Ontario joins 'passport' system for public companies, ending push for national regulator

The Ford government said Wednesday Ontario will join the rest of the country’s “passport” system for publicly traded companies, an important and long-awaited step designed to cut business costs and red tape.

In doing so, it ends the largest province’s push for a national securities regulator – a matter of disagreement between provinces going back more than two decades.

In practice, this means companies across the country will now be able to follow a standard set of legislative provisions in all provinces, while removing an important barrier to investment.

Ontario was the only holdout, with all other provinces and territories having previously agreed to mutual recognition under the passport system.

Peter Bethlenfalvy, Ontario’s finance minister, said during a Wednesday press conference the move will make businesses across the country more efficient and boost the national economy.

Speaking alongside his federal and provincial counterparts, Bethlenfalvy saluted their “national approach” during the ministers’ meeting this week in Charlottetown, P.E.I., and said he expects other provinces to follow suit in breaking down Canada’s other inter-provincial trade barriers.

“This is how Canada works,” he said.

The other provinces and territories signed a memorandum of understanding in 2004 to create the passport system, which came into effect four years later. The system was designed to make it easier for businesses so that they would only need to deal with one set of primary securities regulations while operating across the country.

But Ontario, the country’s largest province and home to the country’s biggest capital market, favoured a single national securities regulator based on voluntary participation, instead of a system of mutual recognition. Yet, other provinces were concerned that a single regulator would lead to a loss of jurisdiction.

Alberta and Quebec were most vocal opponents to Ontario’s preferred model, suggesting their unique economic profiles might be ignored by a national regulator.

But tariff threats from the United States to the Canadian economy over the past 18 months have placed extra pressure on provinces and territories to move past their parochial interests and make national markets more efficient.

Federal barriers to internal trade have largely been removed over the last year, but were never the biggest problem. The broader goal of knocking down trade barriers originating from provincial government, meanwhile, has slowed in recent months.

That’s despite widespread agreement that those nuisances to trade are costing the national economy billions of dollars and countless jobs a year . The federal government has been quoting a figure of between four and eight per cent of GDP, or about an average of $5,100 per Canadian per year.

Finance Minister Francois-Philippe Champagne also saluted the co-operative spirit Wednesday in trying to remove internal trade barriers and to expand the national economy. “We are united in seeing these opportunities,” he said.

Adding Ontario to the national system removes a costly irritant for Canadian companies trying to grow and access capital markets. The fractured system was seen as particularly costly for smaller companies trying to grow because of the costs associated with the paperwork and legal advice, and because that burden pulled senior executives away from the company’s core mission of growth.

Brian Lee Crowley, managing director of the Macdonald-Laurier Institute, a think-tank, said the Ontario move is a positive step but that securities regulation remains “rife with petty provincial protectionism” that obstructs the emergence of an efficient national market.

Canada is already smaller than rivals such as the United States, the United Kingdom and Japan, so the country can’t afford to sub-divide its markets, he told the newspaper.

National Post

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