Crawford panel comes out with single regulator model

The Crawford panel released its long awaited discussion paper this morning, proposing a new model for a single Canadian securities regulator.

The vision of a common securities regulator for Canada has been variously blocked, stalled and clouded by stakeholders at the country’s 13 existing regulators who are concerned that a central regulator would undermine their jurisdictional authority and eliminate jobs.

Proponents of the existing passport system of regulation have steadily been making reforms since first presented with the prospect of a single regulator, in hopes, some say, of creating an acceptable regime that would be difficult to overturn. This morning, proponents of a single regulator and Ontario Minister of Government Services, Gerry Phillips, came back with their own proposal, intended to serve as a starting point for future discussions.

Phillips charged the seven-member panel of lawyers, corporate board members, pension plan and public company executives with the task of recommending a model back in May 2005. The report’s ultimate objective is to help all of the country’s regulatory stakeholders reach an agreement in principle on the architecture and form a single regulator would take.

Those in favour of a single national regulator point out that Canada’s capital market is relatively small in the global scheme, making up only 3% of the world’s markets. Creating a single regulator, they say, would reduce costs for companies and investors alike and make the country more attractive, particularly to foreign investors who see Canada’s regulatory system as complex and fragmented.

“Ontario has been committed to trying to find a way to move on a common regulator. No other province has made the decision to pursue a common securities regulator, but many provinces have noted that if they were to consider that decision, they’d find it very helpful to have more detail on how a common regulator might work,” says Phillips. “This is the basis for a very productive discussion, not an attempt to settle all the details.”

A number of details are at issue, such as the revenue provinces earn from their regulators over and above the costs of running a securities commission, but the biggest sticking points arise over concern that Ontario or other larger jurisdictions would dominate the agenda at a single regulator.

To mitigate those concerns, the recommended model has five components that incorporate safeguards to ensure that no jurisdiction dominates. The safeguards include a council of ministers from each participating jurisdiction, each with one vote; a nominating committee to make recommendations for nominating directors to serve on the independent board; a separate adjudicative tribunal for deputes with adjudicators also recommended by the nominating committee and appointed by the council of ministers.

Purdy Crawford, committee chair and counsel at Osler, Hoskin & Harcourt LLP pointed to the Canadian Pension Plan Investment Board (CPPIB) model as an example of effective cooperation across jurisdictions.

“Frankly we stole this idea from the Canada Pension Plan Investment Board. It is an example of federal provincial ingenuity in creating a solution to a challenge shared by multiple jurisdictions. If you like, cooperative federalism at work,” he says. “The governance and operation model of the CPPIB has many attributes appropriate to a single securities regulator. This model has proved itself over seven years. It demonstrates the competing jurisdictions can work together as a single entity.”

Under the model, management at the commission is accountable to an independent board, the board is accountable to the council of ministers who are, in turn, accountable to their respective governments and legislatures.

The complete report is available online at www.crawfordpanel.ca. The panel is planning a series of regional roundtable meetings with interested stakeholders over the next six months, in Vancouver, Calgary, Winnipeg, Toronto, Montreal and Halifax. The panel is also soliciting feedback comments at its website.

Filed by Kate McCaffery Advisor.ca, kate.mccaffery@advisor.rogers.com

(12/07/05)