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Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce

Issue No. 47 - Evidence - November 1, 2018


OTTAWA, Thursday, November 1, 2018

The Standing Senate Committee on Banking, Trade and Commerce met this day in public at 10:32 a.m. to examine and report on issues pertaining to the management of systemic risk in the financial system, domestically and internationally; and in camera, for the consideration of a draft agenda (future business).

Senator Douglas Black (Chair) in the chair.

[English]

The Chair: Good morning and welcome, colleagues, and members of the general public who are following today’s proceedings of the Standing Senate Committee on Banking, Trade and Commerce either here in the room or listening via the web. My name is Doug Black. I am a senator from Alberta. I have the privilege of chairing this committee. I would ask my colleagues to introduce themselves.

Senator Wallin: Pamela Wallin, Saskatchewan.

Senator C. Deacon: Colin Deacon, Nova Scotia.

Senator Day: Joseph Day, New Brunswick.

[Translation]

Senator Verner: Josée Verner from Quebec.

[English]

Senator Tannas: Scott Tannas, Alberta.

Senator Wetston: Howard Wetston, Ontario.

Senator Tkachuk: David Tkachuk, Saskatchewan.

The Chair: We’re assisted by our clerk and our analysts extremely competently.

On October 17, 2017, the Standing Senate Committee on Banking, Trade and Commerce was authorized to conduct a study on issues pertaining to the management of systemic risk in the financial system, domestically and internationally. Given that it has been 10 years since the global financial crisis, the committee is interested in learning about the measures that have been implemented since that time to manage systemic risk in the financial sector. We’re also interested, of course, in learning from witnesses what they view to be the principal systemic risks facing the system today.

Today is our third meeting on this subject. It gives me great pleasure to welcome Kevan Cowan, Chief Executive Officer, Capital Markets Authority Implementation Organization. Mr. Cowan, thank you very much for your time today. We’re looking forward to your presentation, and then we will have questions.

Kevan Cowan, Chief Executive Officer, Capital Markets Authority Implementation Organization: Good morning, Mr. Chair and committee members. It’s an absolute pleasure to be here. I’m excited at the opportunity to talk to you about the proposed regime I represent.

You may be asking who I am and what I represent. I sometimes like to joke about this project. I like to call it the “alphabet of C’s” because just about every entity involved and every piece of legislation starts with a “C.” I’ll try to avoid getting too bogged down by things like the names of the statutes, the capital markets act, the capital markets regulatory authority act, the capital markets stability act, the CCMRS and, really, just get to substance of this.

I am the CEO of the Capital Markets Authority Implementation Organization, which is the interim authority and the forerunner to the proposed pan-Canadian securities regulator, the capital markets regulatory authority.

Unlike the other witnesses you have been hearing from who are directly on point for your mandate of looking into what’s being done with systemic risk in the last 10 years, I represent a proposed regime. In that way, I’m a little different.

The CMRA, the capital markets regulatory authority, through the various statutes I have mentioned, has principally three areas of focus. The first is the cooperative securities regulator among the participating provinces; the second is an enhanced and comprehensive scheme around enforcement; and the third, more on point for the topic of today’s hearing, is systemic risk.

At a big picture level, this is an exciting project and, in particular around systemic risk, does fill a gap we currently have in the Canadian financial regulatory regime.

First an overview of the cooperative capital markets regulatory system. This is an initiative of several governments — in this case, the Governments of British Columbia, New Brunswick, Ontario, Prince Edward Island, Saskatchewan and the Yukon, together with Canada — who are committed to establishing a cooperative system to achieve better regulatory outcomes for Canadian investors and businesses.

I will also mention that in their most recent budget the Government of Nova Scotia has indicated its intention to sign onto the initiative.

The governing document for this initiative is a public memorandum of agreement whereby all of these participating provinces have set out the terms and the objectives. I hasten to add the memorandum of agreement specifies an invitation for non-participating provinces and territories to engage on a voluntary basis.

This is a cooperative legislative approach. The two most important pieces of the legislation are the capital markets act, which is a proposed uniform securities act that would be passed by each of the participating provinces and territories.

