1. What, in your view, are the key strengths and weaknesses of the current structure?
The major weakness with the current structure is the existence of multiple Securities Acts across the country, most containing different requirements. This results in added costs because of the need to retain counsel in separate jurisdictions and discrepancies in treatment from regulators.
Initiatives such as the Mutual Reliance Review System and the System for Electronic Document Analysis and Retrieval and the development and implementation of national instruments and national policies covering key areas have been helpful in streamlining and harmonizing the rules and administrative practices. Further work is needed in the area of uniform securities legislation to further eliminate remaining jurisdictional differences.
2. How well are enforcement activities related to capital markets carried out in Canada? Does the present securities regulatory structure enhance or diminish the effectiveness of enforcement? What are the key enforcement issues?
The ability of regulators, including the Securities and Exchange Commission, to collaborate in investigations is essential. Work should be done to ensure privacy legislation does not prohibit the sharing of information among regulators.
Aggressive enforcement of penalties and sanctions in cases of serious capital markets fraud should lead to greater investor confidence. The recently announced initiatives of the federal government to strengthen legislation, penalties and provide for increased enforcement of securities violations is a step in this direction.
Co-operation between both regulators and the criminal justice system should be increased. Consideration should be given to the establishment of a specialized tribunal to ensure timely and effective enforcement of securities matters.
3. How does Canada's regulatory structure affect the international competitiveness of Canadian capital markets and the Canadian economy?
The next few years will be critical for the Canadian Capital markets as it reacts to the U.S. reforms under the Sarbanes-Oxley Act. A high degree of harmonization is necessary to preserve efficient access to U.S. markets for Canadian companies through the multi-jurisdictional disclosure system.
The U.S. securities market is of particular importance to large Canadian-based interlisted issuers like EnCana. As we compete with other U.S. peers for capital in the U.S. market, it is important that the U.S. market perceives the Canadian market as an equal to the U.S. market in terms of regulations and enforcement.
4. Are there unique regional and local characteristics of capital markets across Canada that affect you? What regional and local requirements are met by the current structure and how? In particular, do small-and medium-sized growth companies have unique needs and how does the current regulatory structure accommodate these needs?
As a large growth company, EnCana is not in a position to comment on the issues facing small to medium-sized growth companies. However, to the extent there are regional or local needs, they could be recognized through appropriate local (provincial) exceptions to a uniform act or rules.
5. How do you perceive the timeliness, responsiveness and flexibility of the current system in developing policies, rules and regulations and, where necessary, in revising or simplifying them to meet new circumstances?
Through the CSA, a significant amount of effort has been devoted to regulatory coordination. The development of the mutual reliance review system has reduced the burden on issuers to navigate through multi-jurisdictional issues. The development of a uniform Securities Act would be an additional improvement to the system.
6. What is your assessment of regulatory structures in other countries? Are there lessons to be learned from other countries' experiences?
No comment specifically with respect to the assessment of other structures, but as a matter of principle, EnCana supports the harmonization of North American and global securities regulatory standards.
7. Additional Comments
It is critical that Canadian issuers and Canadian capital markets be competitive on a North American basis. Multiple securities jurisdictions, legislation and regulators serve to disadvantage Canadian capital markets by virtue of added costs and time delays. A strong reputation as an efficient and reliable capital market will only enhance Canadian competitiveness. In this regard, harmonization with the U.S. requirements is necessary. Exemptions for Canadian interlisted companies that comply with the U.S. requirements should be a key element of such harmonization.
Decisions made by securities regulators have a far-reaching effect on investors, issuers, corporate officers and directors. Therefore it is important that the implications to all stakeholders of new regulatory initiatives be considered thoroughly before they are implemented.
Firstly, for Canadian securities markets to become more competitive,
securities regulation in Canada should be simplified so that participants
need only deal with one regulator under one set of rules. A fragmented
system of regulation by its very nature leads to inefficiencies, time delays
and potential differences in interpretation. While greater coordination of
the current fragmented system through, for example, a "passport" system,
would provide some benefits in terms of improved administration, the
greatest potential benefits would be realized if a system of an effective
single regulator applying one set of rules were to be achieved.
Secondly, to be effective, the single regulator must have the requisite
expertise to address the potential industry and rgional differences across
Canada. The oil and gas industry, for example, needs to have a securities
regulator formulating policy and administering legislation that clearly
understands the complexity of our industry.
Finally, regardless of the ultimate composition of a system of a single
regulator under a single set of rules, such system should be harmonized with
other global capital markets, especially with those in the U.S. Canada's
capital markets represent a very small portion of the global marketplace and
therefore to ignore harmonization would create a fundamental obstacle for
meeting the objective of increasing the competitiveness of Canadian markets.
I hope you will find the above views useful in your important deliberations.