The two big barriers to a national securities regulator

If, as Canada's Finance Minister Joe Oliver says, the addition of Saskatchewan and New Brunswick to the Co-operative Capital Markets Regulatory System is a "major step" toward the federal Conservative government's dream of a national securities regulator, then clearly "major" has become a relative term on this file. While Ottawa has added two tiny provinces (in financial market terms) to the agreement-in-principle, the four biggest players remain stubbornly reluctant to co-operate – including two who have already signed on to the plan.

The announcement Wednesday has brought the total number of provinces and territories who have embraced the plan to four (Ontario and British Columbia were part of the deal from its inception last September). While the national-regulator pact can boast jurisdictions where three-quarters of the country's publicly listed companies and more than half the total market capitalization are based, Saskatchewan and New Brunswick contribute almost nothing to that achievement: Combined, they represent only about 2 per cent of the country's public listings by market cap. Getting them on board is more a symbolic victory than a statistically significant one.

It would appear that, in the vein of a TV marketing pitch, Ottawa sweetened the pot with an added gift at no additional charge for these two early-bird buyers. By acting now, each will get a regional deputy regulator based in its province. That's a perk it won't be able to extend to other smaller regulatory jurisdictions.

None of it will mean much unless the two big holdouts come into the fold – Quebec and Alberta, who together represent roughly 40 per cent of Canada's public listing by market cap. Without them, Ottawa and its provincial partners might be able to cobble together a cross-country regulatory framework, but nothing close to a truly national one. It might be less cumbersome than the current 13-jurisdiction system (10 provinces and three territories), but with those two huge gaps, only marginally so.

Meanwhile, last September's promised co-operative spirit between Ontario and B.C. isn't faring so well in reality. In March, the two failed to harmonize proposed new rules governing crowdfunding, instead unveiling two decidedly different plans. And just last week, B.C. refused to join the Ontario Securities Commission's proposal for new reporting requirements regarding representation of women on corporate boards – even though six other provinces and two territories are adopting Ontario's plan. If the two provinces can't agree on these relatively small issues, how are they going to agree on fully harmonizing their regulatory systems under the national plan's timelines that, in political terms, are looking pretty short (legislative approval by the end of this year, the new regulator up and running by July 1, 2015)?

While Quebec and Alberta both publicly dismissed the national regulator plan (again) in response to the Saskatchewan/New Brunswick announcement, we may actually have entered a rare (albeit perhaps small) window for coaxing the two into the fold, in that both are under new management. Quebec has a new Liberal government after its April election, and Alberta will select a new premier through the Progressive Conservatives' September leadership vote, as a result of Premier Alison Redford's resignation in March. It suggests an opportunity for Ottawa to extend an olive branch to these two key holdouts, to reopen a dialogue that has been going in the wrong direction lately. (Indeed, Alberta Finance Minister Doug Horner complained Wednesday that Mr. Oliver hadn't provided him the details of the changes to the proposal prior to Wednesday's announcement, although a spokesperson for Mr. Oliver says he did call his Alberta counterpart Tuesday evening to give him the heads-up.)

But it's all a non-starter unless the two other big provinces who have already teamed up on this can develop the kind of co-operation needed to integrate their regulatory systems and make this thing work. Achieving that would be a more meaningful step than getting a couple of junior partners to sign the dotted line.

A Thursday Report on Business commentary incorrectly said Canadian Finance Minister Joe Oliver did not telephone Alberta Finance Minister Doug Horner to inform him in advance of Wednesday's announcement that Saskatchewan and New Brunswick were signing on to Ottawa's national securities regulator plan. In fact, Mr. Oliver did call Mr. Horner the night before, although Mr. Horner complained that he did not receive the details of the news or other amendments to the proposed agreement in advance of the announcement.