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PP RUEHGA RUEHHA RUEHMT RUEHQU RUEHVC
DE RUEHON #0147/01 1811728
ZNR UUUUU ZZH
P 301728Z JUN 09
FM AMCONSUL TORONTO
TO RUEHC/SECSTATE WASHDC PRIORITY 2863
INFO RUCNCAN/ALL CANADIAN POSTS COLLECTIVE
RUEHNY/AMEMBASSY OSLO 0060
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHINGTON DC

UNCLAS SECTION 01 OF 02 TORONTO 000147 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR WHA/EPSC; WHA/CAN 
TREASURY FOR INTERNATIONAL AFFAIRS (NEPHEW) 
COMMERCE FOR 4320/ITA/MAC/WH/ONIA (WORD) 
DEPARTMENT PASS TO SEC 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINT EINV PGOV CA
SUBJECT:  Canada Takes First Step Toward National Securities 
Regulator 
 
Ref: 07 Toronto 160 
 
Sensitive But Unclassified -- protect accordingly. 
 
This is a joint Embassy Ottawa-ConGen Toronto message. 
 
¶1. (SBU) Summary: Canada has taken the first step toward the 
creation of a national securities regulator with the creation of the 
Canadian Securities Transition Office (CSTC).  The CSTC will lead 
the effort to establish a national regulator (e.g., addressing 
provincial concerns) and help the federal government develop 
appropriate legislation.  The Ontario Securities Commission (OSC) - 
which oversees Canada's largest securities market - supports the 
creation of a national securities regulator, while the provinces of 
Alberta, Quebec, and Manitoba are currently opposed.  The CSTC and 
the federal government will need to overcome this provincial 
opposition before a single national securities regulator can be 
created. End Summary. 
 
----------------- 
Transition Office 
----------------- 
 
¶2. (SBU) Canada took the first step towards implementing a national 
securities regulator on June 22 when federal Finance Minister Jim 
Flaherty launched the Canadian Securities Transition Office.  Canada 
is the only G-7 country without a national regulator.  The Office 
will act as intermediary between Canada's federal government and the 
thirteen provincial and territorial securities regulators, and help 
develop national securities legislation. 
 
--------------------- 
Transition Leadership 
--------------------- 
 
¶3. (SBU) The transition team will be led by Doug Hyndman, current 
chair of the British Columbia Securities Commission (BCSC), and 
Ontario's Bryan Davies, who will be vice-chair.  British Columbia 
and a number of other provinces had been opposed to a national 
regulator over fears that a single regulatory body would be 
dominated by Ontario, home to Canada's largest stock exchange and 
the third largest in North America -- the Toronto Stock Exchange 
(TSX) (reftel).  Hyndman attributes British Columbia's newfound 
support to the influence of a "core group of provinces" that chose 
to move in the direction of a single regulator.  Hyndman is 
well-respected by his peers, considered credible, and will likely 
strive to protect his region's interests. 
 
----------------- 
Ontario's Support 
----------------- 
 
¶4. (SBU) An Ontario Securities Commission (OSC) official told ConGen 
Toronto that the OSC was pleased with Minister Flaherty's move 
toward a national securities regulator, which the OSC has long 
supported.  (In the GOC's 2009 budget, Flaherty had allocated C$154 
million to set up a national regulator by 2010.)  Though the OSC is 
one of Canada's strongest supporters of a single regulator, our 
contact stated that the OSC is not leading the Transition Office 
because it wants to avoid criticism that the Office is too 
Ontario-centric.  However, the OSC will participate in a yet-to-be 
announced advisory council and transition team.  While the site of a 
possible national regulator is up for negotiation - perhaps in 
exchange for buy-in from several reluctant regional regulators - it 
almost certainly will have a significant presence in Toronto. 
 
-------------------------------------- 
Provincial Consequences and Opposition 
-------------------------------------- 
 
¶5. (SBU) Although regional securities regulators have largely 
harmonized their rules, there are redundant fees, costs, and 
paperwork arising from Canada's thirteen provincial and territorial 
securities regulators.  Provincial participation in the new 
transitional arrangement will be voluntary, and it is unclear 
whether provinces choosing to join a national regulatory program 
will have to repeal their own provincial securities legislation. 
(Note: In Canada, property and civil rights fall under provincial 
jurisdiction, while trade and commerce fall under federal 
jurisdiction; some powers overlap.)  The C$154 million earmarked to 
set up the national body would likely be used to compensate smaller 
jurisdictions for lost revenues generated from market and settlement 
 
TORONTO 00000147  002 OF 002 
 
 
fees, according to our OSC contact.  (The governments of Ontario, 
Quebec, Alberta, and British Columbia do not earn revenues from 
their provinces' securities regulators.) 
 
¶6. (U) Both Alberta and Quebec oppose a single national regulator, 
and have threatened to take the issue to court.  Alberta Premier Ed 
Stelmach objects because a national regulator would not - according 
to Stelmach - understand the operations of companies involved in 
high-risk petroleum exploration projects - a mainstay of his 
province's economy.  Quebec Premier Jean Charest has said that he 
opposes a single regulator because securities regulation is a 
provincial responsibility under the Canadian Constitution. 
 
------------- 
Hockin Report 
------------- 
 
¶7. (SBU) The Harper Government is basing its support for a single 
regulator on a recent report on securities regulation prepared by a 
panel of Canada's business leaders (the "Hockin Report").  The 
report states that a single securities regulator would: 
 
-- improve accountability between regulators and governments; 
-- create consistent securities regulation and enforcement across 
Canada; 
-- reduce the compliance frustrations and costs of small and 
medium-sized firms seeking to expand beyond their home province; 
-- overcome perceptions among foreign would-be investors of a 
fragmented Canadian regulatory system; 
-- enhance Canada's attractiveness as a destination for both 
domestic and foreign investment; and 
-- enable Canada to speak with one voice at the International 
Organization of Securities Commissions and other international 
forums. 
 
¶8. (SBU) Comment:  From a U.S. perspective, a single Canadian 
regulator would make it easier for American investors to do business 
in Canada, provide a single point of contact for U.S. securities 
regulators, and make Canada a more effective ally at international 
financial forums.  Moreover, the prospect of improved securities 
regulation in Canada could help improve the overall health of the 
international financial system.  The Hockin Report also highlighted 
concerns about laxity in Canadian securities enforcement. 
Interested parties consulted by the Hockin panel indicated that U.S. 
law enforcement bodies appear to have greater success in prosecuting 
Canadians who commit capital markets crime than Canadian 
authorities.  One manager of a large Canadian pension fund stated 
that his fund has a policy of purchasing Canadian stock on U.S. 
stock exchanges in order to have the benefit of U.S. enforcement and 
redress. 
 
¶9. (SBU) Comment (cont.): In the mid-1990s, Canada tried, but failed 
to establish a national regulator.  A major roadblock at the time 
was that the OSC was not self-funded (since changed), and Ontario 
insisted on being compensated millions of dollars to transfer its 
securities oversight to the federal government.  Now, Ontario 
supports the GOC's efforts with an expectation that it will emerge 
as the dominant player in any single securities regulator.  While 
there is non-partisan support at the federal level for a national 
regulator, its success depends largely on convincing Alberta, 
Manitoba, and Quebec to support a single regulator.  It remains to 
be seen if the continued volatility of global financial markets and 
the inherent inefficiencies of a splintered oversight system will 
help push a national securities regulator past a group of reluctant, 
self-interested provincial capital markets. 
 
NAY