National securities regulator would harm Quebec economy: study

Date: Tuesday, May 11, 2010
Author: Investment Executive

A group of business and civic leaders in Quebec is being formed to oppose the federal government’s plan to try and form a single national securities regulator.

The group, which includes such heavy hitters in the province’s business community as Caisse de dépôt et placement du Québec, Fonds de solidarité FTQ, Quebecor, and Groupe Jean Coutu, along with various business groups, and civic organizations, says that it opposes the plan for a single regulator because it would likely hurt Quebec’s financial sector, and its economy.

The head of the provincial regulator, the Autorité des marchés financiers and chair of the Canadian Securities Administrators, Jean St-Gelais, made that same argument in a speech in Montreal a couple of weeks ago.

On Monday, the AMF released the results of a study carried out by the consultancy SECOR, which finds that the creation of a single securities commission would harm Quebec to the extent that local authorities “lose their decision-making power and influence over financial regulatory matters.”

It finds that a single regulator would not necessarily be as open and sensitive to the challenges facing Quebec’s financial sector; that it would not necessarily act as quickly and directly in support of Quebec corporate issuers; and that it would mean both a loss of high-level jobs in the province, and a shift of expertise out of Quebec, including the regulator’s employees, and external experts.

“It is not possible at this stage to quantify these impacts given the many unknowns as to the nature, distribution and location of the activities of a Canada-wide securities commission,” it concludes.

“The Minister of Finance of Canada must note that Quebec does not endorse his plan. Opposition is growing and a genuine movement is taking shape to oppose the federal will to move forward at all costs,” said the province’s finance minister, Raymond Bachand.

Federal finance minister Jim Flaherty has promised that a draft securities act will be released in the next few weeks, and a transition plan for the new body is scheduled to be released by the summer.

In the meantime, the effort is likely to face continued opposition in Quebec and Alberta. “Beyond the job losses that such a project may cause, we fear a major shift of decision-making positions and expertise out of Québec. Montréal, as a financial centre, and Quebec would be weakened,” said the coalition’s spokesperson, Françoise Bertrand, president of the Fédération des chambres de commerce du Québec.

And, St-Gelais stressed the role of the AMF in overseeing and supporting the development of the derivatives market in Montreal. “This market represents hundreds of highly skilled jobs in Montréal. Maintaining and developing this niche of the financial sector in Montréal is a priority for us. The Authority wants to continue fostering the economic development of Québec while overseeing the financial markets,” he said.

Bachand said that the group is not against a pan-Canadian system, but that it is opposed to a centralized system. And, he continued to stress that securities regulation falls under provincial jurisdiction -- a question that the Supreme Court of Canada will likely have to handle, as the federal government’s effort is being actively challenged by both Quebec and Alberta.

“The securities regulation system in place in Canada is ranked among the world’s best by several organizations including the OECD, the World Bank and International Monetary Fund. A massive and unprecedented collaboration by the participating provinces and territories as well as their regulators has resulted in the establishment of a one-stop mechanism in Canada while preserving the ability of each province and territory to decide its own policies and give its investors the best protection possible,” Bachand added.