All other developed nations have a national securities regulator, and Canada’s finance minister, in his Irish stubbornness, is determined to give this country one, too, whatever the political cost.
The Canadian Securities Act that Jim Flaherty introduced Wednesday has infuriated the governments of Quebec and Alberta, who believe Ottawa is messing around in their jurisdictions.
The fierce opposition that the two will put up as the legislation is reviewed by the Supreme Court and then debated in Parliament could further damage the Conservatives’ modest hopes in Quebec while simultaneously angering the Alberta base. The Tories have, in the past, alienated one constituency or the other; it is quite an accomplishment to anger both at once.
Yet Canada needs a national agency to regulate capital markets. Trades cross borders – not just provincial, but national. New forms of trading are proliferating around the globe. Bank of Canada Governor Mark Carney has voiced the need for a single regulatory regime.
“The rude way of saying it is that our regulators are well behind on all of this,” said Ian Bruce, CEO of the Calgary-based investment firm Peters and Co., and a member of a panel that advised Mr. Flaherty in advance of the legislation. “The polite way of saying it is that our regulators are well behind on all of this.”
The need has been there for decades. But previous finance ministers believed they should and could get all provinces to agree to surrender their jurisdiction over securities. They always failed. Something as arcane as creating a national securities regulator in the face of provincial opposition was seen as not being worth the political fight.
The financial crisis helped change that.
“The crisis brought home to individual Canadians that this is an important matter,” believes Heather Zordel,
And then there is the finance minister himself. “He has been single-minded in his pursuit of a federal regulator model,” Mr. Bruce said. “Events of the last month in capital markets continue to reinforce that view.”
It also matters that Prime Minister Stephen Harper is playing host to the G8 and G20 next month. Canada has an enviable record of wise and coherent financial regulation, which helped this country avoid the worst of the cascading financial failures that brought down the global economy.
But other governments have been perplexed and annoyed by Canada’s inability to speak with a national voice on securities regulation.
“When the minister and the prime minister were telling other countries: ‘Get your economic house in order,’ they had to do the same thing; they had to be going back and putting their house in order,” Ms. Zordel said.
At first, the house won’t be that orderly. Provinces don’t have to surrender their role over securities regulation unless they want to. Quebec, Alberta and possibly Manitoba won’t. A so-called new national program will, in fact, be a typically Canadian patchwork.
Powerful regional offices will handle much of the workload – the oil and gas sector, for example, could be regulated out of Calgary – and there will be plenty of politicking over where head office ends up.
The hope is that, ultimately, holdout provinces will either join the national program or quietly tailor their provincial regulators to blend with the national regulator.
“Twenty years from now we will look back and ask: ‘Why was this an argument?’” Ms. Zordel predicts.
If so, a long-since-retired Mr. Flaherty will have reason to smile.
