Winnipeg Free Press - PRINT EDITION

Securities regulator gets critical mass

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Two more provinces have signed on to the federal government's initiative to create a national securities regulator. Saskatchewan and New Brunswick have joined the nascent Cooperative Capital Markets Regulatory System. Ontario and British Columbia were early signatories to an agreement-in-principle with the federal government to unify securities regulation.

Manitoba, unwisely, continues to resist joining a national securities watchdog. It should reverse course. Our participation in a national scheme to regulate securities trading is overdue.

The reform effort is close to having critical mass: The four signatory provinces represent 53 per cent of market capitalization for publicly traded companies and 75 per cent of the number of companies listed on the Toronto Stock Exchange and TSX Venture Exchange.

Of the remaining provinces and territories, only two, Alberta and Quebec, are vigorously opposed to a national regulator. The rest still voice reservations, but in varying ways and degrees.

This co-operative venture is born of the Conservative government's failed 2011 attempt to have the Supreme Court of Canada sanction a law that would have given the feds the right to regulate securities markets. The Supreme Court unanimously told the federal government it didn't have the constitutional authority to create a national securities regulator because it encroaches on provincial jurisdiction over property and civil rights.

But the court also recognized the need for a uniform approach to securities regulation. It invited the federal government to adopt an approach that accommodates provincial powers. The Cooperative Capital Markets Regulatory System is the government's measured response.

Canada has 13 separate provincial and territorial securities commissions, or equivalent agencies, to enforce laws governing the public sale of corporate shares and other investments. That's way more than any other developed nation. Each of the U.S., the U.K. and France has but one national securities regulator. At meetings of the 100-plus member International Organization of Securities Commissions, we look silly with our gaggle of little provincial and territorial fiefdoms.

The patchwork system makes enforcement of securities law tough. Lack of shared information from jurisdiction to jurisdiction allows fraudsters to flourish.

Pyramid-scheme operators scam investors in one province, and then decamp to another and start all over again because a securities commission in one part of the country doesn't share information with its counterpart in another. The same goes for pump-'n'-dump schemes, where shareholders inflate share values by falsely talking up company fortunes so they're bought at overvalued prices by unsuspecting investors. The scammers then quickly sell their own now grossly overvalued shares, leaving bona-fide investors holding worthless stock, even as a repeat performance is already under way in another province or territory.

The federal government's goal is to have the co-operative scheme operating by the fall of 2015, with as many provinces and territories as it can enlist.

The two latest provinces to sign on to the agreement were rewarded by being made home of two of four newly created positions of regional deputy chief regulator.

Ontario and B.C. get one each. The Saskatchewan representative is earmarked to eventually represent Manitoba and the three territories; New Brunswick's will ultimately represent the Atlantic provinces. These representatives would "initially" be located in Saskatchewan and New Brunswick, but could move after five years. Alberta and Quebec would each get its own deputy chief regulator, if and when they agree to join.

Creating the office of deputy chief regulator is an overture to the provinces and territories. It's designed to give input and some clout to regional capital markets in the proposed new national body.

Manitoba should accept the overture, and join the national regulatory scheme. And the sooner the better, so the province still has an early say in its structure and workings.

Editorials are the consensus view of the Winnipeg Free Press’ editorial board, comprising Catherine Mitchell, David O’Brien, Shannon Sampert, and Paul Samyn.

Republished from the Winnipeg Free Press print edition July 14, 2014 A6

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