Two more provinces have agreed to join a voluntary national securities regulator expected to begin operations in the fall of 2015, bringing the total number on board to four and giving the upcoming capital markets watchdog a more pan-Canadian scope.
Sources say Saskatchewan and New Brunswick will sign on to the Cooperative Capital Markets Regulator Wednesday in a ceremony in Ottawa with federal Finance Minister Joe Oliver, embracing a plan backed by Ontario and British Columbia last September.
They join as adjustments are made to governance and operations of the new watchdog to spread out power and decision making more broadly among the provinces and assuage concerns it would be too Toronto-centric.
As they prepare for 2015, participants will try to enlist other provinces, notably Quebec and Alberta, that so far have resisted relinquishing control over capital markets within their jurisdictions.
The addition of both Saskatchewan and New Brunswick is big step forward for the regulator, despite the provinces’ relatively small capital markets presence. The success of the single watchdog rests on momentum – the idea is that once some provinces join, others will feel pressure to follow suit.
The ultimate goal is to create a common nation-wide regulator and end the patchwork of 13 provincial and territorial securities watchdogs.
As it now stands, the four provinces that have joined forces represent nearly 53 per cent of market capitalization of Canadian companies listed on the Toronto Stock Exchange and TSX Venture Exchange. The annual economic output of the financial sector in these jurisdictions represents represents two-thirds of the Canadian total.
One of the persistent provincial concerns about the new regulator is that it would be dominated by Central Canadian concerns. The executive head office is to be located in Toronto along with the chief regulator and a national management team.
Saskatchewan had earlier this year voiced that it was keen to join, so long as local concerns were addressed. While there are only a few publicly traded companies in the province, Saskatchewan Justice Minister Gordon Wyant told The Globe and Mail in May that those concerns include preserving the ability of the province’s small- and medium-sized business to raise capital from sources such as crowdfunding. Mr. Wyant also wanted to ensure that companies and residents in Saskatchewan enjoy the same easy access to regulators they had when having capital markets regulated from Regina.
The province must “protect our companies’ ability to raise capital and preserve that responsiveness,” he said at the time.
Participating provinces have now amended the 2013 agreement in principle to add two additional regional deputy chief regulators who would represent capital market jurisdictions in Eastern and Western Canada.
These additions are an effort to share the regulatory levers of power more evenly among the provinces – along with the related spinoff economic benefits of such offices.
The two additional regional regulators would be initially located in New Brunswick and Saskatchewan and would be in addition to four deputy chief regulators already planned for B.C., and Ontario as well as Quebec and Alberta should the latter two provinces sign on to the deal.
The agreement also leaves the door open to locating related offices to various provinces.
Quebec has said the common regulator would be of no real benefit for that province. “A national securities regulator, whether co-operative or not, with decision makers headquartered in Toronto, could not be as attentive to businesses based in Quebec,” Louis Morisset, president of Quebec’s regulator, l’Autorité des marchés financiers, wrote in February.
“The current system gives regulators flexibility and autonomy for reflecting upon major public policy issues. It is important to maintain this autonomy.”
Advocates of a Canadawide regulator have predicted that Alberta will eventually join the effort.
Ian Russell, head of the Investment Industry Association of Canada, said in June he believes while Alberta is still skeptical it will feel pressure to join once the watchdog gains “critical mass.”
Once it begins operating, the new regulator will have reduced the number of securities watchdogs in Canada to 10 from 13.
With files from Boyd Erman and the Canadian Press