Quebec-Ontario Relations: A Shared Destiny?

5. “Ultimate Fighting,” Canadian Style

5. “uLTImATE fIghTIng,” CAnADIAn sTyLE The Battle surrounding the Creation of a national securities Commission IAn RoBERgE The regulation of the financial services sector is inherently political, especially in Canada . The regulation of financial markets, as per most policy fields in Canada, is of divided jurisdiction . The federal government is responsible for chartered banks and parts of the insurance industry . Provinces are responsible for the regulation of the securities market (though this is evolving, as is discussed in this chapter), parts of the insurance industry, cooperative banking, and trusts . Globalization, market developments, and the evolution of the regulatory environment have brought about the desegmentation of financial services sector industries, further blurring the lines of jurisdictional authority . Coleman (2002) suggests that the desegmentation of markets has led to a centralization of authority, strengthening the hand of the federal government . There has been a long-standing debate in Canada about the need to create a national securities commission, going back to the Porter Commission in 1964 which first made the recommendation . There have been four major attempts to foster the creation of a national regulator since the turn of the century . In January 2009 the Expert Panel on Securities Regulation, put together by federal Minister of Finance Jim Flaherty, released its final report in which it recommended the creation of a national securities commission . The panel suggested that the federal government move forward on the project with willing provinces . In response, Minister Flaherty 100 Quebec–ontario Relations –A shared Destiny? established the Canadian Securities Regulator Transition Office to assist in writing federal securities legislation and in working out organizational and administrative matters . The federal government presented the Canadian Securities Act in May 2010, referring the proposed legislation to the Supreme Court of Canada to assess its constitutionality . Quebec and Alberta are challenging the legislation through their respective courts of appeal . At the time of writing, the federal government still expects to have a fully functioning system in place by 2012 . At the provincial level, there are two camps on this issue, one led by Ontario and one led by Quebec, with support from Alberta and Manitoba . Ontario has strongly lobbied in recent years for the creation of a national securities commission . Proponents of a national regulator model suggest that Canada’s regulatory infrastructure has long been outdated and inefficient, impeding the growth of Canadian securities markets . They also argue that the federal government is within its right to pursue such a project as part of the trade and commerce clause of the Canadian constitution . In the past, the federal government has, however , hesitated to act for fear, among other considerations, of offending Quebec sentiments . For Quebec and other opponents, provincial jurisdiction over the securities industry allows the regulator to better respond to local needs while also fostering regulatory innovation . They argue that securities regulation falls under contract law and is a provincial responsibility . This chapter’s objective is to go beyond the arguments for and against the creation of a national securities commission . The chapter is to focus on the political dynamics, the forces, and the actors at play in this policy field . How have the varying perspectives of Canadian federalism played themselves out in the debate about a national securities regulator? What has the four-decades-old battle taught us about the practice of federalism in Canada? What has it told us about Ontario– Quebec relations? In this chapter, we argue that Ontario and Quebec have distinct policy preferences based on each actor’s specific interests as they pertain to the creation of a national securities regulator . For instance, the Ontario government seeks to promote Toronto as Canada’s financial capital; the Quebec government is trying to safeguard Montreal as the financial and economic engine of the province . Each province, in turn, has opted for different models of regulatory competition in order to promote their selected policy option . Ontario favours processes of competitive federalism, where federal policy decisions can be imposed to reduce negative externalities . From this perspective , Canada’s position as the only major state without a national regulator inflicts unnecessary costs on the country’s securities markets . The creation of a national securities commission serves as the only 5 . “ultimate fighting,” Canadian style 101 viable policy option to correct the distortion . Quebec, on the other hand, supports processes of reflexive harmonization, in which units work together towards an acceptable compromise . The adoption of the passport model, the...