Law Times

www.lawtimesnews.com Law TiMes / March 3, 2008 Page 5 Consensus could be on horizon Expert panel to create common securities act By ROBeRT TODD Law Times F inance Minister Jim Fla- herty has formed an expert panel tasked with creating a model for a common securities act, and some lawyers familiar with securities regulation are hopeful that — with Flaherty's help — a countrywide consen- sus could be on the horizon. Philip anisman, who was commissioned by the federal government in 1979 to write a proposal for a national securities market law, considers Flaherty's will to make something hap- pen in this area "the strongest to date" on the political side. "The strong recognition in the Canadian financial community and the government's willingness to take the lead are the two major changes over the past decade," says anisman. "The increasing vigour of the demand from the financial community for an ef- ficient and effective national sys- tem, meaning a single regulator," is also a factor, he adds. Flaherty's announcement, co- incidentally, came on the heels of another matter at the On- tario Securities Commission that some commentators considered a failure. The high-profile case involving ex-investment banker andrew Rankin wrapped up with the former RBC Dominion Se- curities executive striking a pre- trial deal and admitting to giv- ing a friend illegal stock market tips. Rankin has paid $250,000 in investigation costs to the com- mission and now faces a lifetime ban from acting as a director or officer of a public company. He also was assessed a 10-year ban on trading securities. The Expert Panel to Review Securities Regulation will be chaired by Tom Hockin, former minister of state for finance and former president of the Invest- ment Funds Institute of Can- ada. Howard Davies, director of the London School of Eco- nomics and former chairman of the U.K.'s Financial Services authority, will serve as a special advisor to the panel. "I am asking the panel to de- velop a model common securi- ties act to create a Cana- dian advantage in global capital markets," says Flaherty in a release an- nouncing appointments to the panel. "This effort will build on positive steps taken in recent years by the full range of partners, including provinces, ter- ritories and regulators, contributions by private sector groups, and inter- national best practice." Flaherty has asked the panel to focus on the fol- lowing "key areas": • The outcomes, prin- ciples, and performance measures needed to pursue a Canadian ad- vantage in global capital markets; • How Canada could best promote and ad- vance proportionate, more principles-based regulation; • How this could facili- tate and be reinforced by better enforcement; • How this regulatory ap- proach could be implement- ed under a passport system or under a model common act with a common securities regulator; and • The transition path, includ- ing key steps and timelines, to effect proposed changes to the content, structure, and enforcement of regulation. anisman says the panel has been given a far broader term of reference than was originally described when Flaherty an- nounced in June 2007 that it would be created. "Given the breadth of their mandate . . . drafting a model act is a major task and I think they have a major job to com- plete within the time frame that's been given them," he says, not- ing that their findings are due by the end of this year. But Hockin tells Law Times that his panel is confident it can get the job done on deadline. "I think intellectually it's enough time, and it will set the stage for completing nego- tiations with the provinces," he says. "It could be that the ne- gotiations aren't done; they can continue after this." If they are able to beat the clock, and with the "clear back- ing" of the federal government this time around, says anisman, "what it will do is put on the table another set of recommen- dations that can be considered toward a national regulator. and I think we have to take that step at some point." But there have been up to five previous sets of recommenda- tions through federal gov- ernment actions, with no results, says anisman. "So, the real question — and ultimately it's a ques- tion of political will — is whether enough provinces will agree to move forward toward a national regula- tor to make it viable. Or whether the federal gov- ernment is willing to take their own initiative if they don't." another factor that could push the initiative forward is the recent de- bate of Canada's ability to regulate adequately with- out a nationwide system, says anisman. The need for interjurisdictional co-op- eration between regulatory regimes and enforcement, and the requirement for international acceptance that Canada's markets are properly regulated, is now clear, he says. The Department of Corporate and Consumer affairs published anis- man's 1979 report, which pro- posed a co-ordinated national regulatory regime, involving the federal government. It included a draft statute. Since that time, there's been a "continuing saga of greater provincial co-ordination of the provincial regimes, usually in response to intimations that the Government of Canada was interested in initiating a move- ment toward a national regula- tor," he says. anisman notes that, since the 1960s, securities regulation in Canada has moved from the cre- ation of national policies, to the creation of the Canadian Securi- ties administrators, to the cur- rent passport system. He adds that the passport system still has not received full support within the industry. Hockin says that, while the panel faces initial roadblocks, "I don't want to pre-judge how people will react to what we do. It could be that they'll have a re- think of their position." "It won't be the same old sto- ry," says Hockin. "It will be some- what of a different bargain." anisman doesn't believe that the creation of a national regu- lator would have an impact on individual prosecutions, such as the OSC case involving Rankin. "what a national regulator may be able to address is inter- jurisdictional enforcement inef- ficiencies," he says. Prof. Christopher Nicholls, who teaches securities law at the University of western Ontario, says the Rankin case will do little to change public perception of the OSC — in either direction. "People who already are con- vinced that securities regulation in Canada isn't good enough will say that this is proof of a prob- lem," says Nicholls. "People who do not agree that it's so serious will say that there are special considerations here. I don't hon- estly believe this will change any- body's mind." 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