Investors Scrutinizing the Regulators

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Securities Regulation In CanadA

Fox Guarding the Hen House



Passport not enough

Saturday, October 13, 2007

Re: Minister Calls for "Passport" Option, Peter Brieger, Oct. 4

Canada has a strong financial services sector that spans the country, providing good high-paying jobs. We have a great story to tell, one of economic success, visionary entrepreneurs, growing competitiveness and unbounded potential. And the world sees that potential.

Yet we have a capital markets regulatory system that is holding us back. A system of 13 regulators that is clearly out of step with our global competitors.

I appreciate that Quebec Finance Minister Monique Jerome-Forget and others want to adopt a passport model of securities regulation, but unfortunately it does not go far enough or fast enough. The passport system is simply inadequate for where Canada needs to be:

  • With the passport, Canada still has 13 securities regulators, with 13 sets of laws, however harmonized, and 13 sets of fees.
  • The passport lacks national co-ordination of enforcement activities -- making it difficult to maximize results on this critical part of the system.
  • The passport does not address our need to improve policy-making. It is still necessary to obtain agreement from 13 regulators to make changes to rules.

Ms. Jerome-Forget cites World Bank and Organization for Economic Co-operation and Development studies that rank Canada ahead of the United States and U.K. in investor protection and quality of securities regulation. That's true, but those same organizations are clear that a common securities regulator is needed for an efficient operation and for better investor protection. In fact, the OECD 2006 Survey of Canada stated:

"Securities regulation is currently a provincial responsibility, but the presence of multiple regulators has resulted in inadequate enforcement and inconsistent investor protection and adds to the cost of raising funds. It also makes it harder for the country to respond to changes in the global marketplace or to rapidly innovate."

A common securities regulator is in the best interest of Canada and all Canadians. We are, relative to the rest of the world, a small country and we need to work as one if we are truly going to reach our potential. We cannot allow barriers, self-imposed barriers at that, to hold us back. Clearly, the time has come to explore a new approach to securities regulation, a more collaborative and united approach across jurisdictions, on behalf of investors and businesses.

Dan Miles, director of communications, Office of the Minister of Finance of Canada, Ottawa