Federal Finance Minister Bill Morneau talks a lot about Canada Pension Plan reforms, the middle-class tax cut and the next budget.
But he's been uncharacteristically quiet on another file that deserves his attention – the long struggle to create a national securities regulator. Canada remains the lone outlier among the more than 100 member countries of the International Association of Securities Commissions that does not have a national regulator.
The previous Conservative government joined Ontario and four other provinces in creating the Cooperative Capital Markets Regulatory System. The CCMRS, which would put roughly half the country's financial markets under a single securities watchdog, has set a target of this fall to be up and running.
The plan is to create an organization of willing provinces in the wake of a Supreme Court of Canada ruling that blocked Ottawa from unilaterally imposing its will on recalcitrant provinces, such as Quebec and Alberta.
And for a while, there seemed to be momentum for this national regulator-lite concept. There is draft implementing legislation and a chairman – former insurance executive William Black.
Government officials say Mr. Morneau is committed to working with interested provinces on a "collaborative model" for securities regulation. But his public silence suggests the new Liberal government is less than enthusiastic and may be ducking a fight with the provinces. There was no mention of the initiative in either the Throne Speech or the minister's mandate letter from Prime Minister Justin Trudeau.
The late 2016 start-date seems optimistic, to say the least.
And in that vacuum, foes of a national securities regulator are sharpening their knives to kill the unborn CCMRS.
Louis Morisset, chief executive officer of Quebec's Autorité des marchés financiers and current chair of the national organization of provincial regulators, insists the status quo is working and should be left alone.
"The Capital Markets Regulatory authority … would not only disrupt the truly co-operative securities system already in place in Canada … but would also replace it with a system in which important parts of the country will not take part," Mr. Morisset argued in a recent Globe and Mail opinion piece.
Four former finance ministers from Quebec and Alberta similarly warned Ottawa in a joint letter in the Financial Post last week that pushing ahead now would be a "clear step backwards," resulting in more red tape and unspecified economic consequences. The ex-ministers – Raymond Bachand and Monique Jérôme-Forget from Quebec and Alberta's Doug Horner and Ted Morton – are urging Mr. Morneau to let sleeping dogs lie.
They also suggest – misleadingly – that Canada's fragmented regime has been praised by international organizations, including the International Monetary Fund and the World Bank. In fact, the IMF, the Financial Stability Board and the Organization for Economic Co-operation and Development have repeatedly urged Canada to create a national securities regulator.
The former ministers also implied that the United States is somehow worse off because regulators there failed to stop the Enron and Bernie Madoff scandals.
Canada has a sparse record of successful financial fraud convictions, particularly in high-profile cases. Only one person has ever gone to jail for illegal insider trading in Canada – in part because of the reluctance of regulators to pursue criminal charges, where the burden of proof is higher than in civil cases. And the number of investigations launched has been in steady decline since at least 2010. There were just seven in 2014, fewer than a quarter of those started in 2011.
And the country has not been immune from embarrassing stock market scandals, including Bre-X and Sino-Forest.
So it's hard to feel warm and fuzzy about the status quo, where no one regulator is in charge of investigations that may cross provincial and international boundaries. The Ontario Securities Commission did secure an $8-million settlement from Sino-Forest auditor Ernst Young LLP in late 2014, but the case against the forestry company's former top executives remains unresolved.
The troubling absence of justice in the Bre-X case remains a dark stain on Canada's regulatory regime. The only person charged (former Bre-X chief geologist John Felderhof) was eventually acquitted.
The Enron and Madoff investigations in the United States led to multiple convictions and prison terms.
The notable absence of similar prosecutions in Canada is exactly why Canada needs a strong, co-ordinated and well-staffed securities regime.