The other key piece of legislation, and the one more germane to today’s discussion, is the capital markets stability act, focused on systemic risk, and its complementary federal legislation to address systemic risk and criminal enforcement in Canada and, very importantly, on a national basis.

The legislation will be jointly administered by the capital markets regulatory authority, the CMRA, which in structure has many similarities to many of today’s securities commissions. For example, it is self-funded, and it is an independent federal-provincial-territorial entity. It’s governed by a board of directors. It’s accountable to a council of ministers of the participating provinces. I will speak more about that in a moment.

It will have an office in each of the participating jurisdictions with a single rule book for all participating jurisdictions; so uniformity, applying in each of the provinces, together with a regulatory interface to ensure seamless operation with non-participating provinces.

The interface, in particular, will set out the means by which, in securities regulation, the provinces will cooperate with those who are not part of the system. Then with respect to the capital markets stability act, which again is a national systemic risk instrument, looking at the various ways the provinces will cooperate and work together. The launch timelines for this entity, the CMRA, are currently under review. There is a case before the Supreme Court of Canada. We’re expecting a decision any week. If any of you have tips on how I might go across the street and hurry that along, please let me know.

The objectives of the cooperative system: Leah Anderson appeared before you last week from the Ministry of Finance. She identified three critical areas that the cooperative system has as objectives. First, efficiency; second, a more comprehensive enforcement arrangement; and, thirdly, systemic risk.

I’m going to provide more detail. The cooperative system will strengthen the capacity to identify and manage systemic risk in capital markets on a national basis. Again, I will come back to this, but that is where we have a gap today. It will foster more efficient and globally competitive capital markets, and it will both facilitate the raising of capital from investors and provide increased protection for investors.

The memorandum of agreement, which set out the original objectives, refers to both the efficiency of capital markets and the raising of capital for businesses, as well as investor protection. I know from your witnesses last week that the concept of balancing risk and innovation, and regulation against competitiveness is always top-of-mind and central to this scheme. It will provide more effective enforcement against misconduct and improve coordinating with law enforcement and prosecution authorities.

Finally, by creating a more unified voice among the participating jurisdictions, it will empower Canada to have a more influential role in international capital market regulatory initiatives.

Canada is the only Western OECD country without a national voice for securities regulation.

At the top of the CMRA governance structure is a council of ministers, where each participating jurisdiction has one cabinet minister sitting on that council. Reporting to that is an independent board of directors, comprised of experts who are broadly representative of the participating regions. Below that, there are two divisions: a regulatory division that carries on what you would expect in terms of the day-to-day operations of securities regulation, together with an adjudicative division or tribunal that conducts hearings in respect of securities enforcement.

There are two features of the governance structure that represent a significant evolution in the governance in capital markets. The first is the separation between the chair of the board and the CEO of the regulatory division. That’s something we don’t see today in the larger securities commissions. The second is a Chinese wall, or separation, between the regulatory division, which, for example, conducts investigations, and the tribunal, which conducts the hearings in connection with securities enforcement.

I’d like to turn now more specifically to the matter at hand: systemic risk. The purpose of the proposed federal capital markets stability act is to enhance systemic risk management, detection, et cetera, in Canada. The heart of this is data collection. In the current Canadian financial regulatory regime, there is a gap in data collection, because there is no body charged with the authority to collect data relating to systemic risk threats on a national basis.

“Systemic risk” is defined centrally in the act. It’s an important definition. I will just linger on it for a moment. It refers to “. . . a threat to the stability of Canada’s financial system that originates in, is transmitted through or impairs capital markets and that has the potential to have a material adverse effect on the Canadian economy.”

Very important in that definition is it’s national in scope. It is targeted specifically to systemic risk threats, which by their very nature, cannot be dealt with by a single province or group of provinces.

As you heard in previous testimony, and as you know, systemic risk threats do not respect borders. Capital markets do not respect borders. It is extremely important to have mechanisms and authorities so a financial impact of something that originates in one province but moves to another province — which we see regularly — can be assessed and addressed; and that we have a mechanism to assess and address the systemic risks on the same scale that they occur. In other words, it must be one of national scope that does not respect provincial boundaries.

