Monday, September 23, 2013

Ontario, BC & Ottawa Come Together On Financial Market Regulations

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In 2011 the Supreme Court of Canada ruled that the Harper Government can’t force a national securities regulator on the provinces. So in 2013, Finance Minister Flaherty has presented an agreement that, “represents the best of what can be achieved when a shared responsibility becomes a mutual goal.” Despite the advice of Supreme Court Judges, certain politicians and bureaucrats of Ontario and British Columbia have voluntarily entered into an agreement that puts the whole apparatus under one securities regulatory agency: the federal government.

The problem is simple: governments cannot calculate. The profit and loss mechanism just isn’t there. This crucial aspect of resource management allows price signals to actually mean something. Otherwise, government organizations spend x amount of y on b and c. It’s an endless calculating process that leads nowhere. Private enterprise, on the other hand, relies on mutual exchange. It calculates based on profit and loss. Entrepreneurs are directed to consumer satisfaction through price signals.
A financial security is essentially a contract that is assigned a value and then traded on financial markets. A securities commission is a government organization that acts as a sort-of “police” on the stock market; its aim is to facilitate law and order in the “Wild West” of electronic securities markets. It is believed by Prime Minister Stephen Harper and Finance Minister Jim Flaherty that a centralization of this power is a good thing. The leading figures in the Ontario and British Columbia governments tend to agree. A federal securities commission, like the U.S. Securities and Exchange Commission, is a good thing.
All rules and regulations, once dispersed among two provinces, can be united as one. “The announcement would have looked a little stronger had they had four or five provinces involved instead of just two,” said Richard Steinberg, chairman of Fasken Martineau’s securities and mergers and acquisitions group. Alberta would be a game changer, but Premier Alison Redford isn’t acting just yet. “We need to be able to see that protected,” she said referring to the Alberta Securities Commission.
But Ontario and BC are on board. Corruption will diminish, says the government. But what about the highly centralized U.S. Securities and Exchange Commission? Hasn’t this organization clearly shown that is highly susceptible to corruption? How exactly is nationalizing the regulatory agency supposed to benefit Canadians?
The plan is to make it easier for companies and investors to navigate the system by eventually having a single set of rules nationwide. Therefore, Canadian politicians can conspire with other politicians worldwide in a G20-type format. They can plan an international set of bureaucratic rules and regulations that probably benefits their crony-capitalist friends more than the consumer.
But what about the free market? Can’t it provide a single set of rules – not only nationwide – but globally? Why must we rely on these global technocrats for “facilitating capital markets.” These are the same people that keep interest rates low and money cheap. They clearly have no idea what they’re doing and should not be trusted with a provincial securities commission, let alone a federal one.


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