Mr. Speaker, it is my pleasure today to stand in response to the opposition motion that is before us on the idea of creating a common securities regulator.
I want to thank my colleague from Lévis—Bellechasse for sharing his time. My brief experience with him over the last couple of years has demonstrated that he has been very conscientious and doing a fabulous job for his constituents.
While the issue of improving Canada's securities regulatory framework may seem a distant concern for most Canadians, the issue impacts more people than most would likely imagine.
Whether we realize it or not, Canada is a country of investors. From RRSPs to mutual funds, to registered retirement plans or the new proposed tax-free savings accounts, Canadians have been increasingly turning to the markets to build their nest eggs for their financial future and are counting on it to do so.
Largely because of that, the importance of ensuring Canada has the best possible securities regulatory framework has never been more important. Furthermore, this is a concern that is breaking across the stereotypical socio-economic groups one would associate with it.
As a major national labour organization, the National Union of Public and General Employees recently pointed out:
Workers have a huge stake in the integrity of the country's financial system for one basic reason. They have untold billions invested in pension funds, and billions more in RRSPs. Their retirement depends on keeping the system honest.
However, it is clear that Canada does not have the best possible securities regulatory framework and that their exists room for significant improvement.
Unlike most developed countries, Canada lacks a federal securities regulatory body. Rather, it is administered individually in each of the 13 provinces and territories, each with their own separate laws, agencies and commissions.
The current framework of 13 different sets of laws administered by 13 different agencies or commissions has naturally evoked criticism throughout the years.
In an increasingly globalized and competitive world, Canada's system is clearly out of step internationally. This fact is not lost on Canadian business leaders. In June 2007 the Financial Post polled 80% who overwhelmingly indicated our system of multiple provincial securities regulators is harming the economy and that the situation needed urgent remedy.
A representative of that viewpoint is Ian Russell, president of the Investment Industry Association of Canada. He has noted that Canada's current fragmented framework with multiple securities administrators and commissions is clearly not favourable to attracting investment. He said, “Foreigners just find the construct a deterrent. A negative. And there's very much an awareness of that”.
Little wonder that the all-party House of Commons finance committee made its first recommendation in its 2008 pre-budget consultation report for the federal government to take priority action to encourage provinces and territories to reach an agreement about a common securities regulator. As a member of the finance committee, I can clearly indicate that it was a priority for the committee.
I note that the bipartisan cooperation witnessed at the finance committee on this matter was not an isolated incident. Time after time the major relevant political parties in Canada have agreed on the need for an improved securities regulatory framework.
For instance, the previous Liberal finance minister, the current member for Wascana, also understood the urgent need for improvement and reform. During his short-lived tenure as finance minister, he strongly advocated that Canada “take a very serious look at the proposal for a single securities regulatory”, because the issue “just cannot be left to wither away. It is far too important. We need to substantially improve our system in Canada”.
Similarly, the former NDP finance critic, the member for Winnipeg North, openly admitted that she was convinced of the need for a national securities regulator as opposed to a piecemeal provincial approach. She noted at the time, “Canada does not seem to have the tool box necessary to deal with corporate fraud”.
Accordingly, international voices have repeatedly argued that Canada's system at home must be improved. For instance, the Organisation for Economic Co-operation and Development, OECD, in its 2006 survey of Canada stated, “Securities regulation is currently a provincial responsibility, but the presence of multiple regulators has resulted in inadequate enforcement and inconsistent investor protection and adds to the cost of raising funds”.
More recently, Canada became the first G-7 country to undertake the financial sector assessment program update, which provides International Monetary Fund member countries with comprehensive reviews of the stability of their national financial systems. The assessment also arranges the country's implementation of a range of regulatory standards and codes.
While the IMF characterized the Canadian financial sector as among the world's most highly developed and well managed, it noted that in Canada, “the institutions, markets, infrastructure, safety nets and oversight arrangements that comprise the system are sophisticated, and include a full range of financial intermediaries”. However, the report also concludes that there would be an advantage in moving toward a common securities regulator. In particular it would allow policy development to be streamlined to reduce compliance costs and improve enforcement.
The IMF report also notes that although the passport system of securities regulation will further rationalize the regulatory system for its participants, it will not address the inefficiencies related to costs, delayed policy development and fragmented enforcement. The report states that the participants will still be required to pay fees to the regulatory authorities of all the provinces where they raise capital. Policy development will continue to require approval from 13 jurisdictions. The passport system is not designed to address the limited enforcement authority of individual provincial regulators.
Let us examine in detail the policy development under the current system. The report notes, “the process of adoption of national instruments is protracted, since national instruments need to be individually adopted by each province. Depending on the jurisdiction, ministerial approval may also be needed. In addition, while provinces are committed to harmonizing their regulatory framework, they retain full authority to adopt a local standard”.
Let us also examine the detail of the costs imposed by the current system.
The report notes that “a system of multiple regulators entails additional costs for market participants, including additional direct costs, since participants have to pay fees to all the regulatory authorities of the provinces and territories where they want to raise capital and to provide services; there are also compliance costs and opportunity costs caused by longer review procedures. In addition, there appears to be room for efficiency savings at the regulatory level”.
The report adds that a single regulator “appears to be better positioned to address these shortcomings. There are different alternatives for a single regulator, including the 'common regulator'. A single regulator would probably reduce compliance costs for market participants, since there would be only a single system of fees. It would streamline policy development, since decisions would be taken by a single body, and therefore would allow Canada to react more quickly to local and global developments. A single regulator would have enforcement authority in the whole country, and therefore would be in a better position to eliminate the inefficiencies created by the limited enforcement authority of individual provincial regulators. In addition, the existence of a single regulatory authority responsible for administrative enforcement would help to simplify coordination with other enforcement agencies”.
These are some of the reasons that our government is committed to developing the Canadian advantage in global markets and addressing the issues raised by the IMF.
In my riding of Burlington, there are a number of small and medium size companies. Their opportunity to grow and prosper is limited by their ability to raise capital and by the regulatory framework in this country. Having to register and repeat the work over again in every province and territory hampers their growth and hampers the economic development of this country.