The CMRA’s responsibilities under the CMSA include monitoring activity in capital markets. This is specifically focused on capital markets. When you think about the previous testimony from OSFI and the Bank of Canada, it is the case there is not comprehensive national data collection specifically around capital markets, which this agency will be empowered to do.

Second to mitigate systemic risk in capital markets, with a specific power and authority focused on benchmarks, products and systemically risky practices that are detected as they emerge through that data collection.

The results are of an urgent order power for the authority to act urgently to protect against the propagation of systemic risk through capital markets.

There is also an additional element deriving from the federal authority, which is to provide leadership and coordination in enforcing criminal law, thereby contributing to a more comprehensive enforcement framework in Canada. This will provide a better structure to engage with enforcement partners and an enhanced legal framework with additional criminal offences and evidence-gathering tools to make enforcement more effective. In the statute, there is an obligation to coordinate relevant regulatory activities with other federal, provincial and foreign authorities, with a specific focus on not creating undue burden and a duplication in efforts.

As you’ve heard, markets today are large, complex and interconnected. As you heard in some of the testimony from Jeremy Rudin and Ron Morrow, we don’t know where the next threat is. As Jeremy Rudin said, one of the biggest dangers can be complacency. We have rules in place that protect against past threats. For the next one, we don’t have the mechanisms to protect from emerging threats through national data collection.

The CMRA is well positioned to administer the capital markets stability act, and to add and contribute to the regime around systemic risk. There will be dedicated resources and expertise specifically devoted to systemic risk in capital markets.

Because this agency has authority for both the day-to-day securities regulation, together with national systemic risk activity, there will be the possibility of having synergies between those activities like we do not currently have in any agency in Canada. The federal legal authority under the CMSA over systemic risk does complement the tools of existing regulatory agencies, such as the Bank of Canada and OSFI, and so thereby contributes to the framework, again filling the gap, particularly around national data collection. It will be built with leadership and staff with deep expertise.

In conclusion, systemic risk is complex. We’ve heard that over the last couple of sessions. The threats do not respect borders. It’s very important we address these threats from the same scale from which they originate, which is, at the very least, national. The proposed Capital Markets Regulatory Authority and the proposed capital markets stability act address that gap, complementing the current federal and provincial financial regulatory regime. Thank you.

The Chair: Thank you. We will go to questions now.

Senator Wetston: Thank you for your submission today, Mr. Cowan.

I wanted to speak to you a little bit — not about your views about a financial crisis or what systemic risk we might be facing in the future. It’s highly likely we will be facing financial challenges in our markets. We have in the past; we will again. Some look recessionary and some look more serious than just a recession, but they’re always serious.

Financial crises are often driven by panics, runs and bubbles, and we need to have the capability to manage these kinds of escalating financial crises. Do you believe the CMRA, particularly through the CMSA, would somehow allow Canada to manage a crisis of that sort, should it occur again, like it did 10 years ago, in the context of what I describe as a highly fragmented regulatory system with respect to capital markets?

Mr. Cowan: Yes, I do. That goes to the heart of what the CMSA and CMRA are designed to do, principally through data collection and the early identification of emerging threats, so they can be managed through the powers in the act. That’s also in coordination and collaboration with the other regulatory agencies.

A great example might be the asset-backed commercial paper crisis. In the affidavit from the Bank of Canada to the Supreme Court of Canada for the current hearing, there is a fair bit of information about this, and it’s a good example.

In the asset-backed commercial paper crisis, we had a situation where under provincial securities laws each of the provincial regulators was looking at these products in the context of whether they complied with provincial securities laws, were they being done on a proper basis, and largely around the perspective of sophisticated investors, which grants many exemptions. There was nobody charged with taking the overall view, as we added up all the different issuances, on what the threat was to Canada on a national scope. That is exactly what the CMSA is designed to do. It is to give the agency the data collection powers to identify those risks early on.

Senator Wetston: I have a follow-up question. I think it’s really important to appreciate the magnitude of that. We tend to think these kinds of crises do not have a significant impact on our country. We think that way because the financial crisis, while it affected us from an economic perspective, we did not have to face the kinds of banking issues that Europe and the U.S. faced, bailouts et cetera.

