Ontario reveals new plan for single securities regulator

(June 24, 2004) The Ontario government is making a fresh attempt to reform Canada’s fragmented securities regulation system and the minister spearheading the effort is promising flexibility as he negotiates with other provinces not sold on the idea of a single regulator.

The plan — released today by Gerry Phillips, chair of the Ontario Management Board and the man responsible for securities regulation in the province — would see the creation of one new regulatory agency with local offices, one common set of securities laws and a single fee structure based on a cost-recovery basis.

“We believe that our model would better address concerns around international investment and regulatory burden, while improving investor protection,” Phillips said in a speech this morning.

B.C., Alberta and Quebec are all on record as opposing a single regulator, with the western provinces favouring the passport model, which would allow firms and advisors to operate in other provinces and territories simply by complying with the rules and regulations of their home jurisdiction.

Phillips says while he’s encouraged the provinces are willing to work together on the passport issue, Ontario does not feel that the proposal addresses the structural problems within the current regulatory framework.

“There’s now a concrete alternative to the passport system and we haven’t had that before,” he told reporters following the speech. “My hope is that by laying out another approach we can find ways to overcome legitimate concerns.”

Still, Phillips says Ontario is willing to consider a transition period under which the passport model would be used, as long as the other provinces commit to moving to a single regulator within three or four years.

Quebec is a stickier issue, with Phillips conceding that on top of legal hurdles, Quebec remains firmly opposed to any kind of single regulator, whether it’s led by the provinces or the federal government. But he says Quebec has indicated a desire for change. “That’s common, I don’t believe any province or territory believes the status quo is acceptable.”

Phillips presented his proposal to the other provinces earlier this month and expects they’ll spend the next summer studying Ontario’s recommendations before meeting again.

He concedes that finding common ground on the issue is a daunting task and that he’s set an ambitious agenda. “But what’s changed over the last year is that there has been more momentum in the business community. We can’t ignore the challenges we’ve seen in the U.S. with regulatory enforcement. We have to prove we are globally competitive on our financial market. Three months is a short period of time, but I think all provinces are interested in change.”

Ontario’s new plan is quite similar to the recommendations of the federally-appointed wise persons’ committee, which last year suggested the creation of a national securities regulatory agency based in Ottawa, but with regional offices across the country.

However, Phillips insists that securities regulation must remain in the hands of the provinces. “I’m focused on the provinces working this out — I don’t count on any federal action.” At the same time, Phillips says he’s open to suggestions as to where the proposed new agency should be headquartered. “You have to keep that wide open.”

Phillips is also promising to revisit other regulatory issues, such as the Ontario Securities Commission’s dual role as policy-maker and enforcer. “It may be appropriate to separate the two,” he said. “Ontario hasn’t made a decision yet but it might be a good idea.”

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