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Toronto, April 12 2010 Traders work at the new trading floor of the National Bank Financial Group in the Exchange Tower on King St., Toronto. Photo by: Fernando Morales/The Globe and Mail (Fernando Morales/The Globe and Mail/Fernando Morales/The Globe and Mail)
Toronto, April 12 2010 Traders work at the new trading floor of the National Bank Financial Group in the Exchange Tower on King St., Toronto. Photo by: Fernando Morales/The Globe and Mail (Fernando Morales/The Globe and Mail/Fernando Morales/The Globe and Mail)

Bay Street lawyers fear job losses could follow TMX-LSE merger Add to ...

Some Bay Street lawyers are echoing concerns voiced by the Ontario government over the proposed merger between the Toronto and London stock exchanges, saying it could lead to the loss of high-paying jobs in Canada's financial capital.

Lawyers involved in helping companies list their shares for trading are concerned about potential job losses in Toronto, a major financial hub that employs more than 300,000.

It's widely expected that the federal government will review a transaction that would see Canadian shareholders own a 45-per-cent stake in the combined entity. But the Ontario government does not have to wait for Ottawa to act. It has the power to block the $7-billion-plus transatlantic venture between TMX Group and the London Stock Exchange

Staff in Finance Minister Dwight Duncan's office are engaged in what one official described as a "flurry of learning." In an election year, the governing Liberals must determine whether the transaction will help or hurt their chances of winning a third term. What worries Mr. Duncan is the potential loss of jobs in the financial services sector in the lead-up to the Oct. 6 election, said a source close to the government.

He is not alone. Some lawyers on Bay Street say there are potential downsides to the deal, including the possibility that the Toronto Stock Exchange would be essentially run from London. They worry that Toronto would have difficulty attracting foreign listings because these companies might prefer to have their shares trade on the more prestigious London exchange, where they would have access to deep-pocketed European investors.

If that happens, they said, there will be less work for securities lawyers and all the other ancillary jobs in accounting and consulting in Toronto that support the domestic stock exchange.

"I wonder if there's a threat to the TSX in terms of its stated plan to attract international [companies]to participate in the Canadian marketplace?" asked securities lawyer Alfred Page, who nevertheless said he thinks it's a good deal for Canadian businesses.

"I'm not sure it's necessarily good for Canadian securities lawyers, because I kind of like Canadian companies doing their financings here," added Graham Gow, a mergers and acquisitions lawyer.

Janet Ecker, head of the Toronto Financial Services Alliance, said she is cautiously optimistic about the proposed merger. But she said governments and securities regulators must protect the more than 300,000 jobs in the city's financial sector.

"Those are legitimate questions that need to be asked, because obviously that is a concern here," Ms. Ecker said.

Premier Dalton McGuinty said on Thursday that protecting the public interest is his No. 1 priority.

"There's going to be all kinds of private sector interests at play here," he said. "Those folks will do very well at advancing their cause, but my responsibility is to determine what is, and then uphold, the public interest."

Officials in Mr. Duncan's office declined to comment on whether he plans to block the deal. Stanley Beck, a former chairman of the Ontario Securities Commission, said the government has the power to make a regulation governing any aspect of the stock exchange, including foreign ownership.

This authority is spelled out in the Ontario Securities Act, which says the government can direct the securities regulator to block a deal if there are "extraordinary circumstances requiring immediate action to be taken in the public interest."

Joseph Groia, a securities lawyer and former enforcement director of the OSC, said this power has never been used and he thinks the government would be reluctant to use it now.

The OSC plans to hold public hearings on the transaction "as soon as possible," a spokeswoman said.

Federal Industry Minister Tony Clement said his department officials have met with TMX and LSE officials, adding he hopes by next week to make a decision on whether Ottawa needs to review the deal.



With a report from Steven Chase in Ottawa

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