Investors will benefit from a single regulator: CBA chief

(April 28, 2004) Investors, and therefore their financial advisors, will have greater investment choice and greater security in those choices with a single securities regulatory regime than with the present 13 provincial and territorial jurisdictions, according to Raymond Protti, president and CEO of the Canadian Bankers Association (CBA).

Speaking this morning at the Economic Club of Toronto, Protti noted that investors, governments, and small- and medium-sized businesses all stand to gain from a unified securities regulatory system.

For government, the economies provided by a single regulator, compared with the costs of the provincial and territorial regulators, are part of the larger challenge of making government more efficient. “Governments across this country account for over 40% of the value of all economic activity,” said Protti, himself a former high-ranking Ottawa civil servant.

Small- and medium-sized businesses would benefit from simplified requirements bringing more economical access to capital markets, he predicted, suggesting these types of businesses often find costs of registration and compliance in multiple jurisdictions prohibitive, impractical and beyond their limited financial resources.

“The more entrepreneurs must pay to raise additional equity capital, they less likely they are to do so,” he said, noting that the American publication The Journal of Public Economics recently estimated that each 1% increase in cost of acquiring capital leads to a 0.25% decrease in capital actually sought from capital markets.

Increased access to capital for entrepreneurs would mean increased access to new offerings for investors. Responding to a question from Advisor.ca after the presentation, Protti argued that lowered underwriting costs for small- and medium-sized businesses would mean that investors would have “access to all of the offerings that are available,” which is not currently the case.

Savings from a simplified regime could be used to raise the level of protection provided to small investors who would benefit from increased market surveillance, he added.

“The wise persons’ committee found that just the administrative savings alone from amalgamating the 13 regulators would come to about 42% of their operation budgets, or around $45 million annually.”

Dedicating half of that amount, or $22 million, would double the funds currently spent on enforcement across Canada, Protti noted. “We could doubt the current enforcement budget across the country and still achieve substantial savings across the board.”

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Longer term, if Protti’s predictions prove accurate, the single-regulator concept has other applications for simplifying the lives of advisors and their clients in areas such as the property and casualty insurance sector, which is regulated both by provinces for products such as auto insurance and federally by the Office of the Superintendent of Financial Institutions for financial stability.

Still, while the CBA’s Protti pitches the benefits of the single regulatory regime for governments, investors and businesses looking for capital, it can be argued that individual bank CEOs have said little on this issue, a reserve they did not have with earlier issues such as sale of insurance through bank branches and their perceived need for mergers.

One answer could be that while staying determinedly neutral on the merger issue, the CBA needs a less controversial, more palatable and broadly agreeable issue on which to hang its proverbial hat, since some senior bankers are now questioning the CBA’s relevancy and what they get for their membership dues. As a result, the CBA needs to demonstrate it still has a role to play in speaking for Canadian banks, according to a source contacted by Advisor.ca.

Campaigning on the broadly agreed need for regulatory reform, whether resulting in a single regulatory regime or other model, provides the CBA with such a role.

• • •

Art Melo is a financial services writer based in Toronto.

(04/28/04)

(April 28, 2004) Investors, and therefore their financial advisors, will have greater investment choice and greater security in those choices with a single securities regulatory regime than with the present 13 provincial and territorial jurisdictions, according to Raymond Protti, president and CEO of the Canadian Bankers Association (CBA).

Speaking this morning at the Economic Club of Toronto, Protti noted that investors, governments, and small- and medium-sized businesses all stand to gain from a unified securities regulatory system.

For government, the economies provided by a single regulator, compared with the costs of the provincial and territorial regulators, are part of the larger challenge of making government more efficient. “Governments across this country account for over 40% of the value of all economic activity,” said Protti, himself a former high-ranking Ottawa civil servant.

Small- and medium-sized businesses would benefit from simplified requirements bringing more economical access to capital markets, he predicted, suggesting these types of businesses often find costs of registration and compliance in multiple jurisdictions prohibitive, impractical and beyond their limited financial resources.

“The more entrepreneurs must pay to raise additional equity capital, they less likely they are to do so,” he said, noting that the American publication The Journal of Public Economics recently estimated that each 1% increase in cost of acquiring capital leads to a 0.25% decrease in capital actually sought from capital markets.

Increased access to capital for entrepreneurs would mean increased access to new offerings for investors. Responding to a question from Advisor.ca after the presentation, Protti argued that lowered underwriting costs for small- and medium-sized businesses would mean that investors would have “access to all of the offerings that are available,” which is not currently the case.

Savings from a simplified regime could be used to raise the level of protection provided to small investors who would benefit from increased market surveillance, he added.

“The wise persons’ committee found that just the administrative savings alone from amalgamating the 13 regulators would come to about 42% of their operation budgets, or around $45 million annually.”

