* Ottawa, Ontario and B.C. agree on securities regulator
* Flaherty hopes more provinces will join the plan quickly
* Mid-2015 goal for new regulator to replace provincial ones
* Quebec, Alberta not in plan; Quebec eyes going to court
By Randall Palmer and Louise Egan
OTTAWA, Sept 19 Canada's federal government and
two of its provinces will set up a common securities regulator
as a first step toward their ultimate goal of replacing the
current patchwork of provincial agencies with a more efficient
national markets watchdog.
The federal finance minister, Jim Flaherty, and his
counterparts from Ontario and British Columbia unveiled details
of the plan on Thursday. Together, Ontario and British Columbia
are home to about two-thirds of the country's capital markets.
Ottawa has tried for decades to persuade Canada's 10, mostly
reluctant, provinces and three territories to create a national
regulator similar to the U.S. Securities and Exchange
Commission. Flaherty himself has lobbied hard for it since he
became finance minister in 2006 with the election of the
The federal government hopes the new commission will improve
Canada's reputation for being lax on white-collar crime.
Recently, regulators were criticized for their oversight of
Sino-Forest Corp, one of several North American-listed companies
with Chinese operations whose accounting disclosure practices
came under scrutiny.
In the infamous Bre-X scandal of the late 1990s, investors
lost billions of dollars after a massive gold find turned out to
have been a fake. No one was ever charged with fraud, and the
lone figure who was charged with insider trading was acquitted.
Canada has been criticized by the International Monetary
Fund for being the only advanced economy without a national
capital markets regulator.
The version of the plan revealed on Thursday is less
ambitious than earlier efforts, but is designed to win over
additional provinces before its 2015 launch. Still, the
French-speaking province of Quebec, led by a separatist
government, rejected the plan and hinted at fighting it in
Flaherty said the agreement "represents the best of what can
be achieved when a shared responsibility becomes a mutual goal."
He expects others to join the plan quickly, but the intention is
to push ahead with the initiative even if there are holdouts.
The three governments said they would enact provincial
legislation and complementary federal legislation by the end of
2014 so that the new regulator can start operating in July 2015.
TOUGHER WATCHDOG SOUGHT
The new body will replace the Ontario Securities Commission,
which is now Canada's major securities regulator, and the
British Columbia Securities Commission as well as their
counterparts in any other provinces that choose to participate.
The plan is intended to make it easier for companies and
investors to navigate the system by eventually having a single
set of rules nationwide, and to give Canada a single voice in
global discussions of regulatory issues.
Ontario Finance Minister Charles Sousa said the partial deal
beat the alternative: a federal agency that Flaherty had
threatened to create if he couldn't reach a deal with the
"To introduce yet possibly another federal regulator, with
all the others included, would create an international
reputational signal that would say, you know, we don't have our
act together," Sousa said.
QUEBEC FIERCELY OPPOSED
Some provinces, particularly Quebec, have seen the efforts
to create a national regulator as an intrusion on their powers.
The Supreme Court ruled in 2011 that it was unconstitutional
for Ottawa to impose a common regulator on the provinces and
territories. As a result, Flaherty switched from a unilateral
approach to a cooperative format with willing provinces.
But more legal wrangling could be in store. The Quebec
government said it might challenge the plan in court.
"We will ask the Justice Ministry for a legal opinion to
analyze the proposal that was announced this morning and we will
not hesitate to go to court," said Alexandre Cloutier, Quebec
minister for intergovernmental affairs.
Ian Lee, a professor at Carleton University's Sprott School
of Business, noted Quebec's importance in Canadian capital
markets has weakened in the last 30 to 40 years as many of its
companies migrated to Toronto.
The Quebec government is afraid that trend will only
"If there is only one regulator in Toronto the financial
industry will concentrate there," Quebec Finance Minister
Nicolas Marceau said.
Quebec authorities are also concerned the proposal threatens
the hundreds of technical positions tied to derivatives trading
on the Montreal Exchange.
Alberta, the country's oil-rich province, had at one point
been leaning in favor of Flaherty's approach, but earlier this
year it came out in favor of the status quo.
Alberta Finance Minister Doug Horner said on Thursday his
province and others had not even been consulted on the new plan
before it was announced. Premier Alison Redford said the Alberta
Securities Commission had been key to Alberta's development.
"We need to be able to see that protected," she said.
One advocate of Flaherty's proposal was disappointed at its
lack of support among the provinces.
"The announcement would have looked a little stronger had
they had four or five provinces involved instead of just two,"
said Richard Steinberg, chairman of Fasken Martineau's
securities and mergers and acquisitions group.
"That way it would have looked like a stronger proposal and
it would have given it more momentum," he said.
Corey MacKinnon, a partner at the corporate law group at
Heenan Blaikie, applauded the compromise deal, however, and
predicted others would jump on the bandwagon.
"Ontario and British Columbia are very good starting points,
if they can get Alberta onside you have effectively achieved the
critical mass that you need," he said. "I would be very
surprised at that point to see any of the other provinces, other
than Quebec, not fall in line."
The three governments emphasized the cooperative nature of
the deal. While the head office will be in Toronto, a council of
ministers from participating provinces will oversee the body.
And Ottawa will compensate provincial governments for any
revenue loss resulting from the loss of their own regulators.