OTTAWA — It might have seemed like a straightforward proposition at the time: tying the strands of securities regulators across this country into one federal body with a unified set of rules.

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On Sept. 8, 2014, Finance Minister Joe Oliver and the provinces of British Columbia, Ontario, Saskatchewan and New Brunswick (together with P.E.I.) issued consultation drafts of a Provincial Capital Markets Act (PCMA) and a federal Capital Markets Stability Act (CMSA) — which, together, create the legislative framework that underpins the proposed Co-operative Capital Markets Regulatory System (CCMRS) and creates the Capital Markets Regulatory Authority (CMRA).

If you think that’s a bummer of a title for a proposed National Securities Regulator, wait till you read the reviews. Not since Ishtar, the Golden Raspberry-winning film of 1987, has a piece of proposed legislation accumulated so much official negative critical reception in such a short period of time.

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But Canada — now a respected member of the Group of 20 industrialized nations — has for decades fallen short of that goal, leaving it out of step with global peers who long ago established national oversight of their respective capital markets.

Despite piling on study after study — some dating back nearly 60 years — along with numerous false starts, Ottawa is still less than halfway to its goal of creating some form of federal watchdog here.

It could be said that the most recent attempt, with the Conservative government pushing in 2013 to create the yet-to-be-launched Cooperative Capital Markets Regulatory System, the concept has finally reached the critical mass of signatories necessary to legitimize its existence and move forward.

Even now, of the country’s 13 provinces and territories, only five — Ontario and British Columbia in 2013, and Saskatchewan, New Brunswick and Prince Edwards Island in 2014 — are officially on board, while eight remain outside the framework. And of those, at least three — Quebec, Alberta and Manitoba — have vowed not to join.

The Cooperative System, nevertheless, is scheduled to be launched in mid-2015, although that may be an unrealistic deadline — regardless of how many jurisdictions sign up for it.

“These things take a ridiculous amount of time in Canada,” says Brian Lee Crowley, managing director of the Macdonald-Laurier Institute, an Ottawa-based think-tank focusing on federal policy issues.

The Constitution Act of 1867, he says, “was supposed to tear down the barriers between the provinces, and here we are today with the provinces [only] saying, ‘we think we might make some progress on this’.”

“[But] I’m just delighted that we’ve made more progress in the last year than we probably made in the previous 60.”

For now, Canada’s landscape remains a patchwork of regulators — not the single securities blanket envisioned by Jim Flaherty, who was named finance minister when the Conservatives came to power in 2006 with unifying the capital markets system as one of their goals.

In fact, Ottawa had almost nothing to show for its efforts to create a national body until 2009.

We’ve made more progress in the last year than we probably made in the previous 60

That’s when the federal government — having watched dust collect on previous research documents and taken to heart a more recent set of recommendations by the so-called Expert Panel on Securities Regulation — turned up the heat on the provinces and territories, creating the Canadian Securities Transition Office, tasked with making the single national regulator a reality.

Trouble was, then as now, not all of the country’s 13 jurisdictions were ready or willing to be folded into a federal system. There was also a not-so-insignificant matter of the Constitution, which made it pretty clear the provinces had the overriding authority in these local matters.

Even so, Ottawa struck an advisory committee of the Transition Office to begin building a consensus on the shape and form of an overarching regulator.

But the process stalled again in 2011, after the Supreme Court of Canada, indeed, ruled the federal government lacked the constitutional authority to impose a national regulatory structure on the provinces and territories. Quebec and Alberta had argued in favour of such a ruling.

The high court did, however, acknowledge Ottawa’s role as the legitimate guardian over systemic market risks and also left open the option of pursuing a cooperative regulatory approach between the levels of government.

After allowing for some breathing space, Mr. Flaherty in 2013 unveiled a new version of a national regulator — this one taking the “cooperative” approach suggested by the court. Present for that Ottawa announcement were the finance ministers of Ontario and B.C., representing the first provinces to join the fledgling national regulator. They were followed by Saskatchewan, New Brunswick and Prince Edward Island the next year, when Joe Oliver replaced Mr. Flaherty as finance minister.

“What has surprised me is that this process hasn’t happened faster,” says Ian Russell, president and CEO of Investment Industry Association of Canada.

“After the agreement between Ontario and B.C. and the federal government, we would have expected Atlantic Canada to come in more quickly. What turned out to be the case, is we saw Saskatchewan come in and then we saw New Brunswick. And then it’s taken some time for other Atlantic provinces to come in . . . and we still don’t have Nova Scotia in yet. And no Newfoundland,” says Mr. Russell.

Saskatchewan and New Brunswick decided to join the Cooperative System after key changes were agreed to by participating parties. These included the creation of two regional deputy chief regulator positions — to be based in those two provinces — along with the previously agreed to regulator offices in Ontario and B.C. As well, two similar positions would be created should Alberta and Quebec decide to join in.

Prince Edward Island’s decision to sign on came after fixes to the cooperative agreement in August 2014 to emphasize “local economic development initiatives and it also emphasized regional representation,” says Steven Dowling, general counsel with PEI’s Consumer, Labour and Financial Services division of the Department of Environment, Labor and Justice.

“Specifically for PEI, that amended agreement outlined that there would be two additional regional deputy chief regulators,” he adds.

“And one of those deputy chief regulators will be representing New Brunswick, Newfoundland, Nova Scotia [should those two join] and PEI. You can expect that for all those participating jurisdictions will there will be regional representation for all the Atlantic Canadian provinces. That was a significant development.”

Mr. Oliver, the federal finance minister, says the Cooperative Regulator “will strengthen investor protection, provide more robust oversight of systemic risk, enhance efficiency, and bolster the reputation of our capital markets,” adding that the national regulator “will accomplish that while respecting regional interests and jurisdictions.”

