A proposed national securities regulator could put the growth of B.C. business in "serious jeopardy" by choking off access to investment dollars, warns the head of the B.C. Securities Commission.
Paul Bourque is set to deliver his caution in an address on Tuesday, breaking his long silence on the provincial government's official policy to support a national agency that would police the buying and selling of stocks and bonds.
The risk is that a national securities regulator, dominated by the concerns of senior markets in Ontario, will govern for those markets to the detriment of junior markets that drive B.C.'s economy, he said.
If that happens, "Canada's ability to finance small business, the lifeblood of economic growth and employment, will be put in serious jeopardy," reads the text of his speech to be delivered to the Kelowna Rotary Club.
"It won't matter then whether it happened through benign neglect, through well-intentioned but misguided intervention, or through the friendly fire of new initiatives aimed at senior markets."
Unlike Ontario, B.C.'s economy is driven by small business - 98 per cent of all the province's businesses employ fewer than 50 workers - and commodities. And despite a slump in institutional investment, money continues to flow to those sectors.
In the first nine months of this year, B.C. companies raised $6.1-billion and a huge share of that - $5.3-billion - came from investors pouring money into the so-called exempt market, for companies that are too small to go public.
Unlike Alberta and Quebec, which are fighting the proposal in court, B.C. offered to support the proposal two years ago. But Finance Minister Colin Hansen, in an interview Monday, said his government is prepared to walk away from the table if the national regulator doesn't safeguard the province's venture capital markets.
"There is still work they have to do that is not yet completed. I can't say definitively that British Columbia is going to say 'yes, we want to be part of this new model,' " he said. "Nobody in Ottawa should take for granted British Columbia's support for the national securities regulator."
Mr. Bourque's decision to weigh in on the issue comes as B.C. policymakers are at a crossroads. Premier Gordon Campbell, who offered his support for a national regulator, is on his way out, and Mr. Bourque's message is likely directed at the next premier.
Jock Finlayson, economist for the B.C. Business Council, said he hopes the next premier won't be dissuaded from moving ahead on a national scheme. "Canada is unique among major industrial countries in the fragmentation of regulation over securities matters," he noted. "In an era of global capital markets, it is difficult for Canada to speak with a coherent voice."
He acknowledged that there is resistance in both Alberta and B.C. to governing the securities field at a national level because of fears that an Ontario-centric regulator would impose a regime that makes it difficult for small businesses to obtain capital. If the rules and regulations designed for the large institutional markets are imposed across the board, red tape and higher costs could raise a barrier to investment in small companies.
"The way to address that is not to stick with the status quo, but ensure a national approach has some recognition that the provinces are not all identical," Mr. Finlayson said. "We do need to make a better case for protecting B.C. interests."
Mr. Bourque does not say outright that the B.C. government is on the wrong path to support a national regulator. Instead he cautions that the development of the model should be closely monitored.
"The care and feeding of small business is of extraordinary significance not only for British Columbia, but to Canada as a whole," he says. "It's too important to our future economic well-being to let it slip away."