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Former TSX senior executive Kevan Cowan is the head of Canada’s national securities regulator

Philip Cheung/The Globe and Mail

A forthcoming report says that Canada's proposed national securities regulator has key flaws that need to be addressed before it's launched prior to the end of next year.

The new paper by the C.D. Howe Institute, available Tuesday, says the Capital Markets Regulatory Authority is a significantly compromised plan that will lack the ability to unilaterally impose its regulatory authority across the country.

The think tank says there is no assurance or even likelihood that key provinces Quebec and Alberta will join the new regulator following its launch within about a year.

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The federal government, together with Ontario, British Columbia, Saskatchewan, Prince Edward Island, New Brunswick and the Yukon, are currently developing and planning to launch the CMRA.

The C.D. Howe report also says that in its current form it's not even obvious that the CMRA will constitute an improvement relative to Canada's existing securities regulatory system.

C.D. Howe says Canada's provincial securities regulators have, in recent years, collaborated more effectively to create a relatively high degree of harmonization in Canadian securities regulation, which in turn has fostered vibrant and resilient capital markets growth in Canada.

"There is a legitimate question as to whether the CMRA, in its current form, is ready for prime time," said study author Harvey Naglie, a former senior policy adviser with the Ontario Ministry of Finance.

"The participating jurisdictions need to put the brakes on the current initiative and defer its launch pending an independent review and analysis of the CMRA."

Quebec's Court of Appeal ruled in May that Ottawa's plan to set up the national securities regulator is unconstitutional.

The provincial government asked the province's top court in the summer of 2015 to look into the legality of the federal plan after arguing securities regulation falls under provincial jurisdiction.

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Canada is the only G20 country without a national regulator – a fact that can be attributed to the country's Constitution, which places securities regulation squarely in the realm of provincial jurisdiction.

Proponents of a national regulator say centralizing the process would cut red tape for publicly-traded companies and for investors. They also claim it would give smaller jurisdictions access to a more robust regulatory regime.

However, Naglie said in the C.D. Howe report that the current proposal falls short of creating a unified body.

"Unfortunately, these expectations are destined to be disappointed, if not betrayed, because the CMRA in its current form is not, and will not be able to operate as, a single national regulator."

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