Federal Finance Minister Jim Flaherty is bringing out the big guns in his quest to establish a national securities regulator.
Flaherty will be tabling legislation on Wednesday, both in Parliament and before the Supreme Court of Canada, in an effort to decide the constitutionality of a national regulator. Several provinces—including Alberta and Quebec—are challenging Ottawa’s jurisdiction in regulating capital markets.
According to the Department of Finance, the new legislation, called the Canadian Securities Act, builds on provincial securities regulation and harmonizes existing legislation in the form of a single statute. Participation would be voluntary.
“The question we will ask of the Court is simple,” Flaherty said to reporters on Wednesday. “Is the annexed proposed Canadian Securities Act within the legislative authority of the Parliament of Canada?”
The issue has been one of Flaherty’s long-term goals since the minority Conservative government was elected in 2006, and he has frequently pointed to Canada’s outsider status in this respect. Canada is currently the only major industrialized country without a national regulator.
“We are addressing a key gap in our financial system, which is recognized as the strongest in the world,” he said.
An expert panel appointed by Flaherty recommended last year that a national regulator be established in order to deal with inefficiencies brought about by the current patchwork of 13 regulatory bodies. It argued that the status quo makes it difficult for Canadian regulators to respond to market developments and guard against the systemic risks that lead to financial crises.
However, there are at least three provinces that are opposed to such a regulator. Alberta and Quebec are both challenging its jurisdiction in court, and Manitoba has signaled no desire to participate.
Flaherty explained that a single regulator would be more ably equipped to handle such problems as securities-related crime, fraud and market manipulation. It would also provide regulators with improved investigation tools, and businesses and investors with simpler processes and lower costs.
It would exist as a Crown corporation with a board of directors appointed by the Governor in Council, and would be accountable to Parliament through the Minister of Finance. It would be self-funded from fees levied on market participants.
In an effort to counter complaints from holdout provinces that the regulator is a “power grab” that will steal regional jobs, Flaherty explained that current staff with provincial regulators will be offered employment with the new regulator or at their local offices, which will remain in place.
He did not reveal where the proposed regulator would be based.
Flaherty expects the court to rule in parliament’s favour.
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