Latin American Capital Markets

168 RUBEN LEEhave to comply with many jurisdictions' regulations—is to harmonize the regulationsacross jurisdictions. Any organization operating across jurisdictions—be it an issuer,investor, intermediary, or exchange—should thereby incur lower regulatory costs incomplying with harmonized regulations than if it had to comply with different regulationsacross jurisdictions.Canada is an example of a set of jurisdictions that is promoting regulatoryharmonization. 4 Securities regulation in Canada falls within the jurisdiction of theprovinces and territories, rather than being a federal matter Each province and territoryhas its own securities regulator; and there are 13 regulators operating with differingsets of rules and policies. This regulatory fragmentation is inefficient and costlyfor market participants, as they have to deal with the differences between jurisdictions.Many capital market participants in Canada believe that transforming all theprovincial securities' and territories' regulators into a single national securities commissionwould produce a more cost-efficient and effective system of regulation thanthe current fragmented one. However, nearly all accept that it would be politically unrealisticto do so, following three failed attempts over the past three decades. Instead,the securities regulators have sought to create a virtual national securities commission,which has been defined as a system of securities regulation administered by thevarious jurisdictions in such a way that the public is offered a level of efficiency andconsistency that might be expected of administration by a single jurisdiction. TheCanadian virtual securities commission is being developed via an informal body composedof the entire provincial and territorial securities regulators. The aim of theCanadian Securities Administrators (CSA) is precisely to harmonize legislation, regulatorystandards, and policies and to coordinate the activities of the capital marketregulatory authorities in the various jurisdictions.In addition to this harmonization, the CSA is constructing a regulatory frameworkbased on mutual reliance between provincial and territorial regulators. Mutualreliance, in this context, means that when a market participant, such as an issuer or aregistrant, needs a regulatory response from more than one jurisdiction, participatingcommissions are willing to rely on the analysis and recommendations made by thestaff of commissions in other provinces. For example, if a company wishes to issue securitiesin more than one jurisdiction in Canada, the issuer need deal with only oneprincipal regulator; usually the one in the jurisdiction where the company is located.That securities commission analyzes the prospectus, provides comments to the issuer,Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub4 The discussion about Canada draws heavily on Brown (1999) and McGlaughlin (2000).