Mr. Chair, as all members of the House will know, one key priority of the Minister of Finance and his department has been to create a competitive advantage for Canada in global capital markets.
Part of this challenge has been to improve the regulation of Canada's capital markets, a need recognized and accepted by observers domestic and international. In the words of former IMF managing director, Rodrigo de Rato:
The Canadian economy is a very sophisticated economy, but in financial markets, you're not at the top....
Many of your big corporations go elsewhere to finance themselves. ...you [Canadians] should ask yourself why, and to what extent you're losing opportunities
Mr. de Rato's plea is simple and it is short, “Canada's investors deserve better”. The government agrees. While we recognize the constitutional jurisdiction of each order of government should be respected, we firmly believe we must modernize our securities regulatory framework. It is an important component of strengthening our economic union.
The government is taking action on this file and demonstrated leadership when it recently announced the membership of an expert panel, chaired by the hon. Tom Hockin, tasked to provide independent advice and recommendations to ministers, federal, provincial and territorial, on the best way forward to improve securities regulation in Canada.
There is good reason for taking action on this front. Canada has a strong and growing financial services sector which provides good, high paying jobs for Canadians and key services for consumers and businesses and yet we have a capital markets regulatory system that falls well short of our needs.
As aptly stated by the bastion of Conservative thinking, the Toronto Star:
At a time when the world's seven richest countries are looking for ways to collaborate in strengthening regulatory oversight of integrated, international capital markets, Canada is the only country that does not have a national securities regulator; instead, it has separate provincial regulators.
Canada is one of the only major industrialized countries without a common securities regulator, and this is a problem. Even my Liberal colleague from Wascana, who ever so briefly served as finance minister once, understood that when he remarked in 2004:
that Bosnia-Herzegovina is the only other industrialized country...[without a common regulator..."That should say to all of us that we need to substantially improve our system in Canada".
Our system of 13 regulators is cumbersome and fragmented and lacks the proper tools of enforcement. In a rare moment of clarity, the former NDP finance critic and member for Winnipeg Northdeclared that she was, “convinced of the need for a national securities regulator rather than the piecemeal provincial approach”.
Some have suggested the passport system, currently advocated by some provinces and territories, with the significant exception of Ontario, are sufficient reform.
However, we, along with most observers, believe that does not go far enough or fast enough. With the passport system, Canada still has 13 securities regulators with 13 sets of laws, however harmonized, and 13 sets of fees. Moreover, the passport system lacks national coordination of enforcement activities, making it difficult to maximize results on this critical part of the system.
In the words of the Canadian Bankers Association:
...[the passport system] is only a second-best solution. All of the same infrastructure, costs, and fees of the current fragmented regulatory system remain in place...entrench[ing] a potentially confusing and inefficient enforcement mechanism.
Furthermore, the passport system does not address our need to improve policy making. It is still necessary to obtain agreement from 13 regulators to change the rules.
Such a system is not progress away from the cumbersome realities of today. In short, the passport system is not where Canada needs to be in today's global economy. On that point the Liberal opposition again agrees with the government. I will quote the member for Wascana again who said:
I don't believe that the passport system is an adequate response. It still leaves us with a system that is largely fragmented and certainly less sophisticated than that in virtually every other country in the world.
That is the kind of good sense that the member displays along with his colleagues in the Liberal Party when they continually support our government on matters of confidence in the House.
For years, Canada took a leading role in advocating for free trade in securities with the United States. Under mutual recognition of each other's regulatory regime, Canadian investors would have better access to global opportunities and businesses listed on our exchange would have better access to global investors.
However, our country suffered a disappointing setback when the U.S. Securities and Exchange Commission decided to proceed with discussions with Australia as a priority rather than Canada. This decision was directly related to the fact that the U.S. would have to deal with 13 separate securities regulators rather than a single Canadian regulator.
Where do we go from here? Clearly we can no longer afford to sit back and watch our competitors pass us by. Now is the time for a more efficient market system.
The benefits of a common securities regulator are well known. It would give all regions in Canada a seat at the table. It would make the regulation of our markets more responsive and accountable by creating a decision making body that would coordinate the views of all jurisdictions promptly and fairly. It would improve market efficiency and ensure the best use of money and resources by making the system more efficient to operate. This, in turn, would lower costs and make it more affordable for all who benefit from it, both those with capital to invest and those with businesses to build.
Another advantage is that a common securities regulator would improve enforcement and better protect investors with a common set of sanctions and remedies, as well as better enforcement across the country.
By serving as a single point of contact for law enforcement agencies, both at home and abroad, Canada would be better placed to share information and detect market fraud.
It is worth nothing that many observers suggested that the current market turbulence surrounding asset backed commercial paper, or ABCP, could have been lessened with a common securities regulator.
For instance, in a recent appearance before the finance committee, Diane Urquhart, independent financial analyst, and Larry Elford both noted that the ABCP situation was yet another reason that Canada desperately needed a common securities regulator.
Having such a structure would ensure meaningful participation by all provinces and territories, with a strong presence in all regions with local expertise who would respond to regional needs, for example, the oil and gas industry in the west or the futures market in Montreal.
The bottom line is simplicity and effectiveness. A common securities regulator represents an opportunity to move toward simpler, more principles based regulation.
It is little wonder that the all party Standing Committee on Finance's 2008 prebudget consultation report, something I worked on crafting, had as its first recommendation the establishment of a common securities regulator. The minister has made the case to all ministers, federal, provincial and territorial, that we must look beyond the passport system.
As such, I would like to ask the minister in the time remaining for his comments on improving Canada's securities regulation. Why is it, along with other measures to break down interprovincial trade, so important, and not allow for investment in Canada but investors small and large?
Also, I also would like his comments on the NDP's recent decision to abandon the position of its former finance critic, the member for Winnipeg North--