Perspective
National Securities Harmonization in Canada
FROM:
JUL-AUG 2003 ISSUE
The Canadian political state is unique and special in the world. We are truly a federation in all senses of the word, with political and administrative powers shared among the provinces and the federal government, under the auspices of the Canadian Constitution.
While there is often a push and pull between the members of this unique federation, for the most part things work. Ottawa takes care of issues of national and international importance. The provinces take care of matters closer to home, such as health, education and social services. Our taxation system is also a shared one, with revenue gathering divided across national and provincial lines.
However, recently there has been a somewhat thorny issue on the political horizon — one of important interest, both nationally and provincially. It is the matter of securities regulation in Canada, or in other words, the care and feeding of our capital markets — those engines of economic growth and development that are so important to our
well-being.
In Canada, securities regulation is a provincial responsibility, with provincial securities commissions (or provincial government departments in certain cases) responsible for regulation and oversight of each province's capital markets. There is no national securities regulator in Canada — an arrangement very different from our neighbours to the south. In the
United States, the Securities and Exchange Commission (SEC) keeps a national watch on America's capital markets, with their immense impact on the global economy.
While Canada's global economic impact is much smaller than that of the
United States, we are nevertheless a member of the G7 and we do have a "national" capital market — primarily based in Ontario but also active in Quebec, Manitoba, Alberta and
British Columbia. So the question is this: How can Canada increase market access to capital in all regions, minimize regulatory overload and costly duplication for listing companies, and streamline capital market operations, while continuing to recognize the important diversity of economic realities in different parts of our nation? It's certainly a tall order.
There are a number of important initiatives underway right now that are trying to sort this out. While the final outcome is far from certain, it is important to pay close attention because a changed securities landscape in Canada will have a significant impact on our profession.
A quick review of the various securities harmonization initiatives underway is useful. Ottawa has convened a "wise persons panel" under the leadership of former Westcoast Energy CEO
Michael Phelps. The Ontario Securities Commission's recent
five-year review process has addressed this issue. There are capital market reform discussions underway in Quebec. The Canadians Securities Administrators (CSA) has a Uniform Securities Legislation proposal under discussion. And, last but not least, a number of provincial premiers have convened recent discussions on this issue.
Meanwhile, new securities legislation is being considered in many provincial jurisdictions, which may, among other changes, require auditors of public companies to be participants in good standing of the recently formed auditing oversight body, the Canadian Public Accountability Board.
As noted in CGA-Canada's recent submission to the CSA, we welcome their harmonization initiative. When fully implemented, it would reduce the regulatory burden placed on issuers and serve the public interest with a common reporting standard, ensuring comparability and transparency right across Canada. In our view, the CSA approach shows great promise to balance both regional needs and the national interest.
With reform discussions well underway, one thing is certain. The paramount objective of securing broad confidence in the economic marketplace will be on the minds of all legislators, regulators and professional bodies. We know that confidence has been tested of late. And we know just how important it is to our
long-term economic health. As these discussions evolve, we are hopeful that common sense, pragmatism and a unique Canadian approach will prevail in finding a solution that meets the needs of all key stakeholders.
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