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Supreme Court Law Review (2d). Volume 51 (2001), pp. 603-623


national securities regulator Canada, regulation and jurisdiction of captial markets, cost of capital, liquidity, investor protection, capital markets investors, insittuional investors, public pension and national securities regulation


The purpose of this paper is to provide an empirical foundation from a capital markets perspective to ground the discussion and analysis on the constitutionality of a national securities regulator. Based on the data, the case for a national securities regulator for Canada is more evident now than it has ever been. This paper first explores the academic and empirical literature on the relationship between regulation and the strength of that jurisdiction’s capital markets, as measured by the cost of capital, liquidity and investor protection. Studies have found that Canadian companies have a higher cost of capital than their U.S. counterparts, even after accounting for risk, meaning that Canadian companies pay more financing than their peers. Canadian companies also receive lower valuations. This, in part, can be attributed to the limitations associated with our fragmented regulatory structure, as well as concerns about weak enforcement. The paper then explores the data on Canadian retail and institutional investors and their investing patterns, as well as the financing needs and preferences of Canadian businesses. The data show that the capital markets are now more important than ever to Canadian investors and businesses alike. Capital markets have become a preferred vehicle for investing the savings of individual Canadians, as compared to other investment opportunities. Similarly, institutional investors such as pension funds invest a significant proportion of their assets in the public capital markets. In terms of financing growth and expansion for Canadian businesses, capital markets play a more dominant role than they have ever done in the recent past. Finally, the paper explores how changes in the regulatory and global capital markets environment further exacerbate the negative impact of Canada’s fragmented regulatory system and highlight the need for national regulation.

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