The provinces stay in charge

The issuance of uniform national corporate governance rules is a major step forward for the Canadian Securities Administrators (CSA), Canada’s securities regulatory body. The CSA is a voluntary association of 13 provincial and territorial regulators, which draws its funding from members’ operating budgets on a voluntary basis. In recent years, members have taken steps to strengthen the CSA, hoping to refashion it into a regulatory body with nationwide reach. 

Since last year, the CSA has had a permanent secretariat in Montreal, with a secretary general and a legal adviser. It aims to provide uniform securities laws and one-stop regulation by 2006, according to a statement posted on its web site. 

The new corporate governance disclosure rules taking effect this month are part of that campaign. So is a rule issued by the CSA in March 2005 governing corporate governance disclosures by investment funds. Those rules supplant most local continuous disclosure requirements for fund managers. 

Then in April 2005, the CSA – which already operates Sedar, the database for securities information on Canadian companies – launched a new national registration system for securities issuing companies. 

The new registration regime features mutual recognition by provincial regulators. Companies can apply for registration in multiple jurisdictions and deal with only one regulator: the principal regulator. Non-principal jurisdictions will accept the decision of the principal regulator and normally grant registration within five days after the principal regulator. 

All this points to eventual one-stop regulation, as the CSA has promised. But it still falls far short of having a single national regulator like the SEC in the US. In Canada, securities regulation is still firmly in the hands of the provinces and territories. 

‘Mutual recognition does not mean individual regulators are giving up their powers to police laws in their jurisdictions, or even that they give up their right to have different laws,’ says Andrew MacDougall, a partner in the business law department of Osler, Hoskin & Harcourt LLP. ‘These are efforts to harmonize the law.’ 

In December 2003 a federal panel called the Wise Persons Committee issued ‘It’s time’, a report calling for a single regulator to govern the securities market in Canada, and suggesting that this responsibility should reside with the federal government. It argues that Canada’s existing multi-jurisdictional system is complex, costly and burdensome for issuers, making it harder for them to raise funds. 

So far, nothing has come of that idea. Provincial independence has a long tradition in Canada; federalism can be a sore subject. Many Canadians argue that harmonizing regulation is still far from federal regulation, and may not be heading in that direction at all.

‘[Harmonized regulation] is separate from the national regulator debate,’ MacDougall says. ‘I don’t think it is motivated by anything other than this: if you are going to have corporate governance provisions that apply universally, everyone must universally agree to them.’

‘The corporate community in Canada has been asking for a single, federally regulated securities regime, but for political reasons I doubt it will ever happen,’ adds Urmas Soomet, corporate secretary of Dofasco, and president of the Canadian Society of Corporate Secretaries (CSCS). ‘What we have instead is a typical Canadian compromise. It is an unwieldy system but we try to make it work.’