Finance Minister Jim Flaherty has formed an expert panel tasked with creating a model for a common securities act, and some lawyers familiar with securities regulation are hopeful that - with Flaherty’s help - a countrywide consensus could be on the horizon.
Philip Anisman, who was commissioned by the federal government in 1979 to write a proposal for a national securities market law, considers Flaherty’s will to make something happen in this area “the strongest to date” on the political side.
“The strong recognition in the Canadian financial community and the government’s willingness to take the lead are the two major changes over the past decade,” says Anisman. “The increasing vigour of the demand from the financial community for an efficient and effective national system, meaning a single regulator,” is also a factor, he adds.
Flaherty’s announcement, coincidentally, came on the heels of another matter at the Ontario Securities Commission that some commentators considered a failure. The high-profile case involving ex-investment banker Andrew Rankin wrapped up with the former RBC Dominion Securities executive striking a pretrial deal and admitting to giving a friend illegal stock market tips.
Rankin has paid $250,000 in investigation costs to the commission and now faces a lifetime ban from acting as a director or officer of a public company. He also was assessed a 10-year ban on trading securities.
The Expert Panel to Review Securities Regulation will be chaired by Tom Hockin, former minister of state for finance and former president of the Investment Funds Institute of Canada. Howard Davies, director of the London School of Economics and former chairman of the U.K.’s Financial Services Authority, will serve as a special advisor to the panel.
“I am asking the panel to develop a model common securities act to create a Canadian advantage in global capital markets,” says Flaherty in a release announcing appointments to the panel. “This effort will build on positive steps taken in recent years by the full range of partners, including provinces, territories and regulators, contributions by private sector groups, and international best practice.”
Flaherty has asked the panel to focus on the following “key areas”:
• The outcomes, principles, and performance measures needed to pursue a Canadian advantage in global capital markets;
• How Canada could best promote and advance proportionate, more principles-based regulation;
• How this could facilitate and be reinforced by better enforcement;
• How this regulatory approach could be implemented under a passport system or under a model common act with a common securities regulator; and
• The transition path, including key steps and timelines, to effect proposed changes to the content, structure, and enforcement of regulation.
Anisman says the panel has been given a far broader term of reference than was originally described when Flaherty announced in June 2007 that it would be created.
“Given the breadth of their mandate . . . drafting a model act is a major task and I think they have a major job to complete within the time frame that’s been given them,” he says, noting that their findings are due by the end of this year.
But Hockin tells Law Times that his panel is confident it can get the job done on deadline.
“I think intellectually it’s enough time, and it will set the stage for completing negotiations with the provinces,” he says. “It could be that the negotiations aren’t done; they can continue after this.”
If they are able to beat the clock, and with the “clear backing” of the federal government this time around, says Anisman, “what it will do is put on the table another set of recommendations that can be considered toward a national regulator. And I think we have to take that step at some point.”
But there have been up to five previous sets of recommendations through federal government actions, with no results, says Anisman.
“So, the real question - and ultimately it’s a question of political will - is whether enough provinces will agree to move forward toward a national regulator to make it viable. Or whether the federal government is willing to take their own initiative if they don’t.”
Another factor that could push the initiative forward is the recent debate of Canada’s ability to regulate adequately without a nationwide system, says Anisman. The need for interjurisdictional co-operation between regulatory regimes and enforcement, and the requirement for international acceptance that Canada’s markets are properly regulated, is now clear, he says.
The Department of Corporate and Consumer Affairs published Anisman’s 1979 report, which proposed a co-ordinated national regulatory regime, involving the federal government. It included a draft statute.
Since that time, there’s been a “continuing saga of greater provincial co-ordination of the provincial regimes, usually in response to intimations that the Government of Canada was interested in initiating a movement toward a national regulator,” he says.
Anisman notes that, since the 1960s, securities regulation in Canada has moved from the creation of national policies, to the creation of the Canadian Securities Administrators, to the current passport system. He adds that the passport system still has not received full support within the industry.
Hockin says that, while the panel faces initial roadblocks, “I don’t want to pre-judge how people will react to what we do. It could be that they’ll have a re-think of their position.”
“It won’t be the same old story,” says Hockin. “It will be somewhat of a different bargain.”
Anisman doesn’t believe that the creation of a national regulator would have an impact on individual prosecutions, such as the OSC case involving Rankin.
“What a national regulator may be able to address is interjurisdictional enforcement inefficiencies,” he says.
Prof. Christopher Nicholls, who teaches securities law at the University of Western Ontario, says the Rankin case will do little to change public perception of the OSC - in either direction.
“People who already are convinced that securities regulation in Canada isn’t good enough will say that this is proof of a problem,” says Nicholls. “People who do not agree that it’s so serious will say that there are special considerations here. I don’t honestly believe this will change anybody’s mind.”