Canadian Regulatory Landscape Individual Term Paper Abstract In McKay report to Expert Panel on Securities Regulation, it has been 10 years since the discussion about improvement on Canadian Regulatory Framework that indicate changes have to be done. Major and minor obstacles have been debated since which calls for action of changes. In this research I will try to explain how and why changes are needed for securities regulation in Canada in order to bring our capital market compete-able with the rest of the world while in the same time provides high securities for all the stakeholders and backed by the federal government.
Major obstacles of changes in the last 10 years In my opinion, there are four obstacles which makes changes in Canadian security regulation are difficult which are: 1. Passport system would be sufficient This is a system that was introduced in 2003 with the objective of allowing market participant to deal with regulator in its home province to obtain a regulatory authorization that applies automatically in other province and territories except Ontario.
With this system implemented in 2008, most of the stakeholders think it will be the solution to combine all the regulation of all the provinces and create simpler, faster and cheaper regulation. Although the passport system has helped streamline the provincial and territorial regulatory regimes, the passport still lack of coordination of enforcement, effective international representation and monitoring systemic risks to Canada capital market. Furthermore, it does not resolve the issue of efficiency and accountability system in 13 provincial and territorial regulators. . Voluntary regime This means that all 13 provincial and territorial in Canada are subject to voluntary option which will requires them to agree to established one national regulator in Canada. As it is explained by the department of finance of Canada “Before making a recommendation to designate a participating jurisdiction, the Minister of Finance would have to be satisfied that the single securities regulatory regime that is established by the Act would apply in the province or territory to be designated” . Canada securities administrators The CSA is an association that brings provincial and territorial securities in Canada together with objectives to design policies which will bring consistencies of regulation across country and it is also existed to ensure the smooth operation of Canada’s securities industries. The association came out with passport system in 2003 which is a one step closer to bring a uniform regulation across country but again they are only the administrator, not a regulator. 4.
The need of reference to Supreme Court of Canada (SCC) Based on the information of Department of Finance of Canada, the government needs the reference from Supreme Court of Canada to provide legal certainty to the province, territories and market participant. The result which is an opinion from SCC then will determine whether the Parliament of Canada has the legislative authority under the Constitution to reform the Canada Securities Act. The opinion takes 10-24 month of filling the notice of references. Call for action
All the rounds of discussion and call for action in the past 10 years have finally leaded to a meaningful change to the securities regulation framework of Canada. In May 2010, Government of Canada released a proposed Canadian Securities Act which is build on provincial securities regulation and harmonize existing legislation in form of single statue. This happened by the assistance of the Expert Panel on securities regulation which spent 10 month of work on preparing independent advice on regulations, also with recommendation on how to improve structure, content and enforcement securities in Canada.
Other form of efforts also helped such as various submissions to the Expert Panel such as from IIROC and CBA. Right at the moment, the Government itself has prepared a transition office (Canada Securities Transition Office) to ensure the smoothness of transition and integration of the uniform regulation to minimize disruption to all stakeholders. The transition office has also established transition plans which will guide the new regulator with its anticipated regulatory approach, through its governance structure, organization design and implementation.
Additional information provided by Department of Finance of Canada furthermore explained that once favorable ruling received from the Supreme Court of Canada, the government of Canada will introduce the securities act to parliamentary legislative process. Changes to new regime of a national securities regulation IIROC to Expert Panels IRROC is the national self-regulatory organization which oversees all investment dealer and trading activities on debt and equity marketplace in Canada.
Created through consolidation of the Investment Dealer Association of Canada and Market Regulation Services Inc. they sets high quality regulatory and investment industry standard, protect investor and strengthen market integrity and also maintaining efficient and competitive capital market. In August 2008, IIROC submitted report to the expert panel which includes the reasoning behind why it is formed. In the submission, IIROC explains the benefit of incorporating two SRO which are: 1.
The elimination of potential regulatory gap or overlaps arising from member regulation and market regulation being split to two SRO’s (Market regulation service and Investment Dealer Association of Canada) 2. Single interface for member and investor on regulatory issue 3. Broader risk management principle to determine priorities and allocation of resources which will make a cost-effective regulation 4. Reduce investor confusion by enhancing visibility and clarifying the scope and purpose of self-regulation 5. Adoption of uniform principles 6.
Broader capacity to attract and retain best talent Canada Banker Association (CBA) to Expert Panel CBA is an association that represents 51 domestic banks, foreign bank subsidiaries and foreign bank branches operating in Canada. They are existed to promote an understanding of the banking industry, contribute to a sound, successful banking system that benefits Canadians and Canada’s economy. In addition, they also help Canadians to have informed financial decision and work with banks and law enforcements to help and protect customers against financial crime and promote fraud awareness.
In 2008, CBA also participate in submission to the expert panel about making a reformation of the securities regulation by fully supporting the creation of a single, national regulator which according to them will allowed issuers, investors and registrant to participate in the marketplace under a single set of rules, administered, interpreted and enforce by single body and single fees. Several reasons why CBA considering a reformation of securities regulations are: 1. Inadequate enforcement and inconsistent investor protection across Canada . Capital market are increasingly national and international 3. Province securities regulation is not integrated into regulation systemic risk and no national entity responsible for stability of capital market 4. Multiple provincial regulators increase regulatory costs for business and discourage investment in Canada 5. There has been slow regulatory response to changing global marketplace because consensus among 13 autonomous provincial regulators is needed to develop new policies . Canada is the only industrialized country without a national securities regulator and lacks a national voice on the international stage. From both of the submission to Expert Panel, we can learned that IIROC and CBA has agreed together to ask for changes in Canadian regulation framework. What they are demanding is one national securities regulator of Canada in order to save cost, be more efficient and effective and also will help to compete internationally.
