Flaherty keen to overhaul regulatory regime

Federal Finance Minister Jim Flaherty has announced he will move the ball forward on the development of a single securities regulator, launching an expert panel to research the idea, despite opposition from his provincial counterparts.

“All provinces and territories are invited to participate in this collaborative process, including suggesting names for the expert group and providing input to them as they carry out their work,” Flaherty said after an extended meeting in Meech Lake, Quebec. “I will continue discussions with my provincial and territorial colleagues on how we can move forward on these issues in the weeks and months ahead.”

The thrust of his ambitions for regulatory reform lie not so much in the structure but in enhancing enforcement and the adoption of principles-based regulation. Flaherty says all provinces and territories are welcome to join the discussion, although only Ontario has shown much interest as yet.

Every jurisdiction aside from Ontario has signed on to the Passport model, which allows market participants to register only with their “home regulator” yet be recognized across the country.

The government of Ontario has stated it would sign on to the Passport model only if the governments of the other jurisdictions committed to developing a single regulator and used the Passport model only as a stepping stone.

The need for a single securities regulator in Canada was underscored on Tuesday when the head of the International Monetary Fund chastised the country for our fragmented regulatory environment.

“Canada is currently the only G-7 country without a common securities regulator, and Canada’s investors deserve better,” said Rodrigo de Rato, managing director of the IMF, speaking at a meeting of the Economic Club of Toronto. “Establishment of a common securities regulator would be good policy, and it would be conducive to mutual recognition of securities regulation with other countries, including the United States.”

Flaherty’s expert panel is expected to deliver an interim report by the end of the year, focusing on issues such as how Canada could promote principles-based regulation using existing multilateral instruments, as well as how to better coordinate enforcement efforts.

A final report, due by the end of March 2008, will expand on these topics and include discussion on implementation of these ideals — whether it be through the passport system or through the creation of a single regulator — and lay out a “transition path,” which would include timetables for reaching key stages in implementation.

Among other topics on the table at the Meech Lake meeting was the drafting of regulations for bank-issued principal protected notes. The federal minister also promised to release a draft paper later this week on the alignment of federal statutes with provincial and territorial securities transfer laws.

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