Finance Committee on March 31st, 2009

[David Powell]

A few have exited the business. They're essentially Canadian subsidiaries of American firms who were pulled out of the Canadian marketplace—not because the Canadian marketplace wasn't profitable, but frankly, because Canada in many instances is just a rounding error on their balance sheets. It was a decision made elsewhere.

But if the program doesn't get going, we will probably see some more companies exiting the business.

[Mike Wallace, Conservative, Burlington, ON]

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Wallace.

We'll go to Monsieur Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair.

I'd like to briefly return to a point made by Mr. Boychuk previously. In describing the problem, he talked about the mark-to-market accounting rule. Last week, this committee had the opportunity to meet with a university professor who raised the same problem. I'd like our witness to provide us with more details on this topic. We are here to make suggestions, from time to time. The budget has been adopted, but perhaps there is room to refine certain things.

He must certainly recall that four or five weeks ago in the United States, the possibility of changing the mark-to-market rule was raised. Markets then reacted swiftly. In the one hand, this can be seen as an indication that tweaking this rule could give rise to problems of false market values. On the other hand, if, because of current conditions, we are not able to put a value on things that are inherently of value over the long term, perhaps this rule has to be replaced with something else.

I'd simply like him to share with us the fruit of his experience and even a few observations or suggestions, if he has any.

[Michael Conway]

FEI Canada has various technical committees, one of which is the committee on corporate reporting, and so we spend a lot of time talking with the standard setters and accounting regulators. You're right that marked to market is certainly something that's garnered a lot of headlines.

I guess there are a couple of things about it. It's the value at a point in time, and that means a couple of things. The value is the value set if you have a mechanism to accurately measure that value. But the other thing is that it's at a point in time. So if the market swings the way we've seen over the last year, down 17% one week and up 20% the other week, well, you have to be lucky as to when your year-end is.

Ultimately, there was something back when I was in school many years ago called the efficient market hypothesis, which basically said to disclose everything and then it really shouldn't matter, because it will be completely transparent as to what the value of the instrument is. One of the things to ensure is that all of the information is out there so that, whichever model is used, at least the investors have all the information available to them to make the assessments.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you.

Ms. Walmsley, you ended by saying that “there is a hodgepodge of regulations” which is a very innocuous, but general statement. Now that we're on our second round of questions, I'd like to give you the opportunity to provide a more precise answer. In fact, as legislators, we have to work with very specific things. We're here to draft laws and write rules that will be applied stringently by the competent authorities.

You used the term “hodgepodge of regulations” but I'd like you to be more precise. The passport system was developed over the course of recent years to regulate financial markets in Canada, from one province to the next. I'd like you to give me a specific example of what has not worked and a specific example of a problem that could be resolved if a single centralized securities regulator were established. This has been a matter of provincial jurisdiction since 1867. Civil law, which we are talking about today, has always fallen within the authority of the provinces. This would cause a real constitutional shakeup. I'm not asking you for your opinion on this topic: I simply want you to tell us specifically what your suggestion would change.

[Katie Walmsley]

I'll talk specifically about the way the system works right now and then ideally how it would work under a single regulator. Right now the banks in Canada are getting a fair bit of recognition internationally, and our regulatory system—

[Thomas Mulcair, NDP, Outremont, QC]

One moment, Madam: the banks are under, and have always been under, federal jurisdiction. They have always been regulated by the federal government. Earlier, you said that there was a problem, and that in your opinion, the solution was the creation of an entirely new structure, located in Ottawa, in charge of regulating all financial markets and securities in Canada. Why?

[The Chair, Conservative, James Rajotte]

Just be very brief, Ms. Walmsley.

[Katie Walmsley]

The banks, I believe, have done well in Canada because there has been one regulator. Right now, for securities regulation in Canada, we have 13 regulators.

The passport you referred to provided a somewhat improved registration process, and simplification. However, one of the key benefits of a single regulator is enforcement. My colleague Mr. Buell talked about investor protection. A passport does not do anything for enforcement of investor protection.

[Thomas Mulcair, NDP, Outremont, QC]

Can you speak to us of one single case, anywhere in Canada, where criminal laws were not enforced because of the current system?

Thank you.

[Thomas Johnston]

Can we respond further to that?

[The Chair, Conservative, James Rajotte]

Just very briefly, Mr. Johnston.

