Investors Scrutinizing the Regulators

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Securities Regulation In CanadA

Fox Guarding the Hen House



Lack of single national securities regulator irks Flaherty


By The Canadian Press - For Business Edge

Published: 04/18/2008 - Vol. 8, No. 8

Being shut out of a historic regulatory alliance with the United States highlights the pressing need for a single national securities regulator in Canada, Finance Minister Jim Flaherty says.

Ottawa's push for mutual recognition of securities suffered a setback last week when the U.S. market watchdog announced it was in talks with Australia, which has single regulator.

Flaherty said he hasn't given up on freer trade of securities with the U.S., but the odds would be better if Canada had a single regulator.

"We have to get our own house in order here," he said following a speech to the C.D. Howe Institute in Toronto. "We have to get with a common national security regulator in Canada."

A mutual recognition agreement would help eliminate red tape and extra costs associated with accessing U.S. capital markets for many Canadian companies, particularly investment banks.

But concerns over Canada's fragmented regulatory system of 13 provincial and territorial securities commissions were reportedly a major factor in the U.S. Securities and Exchange Commission choosing Australia over Canada.

Ottawa's had "good discussions" with the SEC about freer trade of securities and will continue to advance the idea with the G7, Flaherty said.

But it would "certainly advance" Canada's case to have a common regulator, he added.

A national regulator would also provide more transparency for investors in the wake of a financial markets crisis that unfolded from the U.S. sub-prime meltdown last summer, Flaherty said.

Several small investors who unwittingly lost their life savings in the asset-backed commercial paper crisis told their stories to the Commons finance committee in Ottawa, accusing the financial community of duping and defrauding them.

"We have 13 securities regulators in Canada which, quite frankly, makes no sense and makes for a great deal of inefficiency in terms of regulation," Flaherty said.

"This is another reason why we need to move forward with a national securities regulator in Canada."

Flaherty has pushed for a single regulator since the Conservatives formed a minority government in 2006, but the provinces have resisted the concept.

In February, the Conservatives appointed a seven-member panel to look into how a single, national securities regulator can be created to replace the current patchwork of provincial regulators.

The panel, led by past Conservative cabinet minister Tom Hockin, the former head of the Investment Dealers Association of Canada, has been asked to deliver a final report and draft model securities act to Flaherty and provincial and territorial ministers by the end of the year.