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Bill 38 - Securities Amendment Act, 2008

October 28, 2008 - Second Reading

Ms Blakeman: Well, hello, Mr. Speaker. It’s me again, and I’d be the critic on this bill. What a surprise. Look, the bills are getting shorter. I started out the evening with a hundred-page bill and then a 30-page bill and now I’m down to 11 pages. I can’t tell you how excited I am.

This looks like an intimidating bill, but it actually isn’t. It’s a pretty straightforward march toward a definitive end, and to my eye what we’re seeing here is the winning side in a power struggle. What we’ve had, on the one side, is a campaign to have a national securities regime, and on the other side we have a number of provinces that are saying, “No; we will have a coalition here, more like a free trade agreement between the provinces.” In fact, I think almost all the provinces, except notably Ontario, have agreed to this series of changes and have worked over a number of years to align themselves. So there has been a sort of period of adjustment as each of the provinces puts their legislation in place, which is, as is our charming way in Canada, just slightly, ever so slightly, different, and then everybody else has had to adjust to that. Then the next one takes their move, and it’s ever so slightly different, and everybody else has to adjust to that. So we’re coming along on that one.

Essentially, what we’re looking at in Bill 38, the Securities Amendment Act, 2008, is entrenching that free trade principle that I talked about, and it’s facilitating a passport system. That, really, at the bottom line is about mutual recognition of everybody else’s stuff, so it makes it comparable between provinces.

As I said, this is a fairly long process that was – I think in 2004 there was a memorandum of understanding that was signed on securities regulation, and it was, sort of, all of the political regimes agreeing to the passport idea. In 2004 we saw the legislation coming forth in the various jurisdictions around prospectuses and continuous disclosure requirements. Then in 2005 we had agreements around legislative changes around long-form prospectuses. In 2006 we see the final prospectus format and the beginning of the registration format. In ’07 they worked on the takeover bids and continued on the registration. What we’re looking at in 2008 is the culmination of that registration process.

My notes are saying: continuous electronic updating. I think that’s part of what we’re trying to facilitate with the changes that are in Bill 38. It’s also bringing down the categories. I think there were 41 categories of registrations, and they’re trying to bring that down to 13, so there’s an attempt at sort of standardization here.

What does this mean to people? You know, Mr. Speaker, I don’t come from a family that ever had money that they could play around with in the stock market. I’ve never had that kind of money. The only time I get involved in this is with mutual funds, and even then I’m not playing with very much money. If I retired now, I probably wouldn’t make it past the end of a year with the savings that I currently have. That’s what you get for working in the not-for-profit sector: no retirement funds. I don’t think I’m alone in that. I think most of the people in Alberta don’t have a close association with or understanding of how securities work and this whole buying and selling and stock markets and prospectuses and free market and all of that. What does it actually mean to most people? Not much. You know, it’s always a section on the news where they show the tickertape and talk really fast. That’s most people’s experience with this.

What does this bill mean to us? What does this mean to the person, you know, walking around on the Legislature grounds, admiring the beautiful evening today? It means less red tape for the people that are trying to operate across the country in securities. Essentially, what it’s doing is setting up what they call a home dealer. You deal with the province in which your head office is located, and you work under those rules, and everybody else will recognize those rules for you. As I said, in the one category they came from 41 categories down to 13 as a way of trying to simplify all of this.

The bottom line is that it’s supposed to protect investors. It’s supposed to instill and maintain confidence in the securities market. The hope is that by going to this kind of passport system, it makes it easier for the people that are working in this area to conduct their business, to be forthcoming, to be able to be as transparent and accountable as they’re required to be, to make their life not so onerous, having to jump through the red tape in every single province that they might be operating in. I agree with that. If that were the only meaning under free trade, I’d be much more supportive of it. But that’s another discussion.

As I say, I’m like most Albertans: I don’t have a close association with this stuff. I don’t have that kind of money to invest and play around with, so I’m not very familiar with it. But I was really interested in the principles. The excellent staff who briefed me brought this to my attention. This, in fact, is the International Organization of Securities Commissions’ May 2003 document, Objectives and Principles of Securities Regulation. Essentially, this document is setting out 30 principles of securities regulation, which are based on three objectives. The three objectives are protection of investors; ensuring that markets are fair, efficient, and transparent; and, finally, the reduction of systemic risk.

The 30 principles break down into a bunch of different categories. Here are the categories. Principles relating to the regulator cover things like:

1. The responsibilities . . . should be clear and objectively stated.
2. The regulator should be operationally independent and accountable in the exercise of its functions and powers.
3. The regulator should have adequate powers, proper resources and the capacity to perform its functions and exercise its powers.
4. The regulator should adopt clear and consistent regulatory processes.
5. The staff of the regulator should observe the highest professional standards including appropriate standards of confidentiality.

That all makes perfect sense, and that makes perfect sense to me. They go on, and they talk about principles for self-regulation.

6. The regulatory regime should make appropriate use of Self Regulatory Organizations…that exercise some direct oversight responsibility for their respective areas of competence…
7. [Self-regulatory organizations] should be subject to the oversight of the regulator…

What a concept.

…and should observe standards of fairness and confidentiality when exercising powers and delegated responsibilities.

It moves into another section, Principles for the Enforcement of Securities Regulation.

8. The regulator should have comprehensive inspection, investigation and surveillance powers.

I mean, this strikes me as very common sense, yet you know that they wrote those principles out because at some point there was a question of this or somebody felt this wasn’t in existence and that they needed to state these principles out front.

They go on with additional ones about

9. The regulator should have comprehensive enforcement powers.

Well, boy, don’t we know that in this province. 10. They…

…should ensure an effective and credible use of inspection, investigation, surveillance and enforcement powers and implementation of an effective compliance program.

That’s exactly right. We’re seeing that in a number of different areas in this very province, where we’ve said: you’ve got to monitor it. It’s one thing to say that this is what the standards are supposed to be, but you’ve got to monitor that that’s going on. You’ve got to check it and make sure that it’s happening. If it’s not happening, there has to be some sort of enforcement going on, some sort of insistence on compliance, that if it’s not being done, it will be done, and often a punishment section that says: you didn’t do this, and here is the fine or the disciplinary measure that is going to be implemented. So all that makes perfect sense.

It goes on, and there are principles for co-operation in regulation, principles for issuers, principles for collective investment schemes, principles for market intermediaries, and principles for the secondary market. I haven’t gone through all 30 of them, clearly, but it was just to give you, actually to give me, and I think a lot of Albertans out there that don’t usually deal in this sector an idea of what regulators are trying to do to reassure investors that the marketplace is being looked after, that it’s being reliably run, that there are adequate resources there to monitor, enforce, and ensure compliance.

That’s all consumer protection is. That’s what you’re trying to make sure is going on, that it’s accountable and – sorry, let me flip that around – that it’s transparent and that it’s accountable. I think that’s the base point, the starting point that you would want to see not only in securities but just about any other area you want to talk about, whether it’s infection control or funeral practices. For those kinds of basic consumer protection standards, that’s what you want to see in place. I think this bill is achieving that. I was satisfied by the explanation that I got from the staff that were kind enough to come over and give me a briefer of what this bill is for.

Now, the one thing that I didn’t have time to do was a check with stakeholders to see if they had any specific feedback. That’s where I’m lacking, so I will try and follow through on that and be able to check with some of the stakeholders that make use of this system and bring that back when we’re in Committee of the Whole. But at this point I’m satisfied enough to recommend to my colleagues that we support this Bill 38 in second reading, and I’m happy to give the floor to someone else at this point for further discussion on the bill.

Thank you.