Law Times

Law TiMes • May 10, 2010 FOCUS PAGE 13 Securities lawyers see hope in national regulator Federal proposal 'will make Canada a more attractive place to raise capital' BY DARYL-LYNN CARLSON For Law Times C anada's plans to con- solidate securities gover- nance into one national regulator have generally been hailed as good news by those who work within the industry. In particular, the hope is it will provide consistency by replacing provincial securities regulators with federal oversight while increasing the eff ective- ness of enforcement. In his federal budget this spring, Finance Minister Jim Fla- herty announced the government intends to establish a national regulator within three years. He expects to have a draft of the legislation prepared for release very soon followed by a planned referral to the Supreme Court of Canada for an opinion on the constitutionality of a national se- curities regulator. Alberta and Quebec have also launched their own court actions essentially challenging the federal government's con- stitutional right to usurp their provincial regulators. Subsequently, the govern- ment plans to have its recently established Canadian securities regulator transition offi ce fi nalize work on an administrative tran- sition plan this summer before putting the fi nishing touches on the rules and regulations. "Canada is the only developed country without a single securi- ties regulator, and it is perceived that we don't have very strong en- forcement," says Vanessa Grant, a partner at McCarthy Tétrault LLP who practises corporate fi - nance and advises issuers, inves- tors, and underwriters. Although the 13 provincial regulators have established com- prehensive guidelines and often undertake investigations or prose- cutions of violators and fraudsters under their respective regimes, there can be diffi culties co-or- dinating communications and getting co-operation between the various authorities in cases where the off ence occurred in more than one province, she says. A single regulatory regime will help Canada present its market as one that's progressive in dealing with violations, she adds. "Th e advantage is that Can- ada would be perceived as hav- ing a robust capital market with transparency, uniformity, and consistency, which will lead to more people wanting to invest in Canada because we have a strong, well-regulated market." In fact, the European Union has recently faced calls to estab- lish a regulator that will consoli- date all of the markets in Europe for the same reason that Canada has come under criticism for its piecemeal approach. In preparation of the transi- tion, the federal government es- tablished an expert panel on secu- rities regulation in 2008. Former MP Th omas Hockin, who served as minister of state for fi nance OMSD - 1/2 pg - 4X for LT.indd 1 and is also a former president of the Investment Funds Institute of Canada, chaired the panel. Th e panel's fi nal report was released in January 2009. It in- cluded a draft of a proposed Se- curities Act, which the panel said in a news release would "provide clearer national accountability, reduce overlap and duplication, strengthen enforcement, and bet- ter serve the needs of investors." Hockin noted at the time he released the panel's report that Australia was one of the last developed countries to es- tablish a national regulator and has since signed a mutual rec- ognition agreement with the United States. Linda Fuerst, a partner at Lenc- zner Slaght Royce Smith Giffi n LLP and a former senior investi- gation counsel with the Ontario Securities Commission's enforce- ment branch, was surprised to learn fi rst-hand of Canada's poor reputation internationally for its securities regulation. Prior to joining Lenczner Slaght in 1994, she spent fi ve months on secondment working with the Securities and Exchange Commission in Washington. "Th e perception was that Can- ada was a diffi cult jurisdiction to deal with, not because there wasn't a willingness to co-operate but because of regulatory barriers created by the fact that there are individual securities commissions in each province," she says. Fuerst notes the piecemeal approach in Canada served to curtail eff ective cross-border co- operation, particularly in cases involving investigations and enforcement. In the event the SEC sought information from Canada, for example, it had to make individual requests with each provincial body. Th ere are also slight proce- dural diff erences between the The current system has creat- ed a perception that Canada doesn't have strong enforce- ment, says Vanessa Grant. provincial regulators that can af- fect prosecutions and investiga- tions, especially those involving multiple jurisdictions. Th e OSC, for example, is un- able to share the testimony from someone who was the subject of a formal enforcement investiga- tion with other regulators with- out an order by the commission or the consent of the person who provided it. But in Alberta, a staff member can release the testimony without permission or an order. Such nuanced diff erences can prove to be problematic in complex investigations and pros- ecutions despite the fact that "re- cently there's been an eff ort by jurisdictions to co-ordinate their procedures," Fuerst says. As a result, she hopes the fed- eral proposal won't meet signifi - cant opposition or face delay by the court challenges launched by Alberta and Quebec. "Investor confi dence, regu- latory effi ciency, and reducing the cost for issuers are the main reasons we need a single regula- tor in Canada, and it will make Canada a more attractive place to raise capital." LT The Ontario Municipal Service Directory: A Comprehensive Guide for Real Estate Professionals, 2010 All the municipal services information you need for real estate searches under one cover This handy resource helps you process your real estate transactions more efficiently, saving you time and energy. Published annually, The Ontario Municipal Service Directory: A Comprehensive Guide for Real Estate Professionals, 2010 gives you up-to-date and easily accessible municipal contact information. 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• Cover
• Plaintiff Rights
• Dangerous Conflicts
• Focus On Securities Law