Lawyers applauded a report last week calling for a Canada-wide securities regulator, but questions linger about what it could mean for their practices.
“We’ve needed a national securities regulator in Canada for some time now,” says securities lawyer Philip Anisman. “This is the first time that the government of Canada has taken as strong a stance as this government has. That, I think, is more important than any technical deficiencies that people may perceive or may think exist in the specifics of the recommendations.”
The Expert Panel on Securities Regulation, led by chairman Thomas Hockin, last week released its final report. The creation of a single securities regulator charged with enforcing one securities act for all of Canada was its major recommendation.
Other key recommendations included the establishment of an investor panel, small reporting issuer panel, governance board, federal-provincial nominating committee, council of ministers, independent adjudicative tribunal, and a capital markets oversight office reporting to the federal minister of finance.
The panel said the measures would boost enforcement, make way for greater accountability, cut down on duplication, and work better for investors.
“We recognized and applaud the progress made by the provinces and territories over recent years to better co-ordinate and harmonize Canadian securities regulation, through initiatives like the passport system,” said Hockin, who served minister of state for finance in prime minister Brian Mulroney’s cabinet.
“However, the recent turmoil in capital markets has made it even clearer that Canada needs a single securities regulator that can move with greater speed alongside other domestic and international regulators to address financial instability,” added Hockin.
The outlook for securities lawyers if the panel’s recommendations are accepted is unclear, observers say.
Anisman, who created draft securities legislation for the federal government in 1979, suggests it’s unlikely the changes would cause a marked change in the volume of work for lawyers.
Counsel will be on demand in the short term to get clients in line with a new federal scheme, he says. But with the panel’s proposal based on existing provincial regulations, most lawyers will already be up to speed with most of the details, he adds.
National law firms currently do the bulk of work on securities matters, he notes.
“The structure will be to have regional and local offices, so that people dealing with the commission can deal with it through the office that is closest to their jurisdiction,” says Anisman.
The shift could increase work for lawyers if federal government predictions that the new, stronger structure will attract new players to the markets play out, he says.
Lawyers in individual provinces currently service local issuers and registrants, notes Barbara Hendrickson, a partner at McMillan LLP. Demand for such lawyers could drop if local opinions are no longer needed, says the co-chairwoman of the Canadian Bar Association’s securities sub-committee. But those aspects are rarely a big part of transactions, she adds.
Hendrickson says the panel’s opt-in proposal could cause a demand for lawyers servicing clients within the federal system, and others in the provincial system. That could be a boon for lawyers, she says.
“There is a fear that the work may migrate to the larger centres as it has, sort of, under the U.S. system,” she says. “Obviously that’s hard to predict in the long term.”
Borden Ladner Gervais LLP’s Philippe Tardif says it’s unlikely the new regulations would lead to more securities prosecutions, and thereby more work.
“I would think we would see a greater focus on choosing or in allocating the resources on the right prosecutions; those prosecutions that have the greatest need for redress,” he says.
The idea of establishing a single securities regulator for all of Canada has been contemplated for over 70 years. A glut of previous expert reports and recommendations, however, have done little more than gather dust on shelves. The end result, noted Hockin, is that Canada remains the only developed country without a national securities regulator.
That’s why Anisman, who served as a legal adviser to the panel, says political will is key.
Ontario is viewed as the strongest backer. Federal Finance Minister Jim Flaherty, who also served as Ontario’s budget chief, is a strong supporter of a national regulator. But he faces a tough slog to convince political leaders in Alberta and Quebec, who largely remain opposed.
The Hockin report outlined a transition period that would eventually allow market participants to opt into the national system if individual provinces refuse to get on board.
Hendrickson suggests Flaherty’s track record bodes well for a future Canadian Securities Commission.
“If you look at his record and his approach, he is generally pretty good at doing what he says he’s going to do, in this type of initiative at least,” says Hendrickson. “He has been committed to this from the beginning and he has pushed it ahead.”