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Tuesday, January 13, 2009

thirteen to one.

As an Albertan, I am naturally skeptical of any Federal program that has the potential to become too Toronto-centric, but I can't imagine that having 13 separate securities regulators across Canada is very efficient. Yesterday, Tom Hockin's Expert Panel on Securities Regulation recommended the creation of a single Securities Regulator for all of Canada.

My amateur knowledge of our Constitution leads me to understand that investment regulations fall under Section 92(13) of the Constitution Act, which acts as balance to the Provinces, while the Federal Government holds powers under Section 91(2), which gives the Feds the power to legislate on matters of internal trade and commerce.

With decentralization of power to the provinces having become a common trend over the past 25 years, it seems to me that economic agreements like the BC-Alberta TILMA have made the situation less clear-cut. The last major internal trade agreement successfully pursued in Canada was the 1994 Agreement on Internal Trade. Since then, the Federal Government seems to have taken a somewhat passive role in actually negotiating inter-provincial trade agreements.

Would a single regulator be more beneficial to Canada? I don't know, but with continued talks of impending economic doom, it is unrealistic to believe that Alberta can remain an island unto itself in Confederation.


Ryan said...

I'd like to know where the Stelmach government thinks the federal government, beyond giving carbon capture funny money, is good for. What exactly DOES Alberta want the federal government to do.

Stephen Jenuth said...

Despite what provinces sometimes like to say, the constitution does not contain a few air tight compartments. The various heads of power tend to overlap.

In this case, its about time that the Federal government began to assert its jurisdiction over "Trade and Commerce", which is section 91(2) of the Constitution Act.

I have a sneaking suspicion that the regulation of securities trading and stock exchanges may fall into those magic words. After all, the federal government has the right to regulate at sorts of similar things including bills of exchange and promissory notes. The founders of this country seemed to think that these sorts of negotiable instruments (which securities have become) should be regulated nationally.

If I am right and the federal law "covers the field" by their law, the provincial laws will be inoperative.

I do think it has to be settled by the Courts. The federal government should introduce a draft bill, and then refer the matter to the Supreme Court for an opinion as to whether it is within their jurisdiction to enact laws in this regard.

Anonymous said...

Our provincial government needs to get with the times. International investors have no interest in trying to figure out which of the 13 securities regulators are being transparent and which are hiding bad investments with shaky rules (Quebec).

This is something we absolutely need, one strong and respectable securities body. Ed Stelmach and Iris Evans should change direction on this issue.

Laurence Miall said...

Canada will be increasingly hampered internationally by its fragmented patchwork of internal trade agreements. To any outsiders, these will seem weird and confusing. Surely international trade is one thing provinces can leave to the feds to negotiate, no? If I was outside Canada, trying to do business with Canada, I would be a little daunted.

And I think Steve's suggestion on the most sensible course of action for the feds is a great one.

Anonymous said...

One securities regulator is no guarantee of transparency and oversight... just look to our next-door neighbour to the south. Long Term Capital Management (an oxymoron if there ever was), Enron, Worldcom, Subprime assets, and now Maddoff all occurred under the auspices of a single national regulator in the U.S.

I suspect the main issue for the province of Alberta is not a single regulator, per se, but that proponents of this single regulator are looking to have mind and management located in Ontario. This will make it even more difficult to support economic/revenue diversification by building up a nascent securities and investment industry in Alberta.

I notice no one on the pro-single-regulator side has put forward the idea that it should be located anywhere else but Ontario (as if Toronto is the default). Why? And it doesn't just have to be Calgary or Edmonton, Alberta, as the alternative. What about Vancouver? Heck, even Winnipeg... they host the commodities exchange, and are geographically centric.

The Feds are being disengenuous at best by portraying this as a means of increasing confidence in the Canadian securities markets. It is something they've always wanted to do, and are now latching on to the current global financial crisis as a reason.

Having provincial securities regulators does not mean a "patchwork of rules". With the exception of Quebec, which has a different legal code (the French civil code - good luck changing that), most of the other provinces are quite similar. Moving to a passport system, with harmonized rules, will achieve the greater standardization expected by a single regulator, but allowing the provinces to control their own destiny.

Ken Chapman said...

This is just more Harper mendacity. He said he was not going to interfere in provincial jursidiction...and here he goes again.

Anonymous said...

It does seem almost intuitive that a single-regulator model would be better. Indeed, the feds and Ontario are pitching it as some sort of magic solution. But what's the problem?

The OECD recently ranked securities regulation among developed countries and Canada's system came out second only to New Zealand. The U.S. fared poorly. (Sorry, I wish I could remember the name of the report so I could link to it).

Could it be better? Absolutely. And to my understanding, the provinces are doing a lot to harmonize regulation and bring standards up to a higher level.

Besides, as anon pointed out above, the SEC didn't exactly do a stellar job with Madoff, even when they had been warned about him.

Anonymous said...

If Stephen Harper was against a federal regulator, Ken Chapman would criticize him too. Hardly consistent - just more partisan rhetoric.