Compromise possible on securities regulator

Holdout provinces will eventually feel compelled to join a national securities regulator if the Supreme Court rules Ottawa has the authority to create one, a former Quebec intergovernmental affairs minister says.

MONTREAL — Holdout provinces will eventually feel compelled to join a national securities regulator if the Supreme Court rules Ottawa has the authority to create one, a former Quebec intergovernmental affairs minister says.

“If ever Quebec loses the case then it will probably try to maintain its own system but in my view after a certain period of time it is something that will not be feasible,” said Benoit Pelletier, a University of Ottawa law professor.

Justice Minister Rob Nicholson said Friday the government will ask the top court if Ottawa can create a national securities regulator to govern the sector that has been historically regulated at the provincial level.

The request comes as the federal government works on a voluntary scheme that includes the provinces and territories except Quebec, Alberta and Manitoba.

Pelletier said provincial governments would feel the “de facto pressure of the markets” and those involved in the field of securities to join a national regulator.

A compromise to attract Quebec’s participation “would be reachable under a few conditions that Quebec would ask for in order to save its own autonomy,” he added.

Among these could be for Quebec to retain some powers and for its role to be defined in a new pan-Canadian securities regulator, Pelletier said in an interview.

He said the federal government’s decision to see the opinion of the country’s highest court gives it a strategic advantage because it allows Ottawa to pose questions to frame its case.

The former politician, who supports Quebec’s arguments, said he expects the Quebec government will either withdraw its own request seeking the opinion of the Quebec Court of Appeal or that court, which is the highest in the province, will refuse to hear the case.

But Quebec Premier Jean Charest said Monday that Ottawa’s decision to seek the top court’s opinion doesn’t change the province’s position.

“It’s the jurisdiction of the Quebec government and we will defend it,” he told reporters in Lachute, Que.

Charest rejected suggestions that a national regulator would prevent fraud’s like Norbourg that caused investors to lose more than $100 million.

He pointed to the United States, where Bernie Madoff ran a multibillion-dollar Ponzi scheme even with a national regulator.

Ottawa said it has legal opinions backing its claim to also have authority under its trade and commerce power.

University of Toronto law professor Anita Anand agrees that the federal government has jurisdiction.

“The issue is whether the federal government also has jurisdiction under its trade and commerce power, maybe not to the exclusion of the provinces but in addition to them,” she said in an interview.

Critics of the current system say it’s overly complex, inefficient and a barrier to foreign investment in Canada, while supporters say the 13 provincial and territorial regulators are responsive to regional needs and working on becoming more co-ordinated among themselves without federal involvement.

However Thomas Mulcair, federal NDP finance critic, said the move by Ottawa is “a frontal attack by the federal government to try and take over one of the key areas, which is the control of markets and securities. And it is going to be resisted fiercely.”

Canadian Bankers Association chief executive Nancy Hughes Anthony said Canada’s regulatory system in all respects except securities regulation, allowed the country to weather the current economic turmoil.

“As the global regulatory community considers reforms to reduce overall financial risks, Canada’s structure of securities regulation stands out as a weak spot,” she said.

Brendan Caldwell, president and CEO of Caldwell Investment Management, applauded Ottawa for exercising leadership on an issue that has dragged on for decades.

“If everybody is going to adopt the same regulations anyway, then everyone should be the same in name as well as in nature,” he said.

Some observers have suggested that if the court rules in favour of Ottawa, it could embolden Quebec separatists who would argue the federal system doesn’t protect the province’s rights.

But Pelletier said there would be fewer political consequences than if Ottawa proceeded without first seeking a ruling from the Supreme Court.

“The fact that it decided to ask the court for an opinion in my view is something that is fair,” he said.

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