Time to Modernize Canada’s Capital Market System

March 05, 2021

Ottawa Journal for the Week of March 05 – March 09, 2021

Globalization has undeniably changed the world we live in. In particular, global financial markets have been transformed by this phenomenon and as a result, have become increasingly competitive. Technology has increased market activity, allowing investors to identify the best returns instantaneously. Much of the world has adapted to this changing environment. However, Canada hasn’t modernized its capital market system, which poses significant risk to investors, businesses, and each of us. It’s time for Canada to have a common securities regulator.

Canada is the only industrialized nation without a common securities regulator. Instead, we have a system that includes 13 regulators and 13 sets of laws and fees. This current system is often viewed as problematic, ineffective, and slow, affecting our personal prosperity, that of business, as well as Canada’s economy as a whole.

Canada is full of different investors. Fifty-five per cent of Canadian households own RRSPs. Approximately half of all Canadians own equities, such as common shares or income trust units. Forty per cent of Canadians own mutual funds. In January 2004, there were 14, 800 active registered retirement plans in Canada, covering 5.6 million Canadians. Canadian investors expect their investments to remain secure and protected.
Aside from investors, our economy needs a regulatory regime that ensures economic integrity and investor protection. Currently, our system is inadequate and calls for action are becoming louder and the arguments for change are compelling.

One argument for change is that regulations in multiple jurisdictions can needlessly delay financings and slow down businesses attempting to grow. Companies that experience these delays may choose to instead find private financing or quickly move to foreign markets, where these obstacles do not exist. Furthermore, the lost opportunities for Canadian businesses translate into lost opportunities for Canadian investors and differential access to investment products from one region to another, which is costly and unfair.

Many provinces are also at a disadvantage under the current system. Currently, all provinces, effectively allow control of the national market by the Ontario Securities Commission, which regulates 83 per cent of Canada’s total listed market capitalization. There is growing opinion which recognizes that without a common securities regulator, the system is unsustainable and undesirable.

The time has come for a common securities regulator in Canada. Such a regulator can: create more investment and jobs, protect investors, save money, and give all regions a real voice. This solution would make the regulation of our markets more responsive and accountable.