion under the Securities Act. Those powers include the right to demand information without a warrant.

"We're not sharing that information for criminal purposes," Kelley McKinnon, the commission's chief litigation counsel, asserted during a panel discussion.

In light of the possibility that such evidence could be challenged under the Charter of Rights and disallowed from a trial, RCMP Supt. Craig Hannaford said the Mounties are "overly careful in how we get information from any regulator or SRO" self-regulatory organization such as the Investment Dealers Association.

Hannaford noted that prosecutors must disclose sources of evidence to an accused's defence counsel, and said any back-door exchange of OSC information is prevented by "an aggressive defence bar."