June 1, 2010

Obsessing about a national securities commission

Yvan Allaire | IGOPP

(This comment reflects the opinion of the author and not necessarily that of the Institute or of its board of directors)

It is curious, even strange, to hear the federal finance minister on May 26th 2010 repeat, like a well-trained parrot, the same lame arguments about why Canada must have a single, national, securities commission. The French version of the argument was even more pathetic.

Let’s single out some pearls of tortured logic.

“A national commission will result in cost savings for the benefit of issuers”; but the new system will call for a new national super-structure; yet there should not be any staff reduction in the personnel of provincial commissions (who, in participating provinces, will become (better paid?) federal civil servants)!

“Canada is the only country member of the OECD which does not have a national securities commission”; but as Terence Corcoran wrote in the Financial Post on May 26th “Canada is the only developed country without a national regulator and the only country not to be burned by the global financial crisis, therefore Canada will create a national regulator. Doesn’t work as a logical syllogism.” Canada indeed fared best when most everywhere else their financial system was going over the cliff!

“Canada is an international laughing stock with its 13 jurisdictions”; but international organizations, far from laughing at Canada, regularly rank our country among the best for its corporate governance and the protection of investors! For instance, in an OECD report, Canada came in 2nd for the quality of overall securities regulation ahead of the USA (4th) and the UK (5th). The World Bank ranked Canada in 5th place for investor protection, again ahead of the United States (7th) and the United Kingdom (9th).

“A single national regulator will do a better job of enforcing the law and prosecuting criminals”; but the federal government is already responsible for the legal framework governing the prosecution of criminal cases, a framework that differs radically from the American system of justice; furthermore, the evidence is mounting that efforts at centralized investigation and litigation have been disappointing; moreover, the track record of “national” securities commission in other countries provides very tepid support for centralized arrangements. It is instructive and discomforting to read how the Boston office of the SEC had tried, in vain, for several years to bring the Washington SEC enforcement authorities to look into Bernard Madoff’s affairs; so much for the superior coordination of a centralized organization.

“A national securities commission will result in simpler, more effective processes for investors”; again the bugaboo of 13 jurisdictions is trotted out; there is a wilful ignorance of the effective coordination that has been put in place by provincial securities commission (with Ontario opting out!), that a single filing is required to satisfy the requirements, that a recent, little known invention, called the Internet, has made filing and reporting a simple, inexpensive process. […] Read more