[Thomas Johnston]

It's a well-directed question, and I think my colleague did address it.

The problem with the Canadian securities regime and why we stand out as the only country in IOSCO, besides Bosnia and Herzegovina, that doesn't have a single regulator is that there hasn't been enough enforcement. It goes to Mr. Buell's point that it's harder to coordinate when you have 13 different groups and national firms. That's the key advantage. All our industries will benefit from greater scrutiny and better enforcement. It enhances confidence, and it's going to get the credit flowing.

[The Chair, Conservative, James Rajotte]

Merci.

I want to thank all the witnesses for their presentations here and for answering our questions.

Members, we do have a motion to deal with and we also have a subcommittee meeting.

The witnesses are excused, but thank you all for being with us here today.

We'll suspend for a minute and then resume with the motion.

Thank you.

[The Chair, Conservative, James Rajotte]

We'll call the meeting back to order.

I have the motion by Monsieur Laforest before me. I'm going to make a ruling on it. The ruling will not surprise Monsieur Laforest. It will not surprise anyone on the committee. It's the same ruling I've given on all of these motions dealing with this issue.

We have checked this procedurally with the clerk. We've checked this procedurally with the clerk of the clerks. This is my formal ruling on the motion.

First, Monsieur Laforest's motion reads as follows: “That the Finance Committee recommend that the government increase the Parliamentary Budget Officer's budget to $2.7 million, as was planned for 2009-2010, and that the Committee report this motion to the House.”

I would refer members to the mandate of the finance committee, as specified in Standing Order 108(2). I will not read that entire standing order; I would just refer members to that.

I'd also refer members to the mandate of the Parliamentary Budget Officer, as defined in section 79.1 of the Parliament of Canada Act. I'm going to read that into the record:

The Parliamentary Budget Officer

79.1(1) There is hereby established the position of Parliamentary Budget Officer, the holder of which is an officer of the Library of Parliament.

This comes further on:

Mandate

79.2 The mandate of the Parliamentary Budget Officer is to

(a) provide independent analysis to the Senate and to the House of Commons about the state of the nation’s finances, the estimates of the government and trends in the national economy;

(b) when requested to do so by any of the following committees, undertake research for that committee into the nation’s finances and economy:

(ii) the Standing Committee on Finance of the House of Commons or, in the event that there is not a Standing Committee on Finance, the appropriate committee of the House of Commons, or

The Standing Joint Committee on the Library of Parliament is therefore the appropriate forum for such a study, as this motion suggests.

Furthermore, Standing Order 108(4) states:

So far as this House is concerned, the mandates of the Standing Joint Committee on (a) the Library of Parliament shall include the review of the effectiveness, management and operation of the Library of Parliament;

I therefore declare the motion out of order because it exceeds the mandate of the Standing Committee on Finance. It is, instead, within the mandate of the Standing Joint Committee on the Library of Parliament.

That is my ruling. I am ruling this motion out of order. Monsieur Laforest can challenge that ruling.

You have a point of order, Monsieur Laforest.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

That's exactly what I'm going to do, Mr. Chair. That is why I am raising a point of order. I dispute your ruling.

[The Chair, Conservative, James Rajotte]

Okay. My ruling is--

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

I can understand that you based this ruling on the committee's mandate, but I, for one, believe that the committee's mandate also includes responsibilities with respect to the new position of the Parliamentary Budget Officer. In fact, this is closely related to the responsibilities of the Standing Committee on Finance.

[The Chair, Conservative, James Rajotte]

You've challenged my ruling. Okay.

It's not debatable. Therefore, the question, I believe, is that the chair's ruling be sustained.

[An hon. member]

Recorded vote, please.

[The Chair, Conservative, James Rajotte]

Okay. The recorded vote is on whether the chair's ruling be sustained.

(Ruling of the chair overturned: nays 6; yeas 5)

[The Chair, Conservative, James Rajotte]

So the chair's ruling has not been sustained.

[Mike Wallace, Conservative, Burlington, ON]

Procedurally, what happens to this motion? Will this go to the House? Is it possible that the Speaker will rule it out of order? That's if the motion carries.

[The Chair, Conservative, James Rajotte]

The committee has not sustained my ruling. Therefore, we actually go to debate on the motion.

I don't want to predict what the Speaker would do, but the advice we were given had procedural advice from very high up. So I think you can guess--