Point & counterpoint

Diogenes's picture

Do we need a national regulator?

Alberta Premier Ed Stelmach

The government of Alberta has stated that it will oppose the establishment of national securities regulator. They argue that it is a provincial responsibility, accorded to it by the constitution. They have offered few other reasons why this should be an exclusive right.

Canada has had many expert panels and commissions over the years that have consistently recommended replacing Canada's patchwork of 13 regional regulators with a single national regulator. The latest panel was chaired by Tom Hockin, the one before that by Purdy Crawford, architect of Canada's recent ABCP restructuring.

Purdy Crawford

Economists and other experts on these matters have almost all agreed that a single regulator in Canada would be a good idea, both for investment and protection of investors.

Why then, the resistance?

The Calgary Herald recently published a number of articles that attempted to present both sides. Dr. Hockin had paid a visit to the Herald editorial board to discuss the panel's report and recommendations.

One column, written by veteran columnist Charles Frank[1], was long on opinion and short on fact. Mr Frank rubs his neck red before hitting the keyboard, digging up mom's metaphors and this crusty analysis of Dr. Hockin's presentation...

--a thinly disguised public relations gambit clearly aimed at mollifying those of us out here in the West who don't think the sun rises and sets in Ontario--

It is no small coincidence that the push for a single national regulator coincides with the rise of the western Canadian economy (and the corresponding decline of the Ontario, or Central Canada, economy).

Yada, yada, yada. Like I said, butter wouldn't melt in the man's mouth.

Way to go Charles! There is nothing like invoking the old "us versus them, east versus west" argument to begin a debate. Mr Frank then goes on to quote Bill Rice, head of the ASC:

Our system works for us and it's taken a long time to get there. We finally got it to the point that you don't have to deal with 13 different jurisdictions.

We have totally harmonized legislation, no duplication, and now everybody wants to throw that work out, says a frustrated William Rice, chairman and chief executive of the Alberta Securities Commission.

Bill Rice

In another article[2] Mr Rice is quoted again...

Alberta Securities Commission chairman Bill Rice argues the plan being touted by Hockin won't be an improvement over the current structure for a number of reasons, and will almost certainly be less effective in terms of enforcement and in recognizing regional needs.

He also notes the chief criticism of the current regulatory structure --that its 13 jurisdictions are too complex and unwieldy for the modern world-- is simply wrong in light of the development of the passport system that eases interaction among jurisdictions.

It's a uniquely Canadian structure that works for a country as diverse as Canada, he adds.

"It would be wrong of me to get in the way of (the single regulator) if I thought there was real progress, but nobody here (at the ASC) thinks that."

And that's pretty much sums up the whole case presented for keeping the current system.

It's too bad they could not find a more credible authority.

A few years back, the the ASC vigoursly fought a losing court battle to prevent being audited by Alberta's own Auditor General. They have been the subject of a number of embarassments, including high profile wrongful dismissals and staff resignations[4].

If a national securities regulator is established, it could mean that Mr. Rice and colleagues are either no longer needed or will have to start working for a living.

The most perplexing statement… "(a single regulator) will almost certainly be less effective in terms of enforcement". How can enforcement be any less effective than it is now?

Canada's current enforcement of securities regulation is broken. It is useless. It offers absolutely no protection to the consumer, no redress for wrongs committed by rouge traders or self serving investment dealers.

wgym (6K)

There was an excellent CBC News show called " Who's Guarding Your Money?" that should be required viewing for every MLA in Alberta. While it focused on the failings of the Ontario Securities Commission (OSC) with respect to enforcement, there is no reason to believe the ASC record is any better.

The numbers speak for themselves.

By the numbers - How safe is our money?

Financial/investment fraud enforcement - Canada vs. US

$700,528 salary & compensation for David Wilson, head of the OSC, 2007
2 the number of criminal prosecutions for securities fraud in Canada for 2002 - 2007
$158,500 salary & compensation for David Cox, head of the SEC, 2007
1,236 the number of criminal prosecutions for securities fraud in the US for 2002 - 2007
17x How much larger the average fine is for securities fraud in the US compared to the comparable fines levied in Canada[3]
$100 million Cost of the RCMP's IMET division - dedicated to the pursuit of securities fraud, 2003 - 2008.
$50 million The cost per prosecution in Canada for securities and investment fraud. Note - this does not include the salaries of David Wilson, Bill Rice, or any other regulators. These costs are secret.
$0 the compensation paid to victims of security fraud from the fines levied in Canada

Shock and Awe

These numbers are shocking. Canada has put significant money and resources into enforcement, but it has been a complete failure. We need to rebuild from scratch.

A single national securities regulator is a start, but only a start. Enforcement has to work as well. We currently have a web of self regulating organisations (SRO) that carry no meaningful insurance. They practise pass-the-buck enforcement.

The IMF and OECD have urged Canada to establish a single national regulator. We are one of the only countries in the world that has this ridiculous territorial arrangement.

Let's do it

A single regulator (versus thirteen) will make it simpler and less costly for all companies to offer shares, certificates, and other investment products to all Canadians across Canada. This is important. Many Canadians provide for their own retirement and they need a system they can trust and one that is competitive.

But a new regulator, with a mandate to protect and uphold the law; with the ability and authority to investigate, audit and enforce that law, will be a big step in building the trust needed to get the system running again.

Let's just do it. Regulation is not the biggest problem, enforcement is. White collar crime is of little consequence in this country. This needs to change.


  1. One regulator two views - Slick sales job can't hide real motives, January 18, 2009, by Charles Frank, Calgary Herald
  2. Alberta pushes economic case against regulator, January 17, 2009, By Theresa Tedesco, Calgary Herald
  3. "Who is Guarding Your Money?" November 22, 2008, CBC New Sunday Report, cbc.ca
  4. Alberta Securities Commission Scandal (2005), investorVoice.ca, An archive of news coverage on problems at the ASC
  5. Mounties' stock-market fraud squads a disaster, December 20, 2008, by David Baines, The Vancouver Sun