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Finance New Brunswick Securities Commission boss doubts national organization would be as effective

The head of the New Brunswick Securities Commission says the interests of the province's investors are better served by his body than they would be by a proposed national regulator.

Donne Smith, chairman and CEO of the provincial regulatory body, told the Telegraph-Journal's editorial board he doubts a national organization would be as effective in achieving the provincial commission's two main goals: to protect investors and to foster fair and efficient capital markets.

In January, federal Finance Minister Jim Flaherty said during his budget speech that Ottawa would introduce legislation this year that would lead to the creation of a single national securities regulator, replacing provincial bodies. Regulation is a provincial responsibility and the minister said participation would be voluntary.

Flaherty's announcement closely followed the release of a report by a panel headed by Tom Hockin - a former cabinet minister under Brian Mulroney. The report recommended the establishment of a national organization to oversee the financial markets.

Smith said the Hockin report is flawed.

"You don't have to look at it too closely to realize that they're proposing no office in Atlantic Canada," Smith said. "From our perspective, the issue is not so much the preservation of the New Brunswick Securities Commission, it's the preservation of the work that needs to be done and that we are doing in New Brunswick.

"We would ask - who's going to do that work? How is it going to get done when you have an office in Ottawa or Toronto? We're concentrating on investor protection. How does somebody in Caraquet contact somebody in Toronto and ask them to deal with and understand the issues that he or she is facing in rural New Brunswick."

Smith said many observers also view the move as a political power grab aimed at concentrating more power in central Canada.

"Ontario is the largest jurisdiction. Most of the registrants' head offices are in Toronto," he said. "The stock exchange is in Toronto. They wish to preserve that control, that presence. Managing money is a big business and it's centred in Toronto. However, a lot of the smaller issuers are not in Ontario. You have oil, gas and mining in British Columbia and in Alberta.

"Mr. Flaherty, the current minister of finance in Ottawa, was the minister of finance in Ontario and he's speaking to an Ontario constituency. That's one of the main reasons, in my view, why he continues to push (for a national body) - despite the fact that some of the significant provinces are opposed to it."

Governments in Alberta and Quebec were quick to voice their opposition to the proposal. The New Brunswick government did not completely rule out endorsing a national concept.

"(Justice and Consumer Affairs Minister T.J. Burke) said in January that the government is satisfied with the current system and it supports the securities commission," Smith said. "(Burke) said if there was a change, he wanted to make sure that there was a viable presence in New Brunswick."

Smith said it's important for regulators to have an ear close to the ground, something that would be difficult if there is no office in Atlantic Canada. He's also concerned one central body would focus too much on the big-ticket offences.

"I think it's fair to say that the type of securities fraud that we deal with, which is boiler rooms, unsuitable trading, inappropriate activities - those are lower on the interest scale of someone in Ontario who might be dealing with issues such as insider trading and corporate abuses.

"When you look at the purpose of a securities regulator, which essentially is to protect the investors, it's consumer regulation and traditionally those closest to the consumers do a better job than those who are far away."

Smith said history shows service to Atlantic Canadians generally suffers when Ottawa moves offices from the region.

"That's the weakness in the federal argument - that they can continue to do the job just as effectively from Toronto or Ottawa or Montreal," he said.

"Those of us in the Maritimes who have experienced federal involvement in consumer affairs over the decades would know that they get involved and then they gradually - sometimes quickly - retrench."