Canada's Securities Plan C (aka Flaherty's Folly): After Defeat of National Regulator, Failure of Cooperative Federal-Provincial Approach, Harper Settles on Skimmed Down National Securities Regulator

By Keith Edmund White
Editor-in-Chief

There's nothing like talking securities regulation to get the morning juices flowing!

But, then again, seeing as increasingly more Canadians and Americans mood follows market swings (FYI-this is not a good life plan), perhaps it will?

And, anyway, it gives you the opportunity to see just how weird Canada is.

Out of the world's major economies, Canada is the only nation that does not have a federal securities regulator.  Instead, it leaves the regulation of financial trading instruments--whether they be stocks, bonds, the markets they are traded in, or dreaded derivatives--to provinces.

It's a quirk of history and federalism, and one that the Harper government had been assiduously trying to change.  

Harper tasked Canadian Finance Minister Jim Flaherty with creating a national regulator. 

First, Flaherty spent years developing, vetting, and constitutionally scrutinizing a plan for a national securities regulator.

Result:  the Canadian Supreme Court (understandably, in my opinion) torpedoed it.

Then Flaherty then spent a about a year trying to get a joint provincial-federal substitute. 

Well, the verdict's in:  Flaherty's folly is over.

Reuters reports on Canada's Securities Plan C:  Give up; federalize the securities slice they can; move on. 

Canada is pushing ahead with plans to create a new but watered-down version of a national securities regulator as its campaign to create a more powerful watchdog like the U.S. Securities and Exchange Commission appears to be headed toward failure.

The Conservative government's new plan would bypass the country's powerful provinces and focus on detecting market risk, sources familiar with the process told Reuters. This alternative, however, is unlikely to impress investors and the financial industry given its limited powers and the potential for duplication and more bureaucracy, industry officials say.

Ottawa has tried for decades to replace a patchwork of 13 provincial regulators with a single agency more in tune with today's globalized markets, arguing it would reduce costs and give it more clout to deal with the cross-border effects of reforms like the U.S. Volcker Rule.

For background on Canada's unique approach to securities regulation, and the failure Canadian legislation aiming to create an aggressive national regulator, read Securitizing Canadian Federalism:  The Supreme Court of Canada and the Proposed Canadian Securities Reform Act [2011]. 
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