TORONTO – (July 31, 2008) – The Investment Counsel Association of Canada (“ICAC”), the voice of the country’s portfolio managers and investment counsellors, today urged the federal government to establish a federal regulator using an “opt-in” solution that would overcome perpetual political and legal wrangling that has left investors at risk.
In a submission to the Expert Panel on Securities Regulation, the ICAC suggested the federal government should use its power to create a separate national regulatory system that would enable securities issuers and registrants to be registered with and subject to the jurisdiction of a federal regulator. Such a system would then exclude provincial jurisdiction over those participants who opt-in.
“Canadian investors cannot wait any longer for the creation of a single national regulator,” said Katie Walmsley, ICAC President, “so we’re calling on the federal government to make bold, transformational change. The opt-in solution that we’re proposing would provide national consistency in regulation, enhanced enforcement, lower regulatory costs – and could still address regional sensitivities – but would not require federal/provincial agreement. Therefore it could be employed very rapidly. It’s the perfect solution to Canada’s constitutional quagmire that is short changing investors, public companies and our national economy.”
The ICAC has long advocated the need for a national securities’ regulator and has participated actively in promoting the concept. While the organization – which represents Canadian investment management firms with over $700 billion of assets under administration – would prefer to see a national regulator created as a result of federal/provincial collaboration, it feels the country can no longer wait for governments to solve their differences.
“After suffering through a plethora of task forces and reviews on this important subject by the federal government, the provinces, industry groups and many registrants and issuers, we are no where closer to single securities regulator,” said Barb Lockhart, ICAC’s Chair and SVP Finance and Administration of McLean Budden Ltd. “It’s time for Plan B and our opt-in model offers some very clear advantages. While we recognize there will be political resistance to our solution, the benefits far outweigh the costs.”
ICAC’s submission focused on eight key advantages to the Opt-In model. These include:
Quickest Way Forward/Least Transitional Risk
In its submission, the ICAC noted that many of the transitional risks associated with any major transformational change to securities regulation could be minimized with the “opt-in” approach. If a federal regime was established, issuers, registrants and provinces could opt in to the new regulator relatively seamlessly. The risk of 1further delay in making transformational change to securities regulation by requiring most or all provinces to be on board with a new approach could be avoided. The ICAC noted in its submission that in moving forward with a single regulator, “Canada is not breaking new ground. Virtually all other developed nations have already reached an accord.”
Consistency in Regulation
The submission also highlighted that a single federal structure would provide market stakeholders with a single securities legislation framework. This framework would be clear, balanced between core and flexible principles and contain the appropriate mix of more detailed rules. The ICAC noted that the merits of uniform and consistent legislation outweigh the perceived value, the practical costs and burden posed on stakeholders from today’s divergent regulatory landscape.
The submission described an enforcement structure featuring local enforcement offices that would report into a nationally coordinated enforcement body. This enhanced enforcement model would apply consistent rules and penalties nation-wide. This would lead to shorter lag times between investigations and formal enforcement proceedings or negotiated settlements. The submission also articulated the need for the federal government to strengthen some of its regulating tools to assist the new regulator in enforcing the rules and creating the appropriate deterrent impact on market participants. The submission suggested this may require the federal Department of Finance to work with the Justice Department to bolster sections of the Criminal Code pertaining to securities violations, particularly those dealing with disclosure, misrepresentation and fraud.
Cultivation of Economic Growth
The new federal securities agency, with its single set of rules and filings and one-stop approach to new and existing issuers and registrants alike, would, in ICAC’s opinion, positively assist in the cultivation of new business and stimulate Canada’s economy for the betterment of all. Canadians, regardless of what province or territory they reside in, would be able to access new share issues rather than the case today where this might not always be possible if a prospectus was not cleared through an individual province/territory. Just as every Canadian should be entitled to certain standards in healthcare and public safety, they should have an equal and national access to the securities markets regardless of where they live.
Flexibility to Respond to Future Evolution of Global Markets
A key point in ICAC’s submission is that Canada is a small marketplace, representing just three percent of the current global marketplace. Given the country’s relative size, it is imperative that “we maintain our flexibility to adapt with change and to initiate regulation on new developments with greater speed than we have to date. The practical reality is that one regulator is able to respond and adapt to change more quickly than 13 securities regulators. “There are many examples where Canadian regulation and/or enforcement has arrived well after similar activity occurred in the U.S., the UK and continental Europe and other markets such as Australia.”
Reduction in Costs
As many previous studies on securities regulation in Canada have noted, a single set of rules and filings and one-stop approach will reduce costs on market participants with the benefits passed onto investors.
Strengthened Influence of Canada in International Markets
The submission noted that a new federal securities agency would be able to act as a strong voice for Canada on associations such as the International Organization of Securities Commissions (IOSCO). If the Canadian market was represented by one voice internationally, it would rank right after the US, UK, France and China. Walmsley noted, “it is an international embarrassment that we, along with Boznia & Herzegovina, are the only other member of IOSCO that is not regulated by a federal regulator.” Ability to Address Regional Sensitivities The ICAC’s submission noted that through the formation of regional branches with specialized areas of expertise, local/provincial sensitivities could be addressed through the opt-in national regulatory regime. “For example, matters pertaining to oil and gas could tap into the skills of Western regional offices, while Eastern regional offices could deal with financial or manufacturing issues.”
The Investment Counsel Association of Canada (ICAC) is the representative organization for investment counsel and portfolio managers in Canada. Our members are from across Canada and are comprised of both large investment management firms managing Canadian’s pensions and retirement savings. ICAC was established in 1952 and its current members are responsible for managing in excess of over $700 billion of client assets. The overall mission of the Association is to advocate the highest standards of unbiased portfolio management in the interest of investors served by Members. Member firms are only in the business of managing investments for clients in keeping with each client’s needs, objectives and risk.
For more information:
Investment Counsel Association of Canada