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Government noncommittal to date on proposed Canadian capital markets regulatory system
Ian Russell is the president and CEO of the Investment Industry Association of Canada.
If you’ve been registered as a director of a company, heard of insider trading or watched a film on the events of the 2008 financial crisis, you have likely dipped a toe into the subject of securities regulation and the capital markets.
In Canada, unlike in many developed countries, regulation of the markets ultimately falls to the individual provinces and territories, as opposed to being under the watch and control of a national entity.
In Newfoundland and Labrador, Service NL has the reins for securities regulation, with little sign from the current government of any desire to change that status quo.
Yet the president and CEO of the Investment Industry Association of Canada (IIAC), Ian Russell, hopes Newfoundland and Labrador will be the next province to commit to coming to the table to create a new, national securities regulator.
“This initiative is not a very high priority with provincial governments, especially with your provincial government that is dealing with some quite daunting challenges in terms of managing its fiscal burden and trying to stimulate growth,” he said, speaking with The Telegram last month.
He acknowledged the subject of securities regulation can be a difficult one for the public to dive into, given some of the detail involved.
A few years ago, in the wake of a global economic meltdown — and with new interest from individual citizens in the hows and whys of the markets and their oversight — the Government of Canada made a move to create a national securities regulator. The process ended up being shut down by the Supreme Court of Canada in 2011, when it was found the Constitution of Canada does not allow the federal government to unilaterally make changes to the existing system (or systems, more accurately, given there are 13).
In the fall of 2013, a new plan emerged to try for a co-operative Canadian capital markets regulator, with provinces voluntarily signing on to the idea and maintaining a voice in the procedure. If the federal government could not go it alone, this time the attempt would be made with the provinces, beginning with the highly active jurisdictions of Ontario and British Columbia. New Brunswick, Prince Edward Island, Saskatchewan and Yukon have also agreed to join in creating the new, co-operative regulator.
To date, there have been multiple revisions to some early drafts of related legislation, addressing everything from legal matters to data collection. Comments are set to close on the latest draft version of the federal Capital Markets Stability Act on Wednesday, July 6.
The arguments being made for continued pursuit of a national regulator include: a claimed reduction in red tape, reduced costs for investors, speedy response to emerging issues and a reduced risk of the country’s many jurisdictions inadvertently acting as “silos” of enforcement, to the benefit of law breakers.
But there are arguments against a national regulator as well, with Quebec, Alberta and Manitoba all issuing objections. The suggestion is the status quo is serving people well and has proven itself with relative market stability. Constitutional arguments have continued as well, while there has been reference to existing, voluntary co-operation of jurisdictions under the banner of the Canadian Securities Administrators (CSA).
In response to questions, a spokesman for Service NL provided a statement: “Service NL confirms it has been engaged in discussions with the federal government and provincial counterparts regarding the possibility of establishing a common securities regulator,” it reads.
“The Government of Newfoundland and Labrador will continue to explore this matter and will advise of new developments as they occur.”
The Co-operative Capital Markets Regulatory System (CCMR)