Published by Senator Céline Hervieux-Payette on 22 January 2009
The Flaherty-Hockin report on the creation of a national securities commission released this week is a political nod to Toronto Inc. and does not provide any additional valid arguments.
It is inconceivable to me that the prestigious Globe and Mail, in an editorial on January 14, argued that a single commission would promote national unity on the economy. One would think that the distinct society of Quebec has a much more rigorous concept of national unity, one which above all is more consistent with the Constitution of Canada and therefore less commercial.
Strangely, the former chairman of the Ontario commission, Mr. Waitzer, who was opposed to a single commission, has reversed his position and now claims that the crisis in the financial markets would have been better managed by a national commission. He endorses the Flaherty-Hockin report, which suggests that a sole authority would provide greater security to investors. Yet Mr. Waitzer refers to the regulatory failure of national commissions such as the ones in the United States and the United Kingdom!
Moreover, national organizations such as the Bank of Canada, the Superintendent of Financial Institutions and the Department of Finance, which all fall under the responsibility of the Minister of Finance, did not respond to the crisis in the financial markets until last fall!
The real reasons for a national commission are not mentioned in the report.
Furthermore, there is some evidence against the conclusion, such as the recognition of distinct markets in the main provinces issuing securities (the financial sector in Ontario, the hydrocarbon sector in Alberta, manufacturing in Quebec, mining in British Columbia). This specialization provides ample justification for the position of Quebec and Alberta, which are suspicious of centralizing the commission at the expense of market knowledge.
As to small investors, the provinces can easily adopt simplified rules. No one maintains that a national authority would serve them better. At this point, Mr. Flaherty should focus on improving his policies to help small and medium-sized businesses by adopting measures in his budget that would make risk capital available to them, something they are sorely lacking.
Another major concern stemming from the report is the balkanization of the financial sector, which the Harper government appears to welcome. There is reference to gradual implementation, with provinces having the option of transferring their jurisdiction to the federal government. Since most provinces do not issue a high volume of securities, the creation of a national commission would not have a strong impact on them. This is also why the market is concentrated in four provinces. Alberta and Quebec reject the conclusions of the Flaherty-Hockin report for valid reasons, while Ontario and British Columbia support the same conclusions for their own reasons.
As a member of the Senate Standing Committee on Banking and Commerce and having been certified by the Investment Dealers Association of Canada, I am aghast to see Minister Flaherty expend so much energy to solve a problem that does not even exist. Our committee could study the real issue in business financing, namely, the shortage of risk capital for small and medium-sized businesses. Tax credits for research are not enough to bring them to the next level of maturity, which would enable them to attack national and international markets.
The Honourable Céline Hervieux-Payette, PC
Senator