EDITORIAL PAGE — Western securities commissions forge ties — Two heads better than one

One needn’t peer into a crystal ball to know that, despite well-Meaning efforts, Canada is not likely to have a national securities commission governing the conduct of public companies and the investment community on the country’s stock exchanges. At least not any time soon.

Too many forces are working against the idea — the two most powerful being politics and human nature. The western exchanges are not particularly keen on the idea of eastern regulators dominating the agenda and overlooking issues specific to their more speculative market niche. This reflects a growing sentiment that the west has come of age and should manage more (not fewer) of its own affairs — a view which spills over into political life (as witnessed by the recent federal election).

Furthermore, the idea of a national commission will never fly in Quebec, as long as some politicians in that province continue to keep alive their separatist aspirations.

Despite these prickly sensitivities, the fact remains that all securities commissions are under the gun to increase investor protection. Salting scams, namely Timbuktu and Bre-X Minerals, have left investors angry and frustrated and seeking legal help to recoup financial losses from the perpetrators . . .

as well as from any deep pockets within their sights. Angry investors don’t much care about politics. They want accountability and reforms, and they want them now.

Fortunately, securities commissions across the country are undergoing structural changes which should strengthen their effectiveness and, in some cases, improve their ability to have common rules and procedures.

Late last year, the British Columbia and Alberta commissions signed an accord which committed them to increased consistency on policy development, regulatory initiatives, enforcement and investor education.

A joint operations committee was set up, and already nine priority areas have been identified for increased cooperation. One of these, the idea of single jurisdiction review applied to prospectus filings, is expected to reduce duplication of effort for both commissions.

Officials now routinely attend each other’s commission meetings, and there are regular staff exchanges which improve communication and co-ordination of policy development.

A common database is being set up to provide each jurisdiction with electronic access to the decisions of the other commission. This provision should prevent the bad apples from rolling to one exchange from the other as easily as they have in the past.

The two commissions are looking at increased use of reciprocal enforcement orders, to the extent permitted by law. They believe the expectation of sanctions in more than one province will be an incentive for companies to comply with legislation.

Other areas identified for co-operative efforts include offshore distributions, escrow requirements, joint industry and investor education programs, and information systems development.

Meanwhile, the Ontario and Quebec securities commissions are poised for fundamental changes that should render them more effective and relevant.

These commissions are about to become self-funding and independent of their respective provincial governments, which will enable them to increase staff and cut fees paid by the industry. As it stands, they deliver to government coffers millions of dollars representing the difference between the fees they collect and their budgets.

The Bre-X scandal has been a wakeup call for securities regulators across the land. The structural changes under way across the country are positive for both industry and investors. Moreover, they should help Canadian exchanges remain important centres for mineral investment worldwide.

Investors don’t much care about politics. They want accountability and reforms, and they want them now.