OSC critical of CSA passport initiative

The Canadian Securities Administrators released a statement today outlining its support for a national securities passport that would allow securities sellers to file a prospectus in their home province and have the same security laws apply to their dealings across the rest of Canada. Notable for its absence of support for this measure was the Ontario Securities Commission.

The CSA initiated the creation of the passport under proposed national instrument 11-102. With the passing of this proposal, members would be allowed to clear a prospectus, register as a dealer or advisor, or obtain a discretionary exemption from the home province regulator and have that clearance, registration or exemption apply in all other provinces and territories.

“The passport will give market participants faster and simpler access to Canada’s capital markets by allowing them to deal only with one regulator and one set of harmonized requirements,” said Jean St-Gelais, chair of the CSA.

The OSC disagrees. It doesn’t think the passport sufficiently addresses what it feels is the need for a complete overhaul of Canadian securities regulation through the creation of one national regulatory body.

“Although the proposal may add incremental administrative improvements and efficiencies to our current regulatory processes, it does not resolve the need to modernize Canada’s securities regulatory structure,” the OSC writes.

The OSC says that the current system of 13 regulators — one for each province and territory in Canada — is an inefficient system of duplication and fees. It argues that this complicates national regulatory processes and hinders Canada’s ability to compete in capital markets, since market participants are deterred by the extra fees and red tape required to trade in each separate jurisdiction.

Under one national securities regulator, the OSC says, not only would Canada be more competitive but concerns that the new passport might make security regulations more fractious nationally would be alleviated. Currently, there are no clear guidelines as to how the passport would harmonize laws beyond allowing one jurisdiction’s rules to override those of other jurisdictions nationally.

The CSA asserts that the passport is an improvement and does address the need for increased harmonization of security regulations. It is prepared to go through with the measure regardless of the OSC’s lack of support.

“The passport we propose is a Pan-Canadian system that will simplify regulation and benefit businesses and investors in all provinces and territories,” said St-Gelais. “Although the Ontario Securities Commission is not participating in the proposal, we have designed it so Ontario can join if it makes the necessary legislative changes.”

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com