Wise persons’ report gets mixed reviews

(December 18, 2003) Ontario’s new finance minister says the province is in favour of a national securities regulator. But Greg Sorbara stopped short of explicitly endorsing yesterday’s wise persons’ committee (WPC) report, which recommends setting up a new Canadian Securities Commission.

“We fully support the notion of a single securities regulator in Canada,” Sorbara said following a speech this morning in Toronto. “Now whether or not that is regulated by the federal government or the provinces working together, we are determined to put energy into the creation of a single regulator.”

The wise persons’ committee, chaired by Michael Phelps, envisions replacing the current structure of 13 provincial and territorial securities commissions with a single agency based in Ottawa. Phelps said the new commission would have strong regional representation, with offices in six major cities and nine commissioners from a wide geographic base.

In his speech to the Economic Club of Toronto, Sorbara conceded that the path to a single regulator won’t be a smooth one. “It’s like corralling cats,” he said. “Every time you’ve got seven of 10 [provincial finance] ministers agreeing, someone has an election and someone has a cabinet shuffle.”

Indeed, getting all the provinces on board will be the biggest challenge for federal finance minister Ralph Goodale, should he choose to accept the report’s recommendations. Alberta, B.C. and especially Quebec, have all gone on record stating they don’t like the idea of an Ottawa-based regulator, and the release of yesterday’s report doesn’t appear to have changed that.

“We maintain that the existing decentralized system is one that has worked well,” Pierre Godin, chair of Quebec’s securities commission told the Globe and Mail yesterday. “Nothing in the report has changed our opinion about this.”

Despite the potential political roadblocks, reaction to the WPC report has been mostly positive.

Investor advocate and securities lawyer Glorianne Stromberg, who has long championed the notion of a single regulator, says 2004 presents an opportunity to “rationalize the Canadian regulatory structure to better serve the needs of investors by implementing, without delay, the recommendations of the wise persons’ report.”

However, Stromberg is worried that the report could gather dust, or that its ambitious recommendations might be watered down. She agrees with the committee’s position that the current structure is unacceptable and must change.

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“The continuance of the status quo is failing in protecting investors and fostering fair and efficient capital markets in which investors can have confidence.”

Industry reaction has also been generally favourable. The Association for Investment Management Research, the Canadian Bankers Association, the IDA, the TSX and the Ontario Securities Commission (OSC) were among those who welcomed the report’s recommendations.

“I’m certain it is no surprise that we support the call for Canada to move to a single securities regulator,” said OSC chair David Brown.

“I am confident that the job can get done because, as the committee’s report makes clear, there is now a broad national consensus for a single national securities regulator,” added TSX president Barbara Stymiest, who is credited with starting the most recent move toward regulatory reform in a speech two years ago.

But not everyone is applauding the WPC report. Steve Howard, president of Advocis, says the entire regulatory reform process has been much too insular.

“You have people inside the tent rearranging the furniture,” he says. “No one’s listening to the people outside who are concerned about consumer interests because the whole initiative is securities driven.”

In addition, Howard says the WPC approach does not meet the stated goal of streamlining and simplifying the regulatory process. “Our sense is this will be a reconciliation of existing provincial regimes, with a new federal regime. What we’re really doing is adding a 14th body and that’s totally contradictory to the objective.”

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

(12/18/03)

Doug Watt