Queen's Professor Counters Finance Minister's Bid for National Securities Regulator

    'Give up On National Regulator - National Securities Enforcement Agency
    More Achievable'

    KINGSTON, ON, June 4 /CNW/ - Last week, Finance Minister Jim Flaherty
with great fanfare once again attempted to muster enthusiasm for a Canada-wide
national securities regulator among his provincial counterparts, with little
in the way of results. Maybe now is the time to look at more creative
alternatives, suggests Steve Salterio, Professor of Business and Director of
the CA-Queen's Centre for Governance.
    "If we can't achieve the international norm of having a single national
securities regulator, we need to leave the various provincial regulators in
place and move the enforcement part into a single national securities
enforcement body," said Salterio.
    Professor Salterio's proposed approach would allow all jurisdictions to
keep their prized involvement in setting the regulations but the interests of
investors would be put front and centre where they belong in enforcement.
    What's the difference between a regulatory and an enforcement
organization? A national securities enforcement body would be a focused
organization with the sole mandate to investigate and enforce the various
multilateral and national securities laws and regulations that are in effect
across Canada. The power to make laws and regulations would remain where it
has been for the last hundred years, with the provincial government and their
securities commissions. Therefore, there is no loss of sovereignty or
jurisdiction at the provincial level but enforcement makes a quantum leap
    "After all, as we wait for the sixth committee in five years - 
Mr. Flaherty's recently appointed Hockin expert panel - to weigh in on what is
becoming a quest for the 'holy grail', the International Monetary Fund (IMF)
characterizes Canada as a country where the enforcement of securities laws is
'still in need of considerable improvement'. This can not be allowed to
continue. The finance ministers' meeting is yet another sign that there is
little hope that such national securities commission is any closer to coming
into being."

    Salterio lists these advantages to having a national securities
enforcement body:

    -   Focus: The body would only focus on investigation and enforcement of
        regulations leaving day-to-day administration and adjudications of
        securities regulations at the provincial level. This also ends the
        appearance of conflict when Securities Commissioners have the
        combined roles as regulators, police, prosecutors and judges.
    -   Expertise and capacity development: As an elite enforcement unit with
        national level responsibilities, the organization would be better
        placed to attract the best and the brightest lawyers and accountants.
    -   Specialized prosecution support teams: Research shows that there has
        been relatively little success in securities law prosecution in
        Canada. This has been attributed in part to the need to educate
        judges about complex technical business and accounting matters. Crown
        prosecutors need support from dedicated teams of lawyers and
        accountants to ensure that they are able to clearly explain these
        matters to judges in a manner that makes sense.
    -   Economies of scale in enforcement: Research in other countries
        suggests that there are economies of scale from enforcement. The
        larger the enforcement unit, the lower the cost per investigation.

    "While there are many advantages to such an enforcement agency it is
certainly not a cure for what ails the Canadian securities markets," said
Salterio. "For example, it wouldn't deal with the problem of lowest common
denominator regulation that occurs in Canada due to the need to negotiate,
among thirteen provincial and territorial regulators, the national and
multilateral securities regulations.
    "However, a well-resourced national enforcement body would be a huge step
forward for the protection of investors in Canadian capital markets in both
appearance and in reality. While others dream of perfection and national
securities regulators, the international reputation of our capital markets
require that we should be a tad more Canadian and be more realistic: let's
create an enforcement agency that has some real teeth. And let's do it soon."

    Professor Steven Salterio is a PricewaterhouseCoopers/Tom O'Neill Faculty
Research Fellow in Accounting and Director of the CA-Queen's Centre for
Governance. He is also the 2008 recipient of the Haim Falk Award for
Distinguished Contribution to Accounting Thought.

    About the CA-Queen's Centre for Governance at Queen's School of Business

    CA-Queen's Centre for Governance (business.queensu.ca/centres/CA-QCG/)
goal is to raise the bar on Canadian governance research and convey the
implications of the research to fellow academics, students and the public at
large. Situated at Queen's School of Business (business.queensu.ca), one of
the world's premier business schools, the Centre conducts cutting edge basic
and applied research on corporate governance issues dealing with such issues
as fraud prevention through better internal control and improving Canadian
securities regulation. The Centre is also actively involved in the not for
profit sector through the associated Fundamental of Governance for Boards of
municipal, provincial and federal agencies, and not-for-profit organizations
executive development course, case writing, applied research and now the
Voluntary Sector Reporting Awards.

For further information:

For further information: To book an interview with Professor Salterio,
please contact: Lisa Brophy-Gervais, Queen's School of Business, (613)
533-2269, lbg@business.queensu.ca

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