2002 in review: Regulatory debate shifts to Ottawa

(December 24, 2002) The long-running debate over whether Canada needs a national securities regulator finally made it back on to the federal government’s agenda in 2002. Federal Finance Minister John Manley appointed Saskatchewan lawyer Harold MacKay to investigate possible ways to reform the country’s fragmented and costly regulatory system. MacKay recommended further study on the issue and Ottawa is set to appoint a committee of “wise persons” to do just that.

There’s no argument the system needs change. Many industry players favour harmonizing securities rules through the Canadian Securities Administrators, the umbrella group for the country’s 13 provincial and territorial regulators, while continuing to look at the possibility of a longer-term solution, such as a national regulator.

“We’re recommending a two-track system,” says Joe Oliver, president of the Investment Dealers Association. “We have to deal with the structure as it exists and make it as efficient as we can, while at the same time looking at potential changes.”

“What [the mutual fund industry] really cares about is uniformity of regulation and uniformity of interpretation of regulation,” says Tom Hockin, president of the Investment Funds Institute of Canada. “I don’t care how we get there. But I don’t think we need the feds doing it. We need to build on the skill sets that are in the provinces.”

That’s also a popular view in western Canada, where there is suspicion that a national regulator, likely based in Ottawa or Toronto, would not reflect regional interests.

Doug Hyndman, chair of the B.C. Securities Commission, says there’s too much attention being paid to the issue of decentralization and multiple regulators. “The most important issue I think is that our rules have become too long, too complicated and too hard for people in the industry to understand,” he says.

“We really need to do a zero-based review and look at what kinds of rules we should be imposing and whether we can move to higher level principles instead of detailed rules and thereby reduce the cost of compliance for the industry and at the same time improve investor protection,” Hyndman says.

Alberta Securities Commission chair Stephen Sibold is skeptical of MacKay’s initiative, arguing that forming another committee to study securities regulation makes little sense, given that the issues are already known, at least within the industry. “It really comes down to whether there is political will on the part of provincial governments,” he says. “Having another committee, I’m not sure it’s going to be that productive because whatever they come up with is not going to be binding on any government.”

Mark Daniels, president of the Canadian Life and Health Insurance Association, takes another approach, arguing Ottawa is missing the big picture by concentrating solely on securities regulation.

“In Saskatchewan and Quebec next year, there’s going to be a single regulatory authority,” he says. “Pensions, securities and insurance are all being brought under one roof.” A similar merger is pending in Ontario and B.C. and Alberta are moving in that direction. “We’re already moving to an integrated system, so the idea of somehow carving out securities strikes me as being a complication.”

Instead, Daniels has floated the idea of a national financial services network, bringing the entire spectrum under a single jurisdiction.

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Despite the various options and opinions, the fact that Ottawa is even paying attention to securities regulation, traditionally not a hot button issue, is generally recognized as a positive development. And there’s optimism the “wise persons” initiative will produce concrete results.

“I’m hopeful something will emerge from this,” Oliver says.

Hockin says he’s more positive than he was in 1996, when a similar effort at creating a national regulator failed. “I don’t think industry associations really gave strong enough support [in 1996] so the ministers got nervous,” he says. “This time we are supportive, we are willing to speak out and do all we can to try to make this work.”

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Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

(12/24/02)

Doug Watt