“The door is open for every provinces and territories to participate. If they choose not to join at this time, they will have a constructive partner in the new Cooperative Regulator,” he adds.

“Discussions with provinces and territories interested in joining the Cooperative System are ongoing.”

So, where will the Cooperative System be a year now? Probably not much farther along than it is now.

The legislation to formally create the Cooperative System won’t be tabled in Parliament until sometime in early 2015 and implementation likely won’t happen until later.

First of all, the new regulator will still be under construction for much of the year — the necessary bureaucratic architecture needs to be formulated, accommodations found, staff hired, and a board of directors named and convened.

Some don’t see all of this completed until the end of 2015, or beyond.

“We have to get down to the brass tacks, which is really hammering this thing together into a viable organization. And you can’t do that without the board of directors and the board will play a very key role, beginning with appointing a CEO,” says Mr. Russell, at the Investment Industry Association of Canada.

“First of all, you’ve got the big job with the legislation and the regulations, but then you’ve got a very heavy task of trying to move out in building this thing,” he says. “The deadline for getting this up and running in the middle of 2015 . . . . It’s hard to believe that will happen. So, we’re obviously going to get slippage in deadlines.”

But, he adds, “hopefully, towards year-end next year, it might be going.”

Who will be next to join the Cooperative System, up and running or not? Five provinces may grow to six or seven in the coming year, with the likely addition of Nova Scotia and Newfoundland and Labrador. The three territories still appear hesitant about the idea and determined to give it more study — and that could take them past 2015.

For sure, there will be no Alberta and no Manitoba, at least not in the next two or three years, depending on which way the local political winds blow, and — most certainly — no Quebec.

“We [have] made clear that Quebec, Alberta and Manitoba are not going to join the Cooperative Capital Markets Regulator,” Quebec Finance Minister Carlos Leitao said after meeting with his provincial counterparts in Ottawa on Dec. 15.

“Those three provinces together account for almost 50% of capital markets activity in Canada. So, we cannot ignore that either,” he pointed out.

“Whatever happens we have no intention, of course, of putting up obstacles [to the Cooperative System].”

A spokesperson for Alberta Finance Minister Robin Campbell says that, “based on consultations with industry, it is clear that industry representatives in all three provinces do not support the [Cooperative System] initiative, preferring a provincially-led approach instead.”

“It is far better for everyone concerned that we are all on the same page,” says Kevin Zagara. “Our worry is that Ottawa will proceed without the support of two of the country’s largest markets, leaving us with a more fractured system than the one we have today.”

Manitoba’s view is similar to that of Quebec and Alberta.

“We’ve always supported the Passport system and will continue to do that,” says a spokesperson for Finance Minister Greg Dewar.

“This system remains one of the best and most respected in the world. In our consultations with representatives of Manitoba’s financial sector, they have expressed strong support for continuing to have a local securities regulator that is responsive to local needs.”

Meanwhile, other current outliers to Ottawa’s proposed Cooperative System are taking a wait-and-see stance on the debate.

Diana Whalen, Nova Scotia’s finance minister and treasury board head, says “the issue is what kind of influence am I going to have in the [cooperative] model and what kind of compensation am I going to get from the federal government for giving up the revenues . . . of securities regulators for the provinces.”

The securities industry in Nova Scotia is “almost universally in favour of what we’re doing right now,” she says. And that includes continuing with the “passport” system that allows domestic and foreign issuers approved in one jurisdiction to operate in other Canadian capital markets — all except Ontario, which did not sign the one-fits-all agreement but considers applicants on an individual basis.

“Right now, I don’t see a risk in us continuing to be part of the Passport system that has other large provinces — certainly Quebec, Manitoba, Alberta — standing in that group,” says Ms. Whalen.

“But in the bigger picture, we’re looking at keeping the door open.”

As for the three territories, “I think they’ll fall in as soon as the others do,” says Mr. Crowley, at the MacDonald-Laurier Institute.

Perhaps, but governments in northern Canada believe they have ongoing issues with the Cooperative System that need to be resolved before any can join up.

David Ramsay, the Northwest Territories’ Minister of Justice and Industry, Tourism and Investment, says “in particular, there’s no provision for a local office in the Northwest Territories in the MOA (memorandum of agreement), as there is for all the participating provinces.”

“We’ve had assurances in the past that there would continue to be a local office here in the NWT, but this has not been provided for in the MOA,” he argues.

“I have to underscore the willingness of our territory to be at the table, to work together to try to come to an agreement on all of the issues.”

The Macdonald-Laurier’s Mr. Crowley believes that “ultimately, we’ll get all the provinces and territories [in the Cooperative System], with the exception of Quebec and Alberta. I think Alberta one day will come in.”

“I don’t think we’ll ever get Quebec on board. But getting nine provinces — or even eight — and three territories . . . will be a huge advance from where we are now.”

In fact, Heather Zordel, a lawyer with Toronto law firm Cassels Brock who specializes in securities regulation, says “it’s not really necessary to push this down everybody’s throats.”

“It’s necessary to work with some of the people that want to work with it and try to get it up and running . . . . If you sit there and try to make it perfect before you launch, you’ll just never to get anywhere,” says Ms. Zordel, who worked with the earlier ground-setting Expert Panel on Securities Regulation.

“We would all agree that this is a work in progress. The main issue is just to get it launched and then we will go from there. A securities regulator will never be perfect. It’s always evolving and it evolves quickly. And that is why we need to have a body that will be able to move effectively, quickly on a go-forward basis for the next hundred years.”

“I’m very positive. It’s been 60 years in the making.”

Financial Post

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Correction: The Canadian Securities Transition Office continues to assist in the establishment of a national cooperative securities regulator in Canada. Incorrect information appeared in Monday’s edition of the Financial Post.