B.C. regulator fires back at Ontario’s

(August 26, 2003) The ongoing war of words between regulators in B.C. and Ontario heated up again today, with the head of the British Columbia Securities Commission (BCSC) accusing his Ontario counterpart of raising “false alarms” about B.C.’s securities reform proposals.

B.C. wants to simplify securities regulation and has introduced draft legislation emphasizing a principles- rather than rules-based regime. In a letter last month, Ontario Securities Commission (OSC) chair David Brown called B.C.’s approach “extreme” and said it would further fragment Canada’s regulatory system.

In a detailed response, BCSC chair Doug Hyndman suggests that Brown’s criticisms are misguided.

“I realize that our commissions have a difference of opinion about the best way to reform regulation and that you disagree with some aspects of our approach,” Hyndman wrote in a letter to Brown. “However, it is important to focus the debate on what each of us is actually proposing. Your comments primarily addressed myths about the B.C. model rather than our actual draft legislation.”

The letter includes an extensive point-by-point rebuttal responding to Brown’s concerns about the B.C. model.

For instance, Brown worries that the BCSC “may have gone too far in removing prescriptive requirements and relaxing requirements on market participants,” adding that principles alone won’t do the job, unless they are supplemented by specific rules.

But Hyndman says the B.C. model contains both principles and rules. “Our proposed legislation would also maintain many specific rules, for both issuers and registrants, which our analysis shows are necessary for investor protection.

“If we really want dealers and advisors to focus on conduct that is fair to investors and consistent with market integrity, we should require them to assess their actions in that light, rather than simply imposing detailed, technical rules that lead to rote compliance,” the BCSC adds.

Another major point of contention surrounds harmonization, with Brown stating that B.C.’s approach could undermine national initiatives, such as the Canadian Securities Administrators’ uniform securities legislation project.

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Hyndman says the idea that reform can only happen on a harmonized and national basis is not supported by past experience. “Our history in Canada shows that many reforms adopted nationally were first introduced and proven in one or a few provinces,” he says. “The B.C. model fits this pattern.”

Hyndman insists that the BCSC’s proposals are founded on the same fundamental principles that underlie today’s securities laws, such as disclosure, investor protection and codes of conduct for market participants.

“We encourage you not to regard the proposals as threatening but to consider them with an open mind,” Hyndman concludes in the letter. “There is more than one way to design legislation that can achieve the fundamental principles of securities regulation.”

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What do you think of this war of words about securities regulation between B.C. and Ontario? Which securities commission do you agree with and why? Share your thoughts with your fellow advisors in the Talvest Town Hall on Advisor.ca.

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

(08/26/03)

Doug Watt