OTTAWA – The federal government is expected to announce on Wednesday it is has garnered sufficient provincial support to proceed with a national securities regulator, marking a major step forward after about eight years of mostly frustration.
Finance Minister Joe Oliver, who would not answer questions on the issue at an event in Toronto, is scheduled to hold a news conference at 9 a.m. in Ottawa.
According to informed sources, Saskatchewan and one Atlantic province — believed to be either Nova Scotia or New Brunswick — are prepared to join Ontario and British Columbia in the effort.
That still leaves major provinces outside the group, with Quebec and Alberta remaining the strongest in opposition, but the federal government believes the regional representation is sufficient to proceed.
Ontario Finance Minister Charles Sousa is expected to be at the announcement in Ottawa, along with some other opt-in ministers.
The key absentee will be Alberta Finance Minister Doug Horner, whose province represents Canada’s second largest provincial capital market after Ontario.
A spokesperson for Horner said the minister will not attend and that the province has not softened its opposition to the initiative.
Still, Ian Russell of the Investment Industry Association of Canada says unanimity is not required as long as Ottawa obtains a sufficient critical mass to create momentum for the new office, which would be charged with regulating and policing financial markets in Canada.
“Once it starts becoming operational it will make all the difference in the world because those provinces that are on the fringe are going to have to make a decision,” he said.
“You suddenly are introducing a uniform securities act with detailed regulations … that will encompass at least 50 or 60 per cent of the Canadian capital markets. It will only be a short matter of time before most of the other provinces will come in because there’s too many efficiencies to gain by coming in and too much efficiencies lost by staying out.”
The proposal has had the support of Canada’s business and financial community, as well as international bodies such as the International Monetary Fund and World Bank, since it was first proposed by the late Jim Flaherty in 2006.
The government argues that Canada’s current system, with 13 separate regulators and commissions across the country, is Byzantine, inefficient and — despite co-operation through what is called a “passport system” — difficult to police for abuses and securities fraud.
But Ontario, where Canada’s largest stock market is located, was the only province to agree with the initiative and several provinces threatened to take Ottawa to court if it proceeded.
In 2011, the Supreme Court sided with the provinces on the main question of jurisdiction, while leaving the door open to federal-provincial co-operation and adding that the federal government had an interest in preventing systemic risk to the financial system.
Last September, Ontario and British Columbia announced they had established a co-operative capital markets regulatory system (CCMR) and begun work with Ottawa to develop complementary provincial and federal legislation governing capital markets.
It is not known whether Oliver will present draft legislation on the matter Wednesday morning, although Russell said any concrete measures would likely require a period for consultation.
Russell said a national or common regulator would do more than oversee stock markets. The office would also police debt markets, oversee institutional traders, high-frequency traders, new bond and equity issues and disclosure, relationships between investment advisers and their clients, “and for the first time we will have a regulator that will represent Canada internationally,” he noted.
Ottawa hopes to have an office in operation by next fall.