Quebec and Alberta have dismissed the federal government's push to create a national securities regulator, despite what Finance Minister Joe Oliver called a "landmark day" that saw two more provinces join the fold.
Saskatchewan and New Brunswick signed on to an agreement-in-principle on the Co-operative Capital Markets Regulatory System at a Parliament Hill news conference Wednesday, joining Ontario and British Columbia in supporting the creation of a single watchdog to replace a province-by-province system.
The addition of the two provinces is largely symbolic – their companies make up just two per cent of the market capitalization of Canadian businesses listed on the Toronto Stock Exchange and TSX Venture Exchange. Mr. Oliver nonetheless hailed the announcement as a key step in "an act of nation-building."
It did not take long, however, for the two biggest holdouts to fire back. Quebec and Alberta both immediately dismissed the development and reiterated their long-standing opposition to joining a national regulatory system, saying they prefer running their own system.
"We remain disappointed that the federal government continues to push ahead with a solution to a problem that does not exist," Quebec Finance Minister Carlos Leitao told reporters Wednesday. Jean-Marc Fournier, Quebec's Intergovernmental Affairs Minister, said the federal scheme "doesn't hold water from the point of view of economics, law or evidence."
Alberta Finance Minister Doug Horner said capital market regulation is provincial jurisdiction, and that there won't be a "critical mass" without Quebec and Alberta.
"Right now, what you have is B.C. has joined the federal government and Ontario. Yes, there are some other provinces that received some compensation and got a couple things out of the deal, but we're not going to be bought or bullied into signing something that's not right for Alberta," Mr. Horner said in Calgary.
The province fears a central regulator would ultimately lead to a brain drain, centralizing power in Ontario. "Our decisions get made here – we want to build the industry here," he said.
The addition of Saskatchewan and New Brunswick "builds the momentum" for a national watchdog that "will deepen the ties of commerce in our confederation and attract more investment capital to Canada," Mr. Oliver said. He suggested Canada's "balkanized" system hurts the country abroad.
"As we get our act together here, I believe it will enhance our international reputation," Mr. Oliver said.
The Portfolio Management Association of Canada, representing investment firms, described the addition of the two provinces a "major milestone" and called on others to follow. The Canadian Bankers Association also welcomed the move and applauded the federal government's push to create a single regulator.
Ontario, B.C., Saskatchewan and New Brunswick represent 53 per cent of market capitalization for publicly listed Canadian companies, and 75 per cent of the number of companies actually listed.
Quebec and Alberta, however, represent the lion's share of the remainder – some 40 per cent, based on market capitalization – and the federal government appears set to press forward without them.
"Whether [other provinces] decide to participate or not, their interests will not be undermined. However, the door is always open to join this initiative which can better serve their current and long-term interests," Mr. Oliver said.
Saskatchewan and New Brunswick joined the fold after the government agreed to add two deputy chief regulators to "accommodate" smaller provinces, with one based at first in each province. B.C. and Ontario will each get their own such officials, as will Alberta and Quebec if they join. Ottawa also offered to match funding for five years for provinces that currently draw revenue from their regulatory regime – a key carrot in wooing the two new provinces.
"We recognized there is a risk to the national economy if we don't work more "closely on the regulatory and enforcement side of the securities industry," Saskatchewan Justice Minister Gordon Wyant said.
The regulator is expected to begin operations by the fall of 2015. Draft legislation is due by Aug. 29.