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National securities plan opens old wounds in Alberta

Securities regulation is not the type of issue that triggers angry slogans, suitable for bumper stickers.

When Ottawa announced its latest attempt to cobble together a national regulator – without Alberta – there were no public protests, no calls to let the Eastern bastards freeze in the dark.

Still, the federal government's aim for a new markets watchdog, and Alberta's resistance to it, may be one vestige of the old East-West divide that can't be bridged.

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Alberta's Finance Minister, Doug Horner, gives no hint that the province is willing to surrender its authority on key regulatory matters to the national government despite Bay Street's urging.

The regional dispute feels a bit unfamiliar in the 21st century.

The two governments have buried a lot of hatchets in the Harper era, and are now friendly fellow travellers on several economic paths.

Ottawa and Edmonton have worked together to promote increased and diversified exports for the province's crude oil and to relax the federal grip on the grain trade.

Now, though, federal Finance Minister Jim Flaherty's move to go public with plans for a Toronto-based "co-operative" securities regulator, along with Ontario and British Columbia, has opened a few old wounds in Alberta, which sees it as a surprise play for an area it needs to protect, and even a potential risk to its economy.

That area is the oversight of its energy-dominant securities industry, which accounts for a quarter of Canada's overall market capitalization, second only to Ontario. Within Alberta, oil and gas makes up a hefty 60 per cent of market value.

Specific expertise in regulation has been developed in Alberta over the decades, the argument goes, and the last thing Premier Alison Redford's Progressive Conservatives want now is a brain drain.

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"There's certainly a concern that if you had the chief regulator headquartered in Toronto and you had no authority in, say, Calgary, where is everybody going to go and establish themselves? They're going to establish themselves in Toronto, not Calgary," Mr. Horner said in an interview.

"Those are the things that we are working on to protect. We want to grow this industry in our province."

To Alberta's surprise, Mr. Flaherty's announced what is essentially a plan for a national regulator-lite last week. Other provinces are invited to join. The new agency would be based in Toronto, have offices in all participating provinces and be directed by a board appointed by provincial ministers.

Mr. Horner has no quibble with a national body assessing and dealing with major economic and capital market problems, known as systemic risks. What bothers him is the sway the federal minister would hold, specifically veto power.

"We're open to discussion with the federal government. We always have been. In fact, we've been at the table on a number of occasions," he said. "But there are certain lines that we won't cross, and ceding authority that is ours by constitutional right is not one of the areas where we're going to go."

Of course, the Supreme Court ruled two years ago that securities regulation is under provincial jurisdiction. But the decision did not quiet the clamour for a single national body. The eastern-based financial sector sees Canada's 13-regulator system as a relic and an expensive embarrassment among developed economies.

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For instance, Texas has a whopping big energy industry, and the U.S. national regulator, the Securities and Exchange Commission, has no problem figuring out its vagaries and providing reliable rule making and policing.

Alberta and the other opponent of the national plan, Quebec, have teamed on a parallel path to make improvements to Canada's current "passport" system that allows approvals simultaneously across all jurisdictions except Ontario. The communications revolution has only made the passport system better, Mr. Horner contends, reducing the need to have a Toronto-based central authority.

He said the message that he's received "loud and clear" from Alberta-based corporate issuers and investors is that the government's priority should be protecting the province's interests.

"All you have to do is wander around Calgary in the Plus-15 [the skywalk system between buildings] and you see why. A lot of guys involved in the industry are directly related to raising capital and doing those deals," he said.

Ottawa's push for a national regulator is often traced back to a recommendation in the Porter Commission on Banking and Finance in 1964, which predates some of the most famous East-West battles over energy. Given Alberta's lingering concerns, it might be wise to start planning a golden anniversary commemoration.

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