« The tired and tiresome arguments for a national securities commission »

« In the Globe and Mail of December 1st, Mr. Monahan states boldly, peremptorily, that “The policy case for a single national regulator is surely overwhelming”. But it is not, far from it.

His first argument, if that is what it is, has to do with the issuance of shares in all parts of Canada. Mr. Monahan seems to imply that an issuer in Canada has the burden of dealing with 13 securities commissions. Has he heard of the passport system whereby filing with the securities commission of the province where the company is domiciled is equivalent to filing with all jurisdictions? Of course, the system would work even better if Ontario agreed to participate fully, but some arrangements are in place to minimize the cost and impact of Ontario’s limited participation in the passport system.

A second, related, point has become the favourite cliché in this debate. Other countries have a single regulator; Canada still suffers from a fragmented system and, thus, is not well represented in international forums such as the International Organization of Securities Commissions (IOSCO). This is “embarrassing” to Mr. Monahan.

Has he   heard of the Canadian Securities Administrators (CSA), an effective body where national policies are reviewed, discussed, and adopted? At IOSCO, Canada has two voices (Quebec and Ontario) but a single position, adopted at the CSA and defended as a Canadian position. Indeed, Quebec even sits on the executive committee of IOSCO. Does he think that, with a “national” commission, some super federal civil servant”, head of this commission, could take policy positions at international forums in the name of Canada without extensive consultation with “regional” stakeholders? The CSA does that more effectively.

Because shares are traded across Canadian provincial boundaries, Mr. Monahan claims that a central, national, commission is required. Then, let’s be consistent; because shares are traded in large volumes across national boundaries, Mr. Monahan should argue for a single international securities commission, located in London or Berlin or Hong Kong. Why not call immediately for a single securities commission for the 27 countries of the European Union instead of the European Securities Committee (ESC), the equivalent of our CSA? Brussels commissars would applaud loudly this suggestion. IOSCO and ESC, coordinating mechanisms for national commissions, seems quite capable of doing at the vast international level what, in Mr. Monahan’s view, CSA cannot do for Canada.

With this Canadian arrangement made up of a passport system and a CSA as a coordinating mechanism, we have the best of all possible worlds: an efficient, cost-effective system, sensitive to regional differences and needs, adapting swiftly to emerging issues, articulating and defending Canada’s position with a single voice in international forums.

The fact is that Canada is respected and given high marks by all international organizations (the OECD, the World Bank, the World Economic Forum) which assess countries for the effectiveness of their securities system, their corporate governance and the protection of minority shareholders. The fact that Canada outclasses most countries with centralized securities commissions or matches the best of them does not give pause to proponents of the “national” commission. The fact is that Canada has weathered the worst financial crisis in 80 years with little damage. Who can say the same for countries with wonderfully centralized securities commissions?

Some people in and around Ottawa want to repair a system that isn’t broken. »