Fractured Securities Regulation Burdens Every Canadian

Article excerpt

When it comes to regulating capital markets, Canada is 13 different countries with 13 different sets of regulations and regulators, each riding off in all directions. The result is cumbersome, slow and costly. Companies raising capital can see financing costs gobble up as much as 50 cents of every dollar from the sale of shares. At a time of intense global competition, fractured regulation impairs Canada's capital markets, which in the 21st century are as vital to the country's future as railway building was in the 19th. The economic future of every Canadian demands that governments resolve the political hurdles that stand in the way of a national securities market that also accommodates local and regional concerns. Speech to the Canadian Club of Toronto, March 18, 2002.

The Canadian Club is this country's premiere forum for identifying issues of national concern and suggesting solutions. Today, in keeping with that tradition, I have some proposals to make for addressing a national problem of growing importance.

As many of you know, I have been speaking out since last summer about our fragmented system of national securities regulation. This culminated in a national symposium 10 days ago, jointly sponsored by the Capital Markets Institute at the University of Toronto and the Canadian Foundation for Investor Education, which was established by the TSE and CDNX. The symposium drew together some of the foremost experts in the world to look at how we regulate our securities industry and how others regulate theirs.

I'll return in a few moments to what we achieved and where it can lead us. But first, it is useful to consider why it matters, not simply as a concern for companies that want to list on a stock exchange or already have, but as a matter fundamental to every Canadian's future.

Most people, not surprisingly, do not often place securities regulation among the usual suspects when they look for what makes a country strong or weak.

Until the 1970s we were, as we had been for more than a century, a nation of savers and our most important financial infrastructure was our national banking system. This served us well. Through our savings and our credit, we had been able to create the sinews of the modern, trans-continental industrial economy that we've become. And we had created the connections that allowed us to share in a great country's prosperity, in its hopes, its fears, its crises and its triumphs -- as we shared that glorious Sunday three weeks ago when as one country we watched the best hockey game of our lives.

But while we were transforming the country, the country was transforming us. No longer a nation of savers, we have become a nation of investors. No longer satisfied with country building, we want to own a piece of what we're building. And now, directly or indirectly, one adult Canadian in two does own a piece of it, and the proportion of Canadians who own shares in Canada will almost certainly rise in the years ahead.

But not only have we been transformed, our needs have been transformed. In the course of a single generation, the local matter of securities regulation has become an essential part of Canada's nation-building infrastructure.

That is because the effectiveness of regulation -- especially its effectiveness in instilling confidence among investors--underpins the health of our capital markets. Our capital markets are now our primary interface with the world and its markets, and the key to our future as a strong, competitive country in a global economy. Our capital markets are to nation building in the 21st century what railroads were to the 19th. And our system of securities regulation is the signal that keeps everything on the rails.

Let me explain why I say capital markets are the railroads of the 21st century.

A little more than a year ago, Charles Baillie, CEO of TD Financial Group, stood before this audience and challenged Canadians. …