Dedicating half of that amount, or $22 million, would double the funds currently spent on enforcement across Canada, Protti noted. “We could doubt the current enforcement budget across the country and still achieve substantial savings across the board.”

R elated Stories

Goodale ready to move on regulatory reform Single securities regulator forecast for 2005 National securities regulator would save $40 million a year, study says Regulatory reform goes beyond politics, Phelps says Federal committee calls for single national securities regulator

Longer term, if Protti’s predictions prove accurate, the single-regulator concept has other applications for simplifying the lives of advisors and their clients in areas such as the property and casualty insurance sector, which is regulated both by provinces for products such as auto insurance and federally by the Office of the Superintendent of Financial Institutions for financial stability.

Still, while the CBA’s Protti pitches the benefits of the single regulatory regime for governments, investors and businesses looking for capital, it can be argued that individual bank CEOs have said little on this issue, a reserve they did not have with earlier issues such as sale of insurance through bank branches and their perceived need for mergers.

One answer could be that while staying determinedly neutral on the merger issue, the CBA needs a less controversial, more palatable and broadly agreeable issue on which to hang its proverbial hat, since some senior bankers are now questioning the CBA’s relevancy and what they get for their membership dues. As a result, the CBA needs to demonstrate it still has a role to play in speaking for Canadian banks, according to a source contacted by Advisor.ca.

Campaigning on the broadly agreed need for regulatory reform, whether resulting in a single regulatory regime or other model, provides the CBA with such a role.

• • •

Art Melo is a financial services writer based in Toronto.

(04/28/04)

(April 28, 2004) Investors, and therefore their financial advisors, will have greater investment choice and greater security in those choices with a single securities regulatory regime than with the present 13 provincial and territorial jurisdictions, according to Raymond Protti, president and CEO of the Canadian Bankers Association (CBA).

Speaking this morning at the Economic Club of Toronto, Protti noted that investors, governments, and small- and medium-sized businesses all stand to gain from a unified securities regulatory system.

For government, the economies provided by a single regulator, compared with the costs of the provincial and territorial regulators, are part of the larger challenge of making government more efficient. “Governments across this country account for over 40% of the value of all economic activity,” said Protti, himself a former high-ranking Ottawa civil servant.

Small- and medium-sized businesses would benefit from simplified requirements bringing more economical access to capital markets, he predicted, suggesting these types of businesses often find costs of registration and compliance in multiple jurisdictions prohibitive, impractical and beyond their limited financial resources.

“The more entrepreneurs must pay to raise additional equity capital, they less likely they are to do so,” he said, noting that the American publication The Journal of Public Economics recently estimated that each 1% increase in cost of acquiring capital leads to a 0.25% decrease in capital actually sought from capital markets.

Increased access to capital for entrepreneurs would mean increased access to new offerings for investors. Responding to a question from Advisor.ca after the presentation, Protti argued that lowered underwriting costs for small- and medium-sized businesses would mean that investors would have “access to all of the offerings that are available,” which is not currently the case.

Savings from a simplified regime could be used to raise the level of protection provided to small investors who would benefit from increased market surveillance, he added.

“The wise persons’ committee found that just the administrative savings alone from amalgamating the 13 regulators would come to about 42% of their operation budgets, or around $45 million annually.”

Dedicating half of that amount, or $22 million, would double the funds currently spent on enforcement across Canada, Protti noted. “We could doubt the current enforcement budget across the country and still achieve substantial savings across the board.”

R elated Stories

Goodale ready to move on regulatory reform Single securities regulator forecast for 2005 National securities regulator would save $40 million a year, study says Regulatory reform goes beyond politics, Phelps says Federal committee calls for single national securities regulator

Longer term, if Protti’s predictions prove accurate, the single-regulator concept has other applications for simplifying the lives of advisors and their clients in areas such as the property and casualty insurance sector, which is regulated both by provinces for products such as auto insurance and federally by the Office of the Superintendent of Financial Institutions for financial stability.

Still, while the CBA’s Protti pitches the benefits of the single regulatory regime for governments, investors and businesses looking for capital, it can be argued that individual bank CEOs have said little on this issue, a reserve they did not have with earlier issues such as sale of insurance through bank branches and their perceived need for mergers.

One answer could be that while staying determinedly neutral on the merger issue, the CBA needs a less controversial, more palatable and broadly agreeable issue on which to hang its proverbial hat, since some senior bankers are now questioning the CBA’s relevancy and what they get for their membership dues. As a result, the CBA needs to demonstrate it still has a role to play in speaking for Canadian banks, according to a source contacted by Advisor.ca.

Campaigning on the broadly agreed need for regulatory reform, whether resulting in a single regulatory regime or other model, provides the CBA with such a role.

• • •

Art Melo is a financial services writer based in Toronto.

(04/28/04)