Wise persons committee delays final report

(November 25, 2003) A federally appointed committee set up to review Canada’s securities regulation system will deliver its final report mid-December. The wise persons committee (WPC) report was originally scheduled to be released by the end of November.

The WPC today released three independent research studies on securities regulation in the U.S., Europe and Australia. The studies were commissioned by the WPC.

“Over the past nine months the committee has heard repeatedly that the world has changed and Canada must respond,” said WPC chair Michael Phelps. “Each of these studies has provided an important perspective to the committee’s deliberations. We are pleased to contribute this research to the ongoing debate regarding the best regulatory structure for Canada’s future.”

The U.S. report, written by Professor Joel Seligman, dean of the Washington University School of Law, concludes that although America’s federal-state securities regulatory system appears divisive and complex, it has generally worked well. “Both the Securities and Exchange Commission and the states perceive advantages to having more rather than fewer regulators involved,” he writes. “It is worth emphasizing that the U.S. system preserves a great deal of flexibility for each state to address local concerns.”

Seligman adds that if given the opportunity to redesign the U.S. regulatory system, he would retain the federal-state model.

The European study, written by Karel Lannoo and Mattias Levin of the Centre for European Policy Studies, finds that the European Union is close to achieving its goal of an internal market for financial services. However, the authors add that whether the system — based on the passport model and mutual recognition — will work remains to be seen.

“The new legislation is complex and the consensus around it is fragile,” the report says.

The Australian study details that country’s journey to a federal securities regulatory agency, with some allowances for regionalized regulation. The report, written by Ralph Simmonds, a law school dean, and associate professor Ray Da Silva Rosa, concludes that the current model “appears in Australian eyes to be general successful, if not necessarily optimal.”

“On the whole, the evidence is consistent with federalization improving the efficiency of the Australian capital market,” the report states.

As well as conducting an extensive review of securities regulation, the WPC has been asked to recommend an appropriate regulatory structure for Canada. Options include harmonization of the current structure through initiatives like the uniform securities legislation project or the creation of a single national regulator, which could be run by Ottawa or the provinces.

Although many of the written submissions the WPC received favoured a single regulator, that solution may be politically unpalatable — especially if Ottawa is involved, because of constitutional concerns and Quebec’s continued opposition.

It’s also worth noting that the Canadian Securities Administrators (CSA), the umbrella group for provincial regulators, recently announced the creation of a head office in Montreal, a move some industry watchers say might be an attempt to position the CSA as the country’s “de-facto” national securities regulator.

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