Ontario regulatory reform proposal unrealistic, Advocis says

(July 2, 2004) Ontario’s latest push for securities regulation reform is unlikely to be successful, according to the country’s largest association of financial advisors.

Last week, Ontario Management Board chair Gerry Phillips unveiled a new proposal that would see the creation of a single regulatory agency enforcing one set of securities laws.

At the same time, Phillips poured cold water on the passport model, preferred by B.C. and Alberta, in which market participants would register with and comply with the rules of a single jurisdiction. However, Phillips said Ontario would be willing to consider the passport model as in interim measure if the other provinces commit to the idea of a national regulator.

Beverly Brooks, vice president of public affairs at Advocis, calls Ontario’s proposal unrealistic. “If you look at where the other provinces are headed, it’s hard to see them accepting that condition,” she says, noting that B.C. has already made changes to its securities laws and that Alberta has released a study stating that its capital markets are unique and require a separate provincial securities commission.

“With all those changes, it’s very difficult to imagine that they would accept this condition Ontario has put forward,” Brooks adds.

Brooks says she was disappointed by the way the new proposal was released, pointing to an apparent lack of industry consultation. “We weren’t consulted. And they’ve issued this without asking for input or comment. They haven’t established a process for listening to views from various organizations.”

Advocis supports the harmonization and streamlining of securities regulation, Brooks says, but doubts that getting the provinces to band together under a single agency is the best approach.

“The provincial securities commissions’ interests are too entrenched. Their views are very different and there’s a lot of history there. It would be a very difficult battle to convince the provinces to give up part of their powers, even if they are able to get a regional presence in place.”

At the same time, the federal government, which initially expressed support for a national regulator, has been quiet on the issue since the election was called and is unlikely to pursue such a controversial project in a minority government situation.

“It’s the direction that Ottawa wants to head but they don’t have any allies except Ontario,” says Brooks. “And with Ontario leading the charge, the other provinces see it as an Ontario-led initiative and see the proposal as perhaps being a larger version of the Ontario Securities Commission. That would not be acceptable.”

Still, there has been some support for Ontario’s proposal. The Canadian Bankers Association is pleased that Ontario has put a model for a single regulator on the table.

“We fully agree that the three principles Ontario is proposing — a common set of rules, a common fee, and a common regulator — are critical and need to form the basis of discussions going forward,” said CBA president Raymond Protti.

Protti expresses concern that Ontario is willing to accept the passport model as an interim step towards a single regulator. “However, we are hopeful that this proposal will help focus the discussion among the provincial securities ministers and make it possible to come closer to an agreement,” he said, calling on the provinces to reach an agreement on a single regulator by the end of the year.

Phillips has promised to re-visit the proposal at the end of the summer, after the other provinces have had a chance to study it.

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com