CSA comes to Ontario to plug Passport

The chairs of four provincial securities commissions met with Bay Street’s leading figures at the TSX this morning, touting the benefits of the next phase of the regulatory Passport model.

“Passport is designed as a single-window access system for public companies and investment firms,” said Doug Hyndman, chair of the BCSC. “With limited exceptions, [market participants] would only have to comply with harmonized laws applied across the country, with local variations.”

Hyndman was joined by fellow Passport members, ASC chair Bill Rice, MSC chair Don Murray and Jean St-Gelais, chair of Quebec’s AMF. While Ontario has not signed on to the Passport Model, OSC chair David Wilson sat in on the meeting.

Under the second phase of the Passport model — or Passport II, as dubbed by the CSA — provincial regulations will be harmonized to the extent that market participants will need only to file documents with their principal regulator. Acceptance in the home jurisdiction will convey instant approval across all provinces except Ontario, which has refused to sign on until the other provinces commit to a timetable for developing a single regulator.

“The instructions we have from our governments are to go ahead and implement the system anyway,” said Hyndman. “We published it a few months ago as a system that is designed to apply to all 13 provinces and territories, even though Ontario isn’t part of it, because we wanted to see what the system would look like when applied to the whole country.”

All five commission chairs in attendance admitted that it was unclear how the system would interact with the hold-out province. Ian Russell, president of the IIAC, asked from the floor whether Ontario would be able to serve as a principle regulator under the system.

Such an arrangement could drive more participants to file in Ontario, as they would gain nationwide approval if documents were approved by the OSC, rather than having to file with Passport members as well as the OSC.

It would be “silly for us to punish market participants for Ontario not participating,” St-Gelais said, admitting that ideally, Ontario will sign on in the end. Hyndman echoed that sentiment, pointing out that the interface between the Passport provinces and Ontario would need to be established before Passport II is implemented.

Passport II is slated to be in place by March 2008 for publicly listed companies, with streamlined regulation for investment firms coming online in July of the same year. The official comment period is now closed, but Hyndman says the CSA will consider additional comment filed before June 9, 2007.

Hyndman said advancing the Passport model should not be taken as a move to entrench the currently balkanized system, and that a single regulator could still evolve from Passport II.

That seemed to offer hope to some in the audience.

“I don’t see any reason in the world why what you have done couldn’t be morphed into a single regulator,” said Purdy Crawford, who chairs a panel currently studying options for a single Canadian securities regulator. “I think there are so many good reasons to move forward, take all of your good work and morph it into a single regulator.”

Crawford emphasized that such a regulator would not be run by the federal government, and that the CSA would still be in charge of making rules. He also pointed out that a common regulator would encourage foreign investment.

“This really is something that will, at the end of the day, be decided by governments,” St-Gelais pointed out. “We, the regulators, are there to apply the laws and regulations that the governments put in place.”

“It’s easy to take a current system that has warts, as any system does, and compare it to an idealized system that you, of course, assume won’t have any warts,” Hyndman said. “Don’t assume that somebody throws a switch and suddenly you have a single regulator and all of our problems will be solved.”

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

(05/28/07)

Steven Lamb