Election opens path for national regulator

Few topics would have put the electorate to sleep faster than a debate on the merits of a national securities commission, but with a majority now in hand, the Conservative government is likely to press harder than ever for the creation of such a regulator.

The risk of the issue becoming politicized is now at al all-time low, however, leaving the Conservatives free to maneuver.

“I’m hoping that the government is even more committed now to seeing a national securities commission come to fruition,” says Joseph Groia, securities litigator with Groia & Company in Toronto. “Minister Flaherty has said that he sees it as one of the most important political initiatives of his career and I don’t see any reason, now that they have a majority, why they won’t go ahead with it.”

Groia expects the Supreme Court to give the government the go-ahead to institute a national regulator, although there could be some reservations.

During the campaign, the Liberals remained non-committal, saying they were waiting for the Supreme Court decision, while the NDP declined to even respond to the question. Needless to say, the Bloc Quebecois was a staunch opponent.

“If in fact [the results] are an indication that the majority of Quebecers are now much more committed to a national framework, and much less interested in the separatist option, one could hope—and I wouldn’t put it any higher than hope—that the provincial government would use that new sentiment as the basis of jumping into a national securities regulator.”

The multiple layers of regulatory costs associated with the current system serves as an indirect tax, Groia says, which has “a significant adverse affect” on the raising of capital.

He says the total economic cost is a multiple of five to 10 times the cost of these fees, meaning that for every $1 million in regulatory cost, up to $10 million of economic activity is lost.

“You have to make a political choice: Do you bring in a national commission and hope that you can persuade or cajole the provinces into joining?” he says. “

The alternative—creating the commission and not applying pressure to join—could result in an even worse situation, he says.

“Its hard to imagine that we could have a situation that is worse than the current situation, but there’s a possibility that if we go ahead with a national commission and the provinces can’t be made to see reason and join it, then we could have a regulatory framework that’s even worse than the one we have now,” he says.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.