John Ivison, Paul Vieira And Barbara Shecter
Saturday, January 10, 2009
The creation of a national securities regulator, to be recommended on
Monday by a government-commissioned panel, would allow Canadian
companies to bypass provincial stock watchdogs and file a single set of
documents directly with the federal body -- a potentially crushing blow
to provinces, notably Quebec, that don't want to participate in the
revamped regulatory scheme.
Furthermore, the enforcement and adjudication arms of the new
super-regulator would be separate, a key difference from the way
Ontario's regulator and other provincial stock watchdogs operate.
Draft legislation to implement the new national regulator is being
developed and could find its way into the coming Jan. 27 federal budget.
An expert panel headed by former Mulroney-era Cabinet minister Tom
Hockin developed the regulator's proposed structure. The Financial Post
learned key details from people familiar with Mr. Hockin's final report.
Jim Flaherty, the Finance Minister, said yesterday he will be in
Vancouver on Monday, where Mr. Hockin is to deliver a speech unveiling
details of his panel's completed report and explain why Canada needs
this regulatory change.
It is understood that Mr. Flaherty, who commissioned the expert panel,
will embrace the report's findings, and argue that the global financial
crisis has underscored the need for Canada to scrap its checkerboard
securities regulation scheme involving 13 separate provincial and
territorial securities regulators for a stronger, single model.
The report, people say, will suggest the current system -- under which
companies must file relevant information with all provincial and
territorial securities agencies -- results in a "misallocation" of
resources, and that regulation is "less efficient and less effective"
than it would be under a national regulator.
After the Speech from the Throne last November, Mr. Flaherty said Ottawa
would forge ahead with "willing" provinces to create a national
Indeed, the rules governing the new regulator will give provinces the
option not to participate.
Quebec has long objected to the national scheme, and Alberta and British
Columbia have been lukewarm about joining such a body.
However, the regulator's proposed structure would allow publicly traded
companies based in the no-go provinces the ability to bypass the
provincial watchdogs and file their documents -- such as prospectuses,
financial statements and proxy circulars -- with the national regulator.
This is likely to be addressed in the legislation, because currently
companies need to file in each province if they want to sell shares to
its residents, including large institutional buyers such as the Caisse
de depot et placement du Quebec.
In an attempt to appease provinces, the national regulator would keep
regional offices in provinces that have certain expertise -- such as
Alberta with energy and British Columbia with mining.
A mould-breaking recommendation of the panel report is expected to be
the separation of the enforcement and judicial arms of the national
securities regulator. The expectation would be to follow the example of
how Ottawa regulates competition: One agency, the Competition Bureau,
enforces the law, but another independent body, the Competition
Tribunal, determines whether the charges have merit and metes out
This recommendation is expected to be widely praised by industry players
who say there is room for bias in the current model that puts stock
regulators in the role of both prosecutor and judge. A 2004 report
commissioned by the chairman of the Ontario Securities Commission
recommended separating the adjudicative arm from the investigative and
enforcement functions due to the "apprehension of bias."
As Mr. Hockin's panel made its way across Canada in the months since
receiving its mandate last February, several industry players suggested
methods and structures to strengthen the country's ability to track and
successfully prosecute market crimes.