Budget 2007: Flaherty takes on regulatory reform

Some boosts for small companies Old age benefits A Conservative balancing act Tax planning, perks and hidden gems “Canada simply cannot afford 13 securities acts and securities regulators,” the Minister said in a budget document entitled Creating a Canadian Advantage in Global Capital Markets. “In order to remain competitive and fully engaged internationally, Canada must […]

By Steven Lamb | March 19, 2007 | Last updated on March 19, 2007
3 min read
  • Some boosts for small companies
  • Families first
  • TEMPLATE LETTER — To Clients/Prospects: The 2007 Federal Budget and your financial plan

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    Canada’s fragmented regulatory environment remains one of the biggest disadvantages of the Canadian marketplace, and Flaherty pointed to the Financial Services Authority in the UK as a possible model in developing a principles-based system of regulation.

    Looking abroad for inspiration is likely a good idea, as the budget reaffirms the government’s commitment to establishing free trade in securities, allowing Canadians to invest in foreign markets directly.

    Increased competition for investor dollars could place stress on the Canadian mutual fund industry, which has frequently been attacked for its management fees.

    Free trade in securities should also see an increase in foreign participation in Canadian markets. In an effort to improve investor confidence, Flaherty is proposing tougher enforcement actions against those who violate market integrity. Enforcement would be coordinated by the proposed national regulator, with a separate securities tribunal overseeing disputes.

    The Minister will appoint an “expert advisor” to the RCMP to develop and guide implementation on plans to improve the Integrated Market Enforcement Teams. He has also promised “substantial additional resources” once this plan is formulated. IMET’s mandate will be expanded to include cases involving investment funds and any cases “of regional significance” which threaten investor confidence.

    To further bolster investor confidence, the government will fund the Financial Consumer Agency of Canada to develop a financial literacy program aimed at young people.

    One measure takes aim at a specific niche of the market: Principal protected notes, which the Minister says are not fully explained to consumers. The government will be releasing for comment a set of regulations aimed at the banks that issue these notes, which will require a fuller, plain language explanation of how they work, including all fees, risks, and cancellation/redemption rights.

    On the fixed income side, investors could soon see fewer options. With balanced budgets becoming the norm, Ottawa requires less debt issuance and has traditionally allowed Crown corporations such as the Business Development Corporation and Canada Mortgage and Housing Corporation to issue their own debt.

    The budget plan calls for the consolidation of various debt issues into overall federal borrowing. The proposal would save the government $90 million over five years, according to budget projections.

    Government of Canada bonds tend to carry a slightly higher credit rating than those of Crown corporations, so the consolidation strategy could see a shift toward higher quality debt with lower yields.

    Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

    (03/19/07)
    This Advisor.ca budget coverage is sponsored by:

    Steven Lamb

  • Old age benefits
  • Some boosts for small companies
  • Families first
  • TEMPLATE LETTER — To Clients/Prospects: The 2007 Federal Budget and your financial plan

    Back to main

    Canada’s fragmented regulatory environment remains one of the biggest disadvantages of the Canadian marketplace, and Flaherty pointed to the Financial Services Authority in the UK as a possible model in developing a principles-based system of regulation.

    Looking abroad for inspiration is likely a good idea, as the budget reaffirms the government’s commitment to establishing free trade in securities, allowing Canadians to invest in foreign markets directly.

    Increased competition for investor dollars could place stress on the Canadian mutual fund industry, which has frequently been attacked for its management fees.

    Free trade in securities should also see an increase in foreign participation in Canadian markets. In an effort to improve investor confidence, Flaherty is proposing tougher enforcement actions against those who violate market integrity. Enforcement would be coordinated by the proposed national regulator, with a separate securities tribunal overseeing disputes.

    The Minister will appoint an “expert advisor” to the RCMP to develop and guide implementation on plans to improve the Integrated Market Enforcement Teams. He has also promised “substantial additional resources” once this plan is formulated. IMET’s mandate will be expanded to include cases involving investment funds and any cases “of regional significance” which threaten investor confidence.

    To further bolster investor confidence, the government will fund the Financial Consumer Agency of Canada to develop a financial literacy program aimed at young people.

    One measure takes aim at a specific niche of the market: Principal protected notes, which the Minister says are not fully explained to consumers. The government will be releasing for comment a set of regulations aimed at the banks that issue these notes, which will require a fuller, plain language explanation of how they work, including all fees, risks, and cancellation/redemption rights.

    On the fixed income side, investors could soon see fewer options. With balanced budgets becoming the norm, Ottawa requires less debt issuance and has traditionally allowed Crown corporations such as the Business Development Corporation and Canada Mortgage and Housing Corporation to issue their own debt.

    The budget plan calls for the consolidation of various debt issues into overall federal borrowing. The proposal would save the government $90 million over five years, according to budget projections.

    Government of Canada bonds tend to carry a slightly higher credit rating than those of Crown corporations, so the consolidation strategy could see a shift toward higher quality debt with lower yields.

    Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

    (03/19/07)
    This Advisor.ca budget coverage is sponsored by: