Clock ticking on regulatory reform, says IDA head

(January 22, 2004) Canada may be on the verge of a transformational reform in securities regulation, but the window of opportunity won’t last long, says IDA president Joe Oliver.

“This is not an issue that is usually at the top of the radar screen,” Oliver said following a speech this morning in Toronto, noting that the recommendations of the wise persons’ committee (WPC) are being widely discussed by politicians at the federal and provincial level.

“It’s unrealistic to think that interest will be sustained,” he added. “[WPC chair] Michael Phelps has said if nothing happens within about a year after the next federal election, probably nothing will happen for a long time and that would be unfortunate.”

The WPC recommends the creation of a new Canadian Securities Commission, based in Ottawa, but with strong regional representation, replacing the current structure of 13 separate provincial and territorial regulators.

Oliver says the WPC offers a viable approach and a significant improvement over the current system. “The proposed structure implies sensitivity to legitimate regional interests, regional input in policy development and local operational presence for communication and enforcement,” he said in his speech. “From a provincial perspective, this is as good as it gets”

However, there are some problems with the national model, Oliver noted. It does not deal with regulatory content or reduce the regulatory burden, he said, and it would neither bolster enforcement nor ensure policy innovation.

With the provincial finance ministers apparently unable to agree on a passport system, some regulators are championing the uniform securities legislation (USL) project — an attempt to harmonize the various provincial rules and regulations into a single uniform act.

While the USL also represents progress, it has even more roadblocks to overcome than the WPC model, Oliver suggested, claiming that none of the provinces have specifically endorsed USL and that it will not be truly uniform, since B.C. is working toward a new securities act and Quebec’s rules will continue to reflect its civil law environment.

In addition, the USL will be neither comprehensive nor enduring, Oliver said. “The system will unravel over time, unless amendments are kept uniform.”

“I believe there is a risk that the provinces will prove their critics right — that they cannot get their collective act together to make our system as efficient and competitive as it can be.”

There are three possible outcomes to the current debate, Oliver believes. First, following an expected spring election, the federal government could make the WPC recommendations a priority and turn a Canadian Securities Commission into reality. Second, the provinces could achieve a breakthrough and pass legislation to streamline the current system, although he said that seems unlikely today.

“Or we may simply settle for some modicum of improvement and muddle through for a few more decades, wondering why we seem to be losing out on the world stage.”

In the end, it’s up to the financial services industry to keep the issue on the public agenda, Oliver said. “This is a bottom-up problem and ultimately the private sector will determine the result.”

“Canada cannot afford to maintain a balkanized structure in a globalized world. We know what needs be done. Let’s just do it.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com