WPC Committee to Review the Structure of Securities Regulation in Canada
In considering optimal securities regulatory structure, it is important to determine whether distinctive local and regional capital markets exist. If so, they should be taken into account.
A capital market is comprised of issuers and investors. In respect of issuers, this study finds that local infrastructures for capital raising (LICRs) exist for certain industries and levels of market capitalization. An LICR is defined as a geographic region where there is a critical mass of issuers of a certain industry type or level of market capitalization; this allows local securities regulators and professionals (such as investment bankers, lawyers and accountants) to develop an expertise and respond to the needs of such issuers.
This study finds that Alberta hosts an LICR for oil and gas, B.C. hosts an LICR for micro-cap issuers, and Ontario hosts an LICR for financial services. Certain LICRs exist in more than one province: Both B.C. and Ontario host LICRs for mining; Ontario, Quebec and B.C. for communications and media; Ontario and Quebec for life sciences; and B.C., Alberta and Ontario each host an LICR for small cap issuers.
However, the existence of LICRs for certain industries does not allow us to conclude that the economic activity associated with these industries is local to host provinces or that host provinces have distinct local interests in the capital markets regulation or general regulation of those industries.
The activities of issuers concentrated within an LICR have an impact outside the geographic boundaries of the province that hosts and regulates the LICR. Other provinces may have an interest equal to that of the regulating province, given investor location and the importance of those industries to the economies of other provinces, as bome out by Gross Domestic Product (GDP) data.
Having found that LICRs for certain industries and levels of market capitalization exist in Canada, the issue that follows is whether provincial securities commissions that host an LICR identified in this study are responsive to that infrastructure in a manner that is different than other provincial securities commissions that do not host that LICR.
Puri, Poonam, "Local and Regional Interests in the Debate on Optimal Securities Regulatory Structure" (Ottawa: 2003). Commissioned Reports, Studies and Public Policy Documents. Paper 118.