Ontario not giving up on single regulator

Ontario’s Minister of Government Services says Alberta and other provincial jurisdictions need to have their worries and needs addressed before a single securities regulator for the country can be established.

“I think what Alberta very much worries about in a common regulator is they don’t want to see something that’s Ontario-centric or something that doesn’t understand their oil and gas industry,” said Gerry Phillips, after a speech on Thursday to the Economic Club of Toronto that focused on his government’s push for a national securities regulator. “They don’t want to see something that’s not respectful of their entrepreneurial environment.”

Phillips and proponents of a national securities regulator — including just about every financial services company across the country — have long argued that the costs and time lost to running 13 different regulatory regimes across Canada are prohibitive. Yet, mostly because of a lack of provincial will, the country remains the lone nation with a substantial capital market globally that doesn’t follow a single-model system.

There is also more work to do to ensure other provinces, like Manitoba and Quebec, feel comfortable that they have local access to decision making.

“What I recognize is that there are legitimate concerns about a common regulatory system that have to be answered. So we systematically have to answer them. We have to satisfy them with whatever solutions will satisfy them,” said Phillips, who has hinted before that he’s willing to concede the location of a national regulator to another province.

He reiterated that the location of the national body is “kind of mechanical” in the big picture. Ontario’s vision requires three conditions to be met: a single regulatory body; a single set of laws; and a single fee structure.

Last spring, Phillips asked Purdy Crawford, a veteran corporate lawyer at Osler Hoskin and Harcourt LLP in Toronto, to chair a national panel to develop a model for a national regulator. It published “Blueprint for a New Model” late last year. The report noted that, per dollar raised, on average, Canadian issuers pay 1.5 times the cost of issuers in Britain, and 2.5 times the cost of those in the U.S.

Phillips noted in his speech that the province had recently passed a new Securities Transfer Act permitting the legal digital transfer of securities, saving investors more than $150 million nationally. It’s that sort of savings on cumbersome paperwork that a national regulator would provide. “This act codifies what has become practice,” said Phillips. “It moves the industry into the current century.”

Currently, most provinces engage in a “passport” system whereby regulatory and legal rulings in one jurisdiction are abided by in the rest of the country after legal approval. Phillips said in a question-and-answer period after the speech that Ontario would be willing to participate in the passport model if it was on the roadmap towards harmonization.

Phillips added in his speech that the Organization for Economic Co-operation and Development recently added its voice to the argument for a more efficient system in Canada in a report on the nation’s economic performance. “The report recommended that governments reach a decision on an appropriate Canada-wide securities regulatory model as quickly as possible,” said Phillips.

Still, Phillips’ vision could be a long way off. A massive report earlier this week released by the Task Force to Modernize Securities Legislation made no mention of a single regulator, but did call for harmonized securities laws across the country, a path most other provinces seem to be willing to follow.

The minister also took the opportunity to champion a government initiative, three years into its four-year mandate, to implement civil liability law for secondary market investors. From the beginning of the year, investors have had legal recourse to take secondary market participants to court “to hold companies accountable if [the information they disclose] is false, misleading or untimely.”

Gavin Adamson is a Toronto-based freelance financial writer.

(10/06/06)