Currently, only Ontario and British Columbia have agreed to set up a co-operative approach as a first step toward establishing a national securities regulator, although some of the smaller provinces are believed to be ready to join.
But several provinces, particularly Quebec and Alberta, continue to insist they will not opt in to the federal initiative as currently proposed by Finance Minister Jim Flaherty. Instead, they are attempting to improve the current passport system to address some of the federal concerns.
On Tuesday, Quebec announced it will launch a reference case in the province's court of appeal to block the federal bill when it is tabled. If it is successful it would be the second time Flaherty's project has been stalled by court action.
"Regulating securities is a provincial jurisdiction that Quebec has always defended," said Finance Minister Nicolas Marceau. "The system we have does well the job of protecting investors and developing the economy."
Provincial ministers met on the issue in Ottawa on Tuesday with Horner, the chairman, saying the best approach is for a compromise that will satisfy both camps.
"Our worry is that they are going to proceed without consultations, without the next two largest markets — Alberta and Quebec — and you are going to end up with an even more fractured system at the end of the day," he said in an interview.
"It's far better for everyone concerned that we are all on the same page."
Horner said the so-called "passport" provinces will present Ottawa and Ontario with a proposal for melding the two systems that respects federal concerns about systemic risk and policing, as well as provincial jurisdiction in day-to-day affairs of the regulatory process.
Flaherty has long argued that a national securities regulator operating under one set of laws is necessary to reduce costs, improve oversight and policing of financial markets, and reduce red tape. He has been supported in his six-year battle by most business lobby groups as well as global institutions, including the World Bank and the International Monetary Fund.
But in 2011, the Supreme Court ruled proposed federal legislation on the issue stepped on provincial jurisdiction. The court did recognize, however, that Ottawa had jurisdiction to guard against systemic risk in the financial markets.
In September, Flaherty, Ontario and B.C. took the first step toward a national system by announcing a "co-operative" regulator headquartered in Toronto that could administer a single set of rules.
Speaking for the opting out provinces, who say the current passport system of co-operation between the provinces works just fine, Horner said the federal government needs to "take a pause" and begin consultations.
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