01/26/2012 11:20 EST | Updated 03/27/2012 05:12 EDT

Canadian Securities Regulator Not In The Cards As Feds Drop Plans


DAVOS, Switzerland - The federal government announced Thursday that it is abandoning plans to create a national securities regulator in the wake of a stinging courtroom defeat.

Finance Minister Jim Flaherty delivered his most elaborate public reaction since last month's critical ruling by the Supreme Court of Canada.

Flaherty told The Canadian Press that he recognizes that the day-to-day regulation of financial markets is a provincial responsibility — as determined by the high court.

With Thursday's announcement, the feds are backing away from a decade-old project, touted by successive governments, to streamline the country's securities regulation.

But Flaherty added one asterisk.

The minister said he's still hoping to create a national body that would monitor what he calls systemic risks to financial markets.

He made the remarks in an interview in Switzerland, at the Davos economic summit.

Flaherty said that last month, when the Supreme Court ruled that securities regulation was a provincial responsibility, it also agreed that the feds could play a role when it came to oversight of general and systemic risks.

To play that role, Flaherty said the federal government would need to create a new organization.

He said the task could not simply be handed to the existing Office of the Superintendent of Financial Institutions. That agency, he said, oversees banks and insurance companies and the additional role could create a conflict of interest.

Flaherty said he has already discussed his plan with some provincial counterparts. He said the idea has been well received.

However, he said he has not yet discussed it with Quebec's finance minister, Raymond Bachand, who was among the more ardent critics of the securities-regulator plan.