Hyndman confident about national regulator

A single national regulator is essential to Canada, as it will give the country better regulation at home and a greater voice abroad, according to the man charged with developing the Canadian Securities Regulator.

Doug Hyndman, chair and CEO of the Canadian Securities Regulation Regime Transition Office (CSTO), admits the goal is ambitious as there were many false-starts in regulatory harmonization before the Passport Model was eventually adopted. Perhaps the most ambitious aspect is the target date for having the national regulator up and running: 2012.

“Our aim is not modest,” he told the audience at the IIAC’s Annual Conference. “We’re attempting to give Canada the best securities regulator in the world. That might sound Quixotic, but from my experience, in working with both my regulatory colleagues here in Canada and with regulators from around the world, I think that’s quite achievable for Canada.”

The office, formed by an act of Parliament earlier this year, has a three-year mandate, with two key target to be met before the end of its first year.

“We have to deliver a draft securities act to the Minister for his approval and hopefully introduction into Parliament, and we have to deliver by next July, a transition plan,” said Hyndman.

That plan will also be delivered to the provincial ministers responsible for securities regulation. Whatever form the new regulator takes, it will require a common organizational culture throughout its regional offices to ensure a seamless regulatory landscape.

To develop that plan, CSTO is enlisting the assistance of an advisory team, with one member from each province. This provincial representation is important, he says, even if not all provinces are onboard with the project. Having their voices in the initial discussions should lead to a draft bill that will be sensitive to local market demands.

“It is our objective to design a proposal that will attract full participation by all provinces, but we are not going to allow a desire for unanimity to stop us from getting going,” Hyndman said. “We will have as many provinces (on board) as we can for the initial launch, and design the Canadian Securities Regulator in such a way that others can opt in later.”

Hyndman, who was one of the driving forces behind the Passport Model, makes no apologies for the existing system of harmonized regulation. In fact, he says it provides a “strong foundation” upon which to build the new nationwide regulator.

The national regulator would be able to forge closer ties to other national financial bodies, including the Bank of Canada, Canada Deposit Insurance Corporation, and Office of the Superintendent of Financial Institutions and the Ministry of Finance, to name just a few.

“There’s already coordination between provincial securities regulators and federal financial authorities, but that’s going to be a lot simpler when we have a national regulator up and running,” he said.

The national regulator will face new challenges, including the regulation of credit rating agencies, hedge funds and over the counter derivatives. The global credit and financial crises sparked calls around the world for greater oversight of these entities.

Having a single national regulator will give Canada a stronger voice in the current drive for a global regulatory harmonization. With a such a small population and an economy that accounts for only about 4% of global GDP, a fragmented securities regulation regime only serves to further weaken the country’s voice.

(09/24/09)