Thanks to a historic ruling from the Supreme Court on Friday, the road is open for Canada to create a national securities regulator. Now that there is real momentum on the issue, Ottawa and the provinces should move quickly to take advantage of it, and finish the job.
Of course, this being Canada, the final product will not be a national securities regulator in the way the 19 other countries in the G20 understand it. While those nations have a single body that oversees capital markets, our Constitution prevents something as obvious and sensible as that by making the regulation of markets a provincial jurisdiction.
Repeated calls for a single regulator have been thwarted by provinces that have objected to any federal overreach. Most recently, in 2011, the Supreme Court blocked a plan to create a national body. As a consequence, Canada is a country where companies that want to trade securities have to deal with a patchwork of provincial regulators, as well as a federal one, resulting in duplicate red tape and inconsistent enforcement.
As a constitutional workaround, in 2013, Ottawa and six less obdurate provinces and territories proposed the Capital Markets Regulatory Authority, a co-operative body that would be overseen by a council of ministers from participating jurisdictions. The proposal includes a model provincial/territorial law that deals with the day-to-day aspects of the securities trade, and a federal law aimed at preventing and managing systemic risk, including criminal offences for violations. The new CMRA will only have jurisdiction in places that adopt the model provincial/territorial law.
Ontario, British Columbia, Saskatchewan, New Brunswick, Prince Edward Island and Yukon are in. Alberta and Quebec are opposed and can keep the new regulator off their turf, but Friday’s court ruling effectively says they can’t block the agency from getting to work in provinces that welcome it.
It is now up to Ottawa and the participating provinces and territory to adopt the necessary legislation and to get this much needed agency up and running. With Ontario and B.C. on board, the two biggest securities markets are covered. There will be holdouts, so it won’t be perfect. But it will be a very Canadian solution to a very Canadian problem.