The cause of modern, robust, Canada-wide regulation of the securities industry took another long step forward this week. The federal government should remain on course and move ahead forcefully to get a national securities regulator up and running.
It's absurd, in an era of unprecedented anxiety about all things financial, that 13 different agencies, one in each province and territory, regulate the trading of stocks and bonds and the like in Canada. Around the world there's a serious move afoot to monitor and control companies in this industry in a co-ordinated international fashion. Yet in Canada, each province still sets - and enforces, more or less - its own rules.
This financial tower of Babel deters investment in Canada and gives opportunities to the unscrupulous. A report for the federal government last year claimed that this fragmentation costs Canada about $10 billion in foregone annual economic output, and a total of 65,000 jobs. Numerous non-government expert observers, in Canada and elsewhere, have for years expressed perplexed amazement that Canadians would accept this.
This week an expert panel, convened a year ago by the federal government to study the issue, endorsed a single pan-Canadian regulatory agency. This is no surprise - the Conservative federal government is in favour, and they're the ones who set up the panel. But the report from the group, which was led by former cabinet minister Tom Hockin, should move the project ahead.
First, the committee proposed three agencies, not one: a national securities regulator, a separate governing body for the new unit, and finally an independent tribunal to hear charges brought by the regulator. Ontario's government gracelessly demanded within minutes that the whole package be based in Toronto, a move which raised hackles in both Quebec and Alberta, the strange bedfellows most opposed to central regulation. But Hockin himself noted that any of the three units could be based in Toronto, Montreal, Calgary or Vancouver.
Second, the report called for big regional offices of the regulator, across the country. Best of all, it suggests that in some circumstances companies could choose their regulator, either the 13 across Canada or the one new agency. Major players would surely choose the simpler route, as would companies with nothing to hide. Still, this idea would in a way let the provinces save face. Some observers actually accused the Hockin panel of pandering too much to provincial - in both senses - sensibilities.
Quebec remains fiercely opposed to Canada-wide regulation, as does Alberta. But British Columbia, previously a foe, seemed to accept the Hockin proposal. Monique Jérôme-Forget, Quebec's finance minister, should explain her opposition. After the litany of investment scandals in this province in recent years, we believe many Quebec investors would put a higher priority on proper investigation and enforcement than on tiresome nationalism. If Quebec is to remain intransigent, it should at least explain why.
Federal Finance Minister Jim Flaherty is expected to move forward on this in his Jan. 27 budget. Quebec and Alberta have threatened court action but Flaherty and his officials are reportedly confident that they could win a constitutional challenge. Meanwhile it will be interesting to see how Liberal leader Michael Ignatieff reacts on this issue. He has big hopes for Quebec, but he is a pragmatist who sees, we trust, the need for change on this issue.