Canada is the only major industrialized nation without a single national securities regulator. That may change—to an extent—in 2015.
Canada's federal government announced last week that it would create a national securities watchdog, but with a twist: It will be a "cooperative" agency that will cover only two of its 10 provinces.
The as-yet-unnamed agency will replace the Ontario Securities Commission and British Columbia Securities Commission. The other eight provinces and three territories will retain their local securities regulators, although Canadian Finance Minister Jim Flaherty said he hoped that other provinces would sign on shortly.
The new regulator "represents the best of what can be achieved when a shared responsibility becomes a mutual goal," he said.
Ontario and British Columbia account for about two-thirds of Canada's capital markets activities and just over half of its population.
The decision to create a hybrid, partial national regulator follows a Supreme Court of Canada ruling in 2011 that barred Ottawa from imposing a national regulator. And the current plan may yet meet the same fate, with Québec, along with Alberta the strongest opponent to the plan, threatening a legal challenge.
"We will ask the Justice Ministry for a legal opinion to analyze the proposal that was announced this morning, and we will not hesitate to go to court," Alexandre Cloutier, Québec's minister for intergovernmental affairs.
The new agency will be based in Toronto, Canada's largest city and its financial capital. Ottawa has promised to make up any losses that Ontario and British Columbia suffer from the disappearance of fees their regulators currently collect. It is set to begin operations in 2015.
The Canadian government hopes that the plan will blunt criticism, including that of the International Monetary Fund, that its decentralized regulatory system opens the door to white-collar crime.