I will ask another question because the context is important from my perspective. I think the crisis was around a $30 billion which, in the size of an economy like Canada, could have quite an impact. It was resolved, but a lot of the paper went to consumers not just financial institutions or higher commercial level of investment.

It’s my understanding the first question that officials asked is, “What do we do? How do we coordinate this? How do we collaborate and get to the bottom of this?” If this crisis occurred today again would we, through this process, have a mechanism to be able to address it in a more efficient way, to understand what we need to do? Because in the asset-backed commercial paper, there were also sanctions with respect to a number of institutions flowing from how that occurred. Can you add a little more content to that from the perspective of how this would address those issues?

Mr. Cowan: The bedrock, the foundation of this is data collection and early identification. The statute does contain powers, for example urgent order-making powers, so people can take action as these threats to start to escalate. It is important, however, to put the CMRA and the CMSA in the context of the overall financial regulatory regime. That includes OSFI and the Bank of Canada but also the provincial securities regulators. Based on the early detection and the potential use of powers, the big thing is collaboration and co-operation. To have the data at the table and the ability of the appropriate agencies to take the appropriate action, depending on who has specific authority over the issue in question.

Senator Tannas: Thank you for your presentation. I’m from Alberta. It won’t surprise you I will ask a question from a skeptic’s point of view. You mentioned all of the other OECD countries have a national regulator. I don’t doubt that. I did some quick looking around and they’re all located in their capital cities.

For whatever reason, Toronto turned out to be the place we had to have our regulator, which is fishy to those of us who are in other places where capital is raised and invested because it won’t be national for as long as the regulator sits among a large robust group of players. I suspect that is why other OECD countries sensibly placed their regulator not in the financial centre.

What was the thinking? Why would somebody from Alberta with that kind of a cynical question ever support the idea that everything, including the decisions, has to emanate from Toronto?

Mr. Cowan: Senator, thank you very much for your question. I will provide additional detail but my initial answer is it is not located in Toronto.

The cooperative securities regulator, as published in the memorandum of agreement, has a comprehensive leadership structure placed in all of the participating provinces. The participating provinces did agree the CEO and the head office would be located in Toronto. That is a small portion of this. In addition, the memorandum of agreement sets out that there will be a deputy chief regulator in each region, together with a local office director in each office of the organization. It also says that any decision made in any office is binding throughout the entire cooperative system.

A decision made in the Calgary office is binding in Ontario, as it is binding in Prince Edward Island and the other participating provinces, if that was the case. For example, if Alberta was involved, that would be the case as well for any decision made there.

Senator Tannas: Again, why wasn’t the model of the other OECD countries followed with respect to locating a proposed national securities regulator in Ottawa-Gatineau, where it could truly function as a national securities regulator?

Mr. Cowan: The farthest I could go on that question is as a commentator on the political process. The memorandum of agreement was negotiated among the cabinet ministers and their staff in a comprehensive manner. For a variety of reasons I’m not privy to, that is what was decided. What is important to me is this is a distributed leadership model. It’s the leadership in each of the regions which has been highlighted as being extremely important to this the model. The entire structure is laid out in public.

From my perspective, it’s all about getting the organization up, proving that it works, proving the efficiencies. That’s the best recruitment tool. If ultimately Alberta, for example, decides to join, decisions made in Calgary will be binding throughout the system.

Senator C. Deacon: Mr. Cowan, I’m impressed to see the progress you’re making on an issue that, as I recall, has been talked about in this country for more than 30 years. It’s great to see progress being made because it’s so important, from my standpoint, in terms of how the risks are evolving and how the pace is evolving. They’re coming at us faster than they have in the past.

I’m excited by what I have heard. I think there is a lot of promise and thoughtful steps being taken.

I want to focus on one area I view as a risk in our economy because of the world that I come from, which is early-stage companies. It is encouraging we’re making sure we have the systems in place to make early-stage capital as available as possible throughout this country. Our entrepreneurs are coming from every corner of the country. We need to make sure that is efficient and swift in terms of process, but also regulated so the bad actors are kept out. They ruin it for all the best companies, as far as I’m concerned, any time a bad actor makes it through.

I want to speak to how you are managing that side of the equation or how you foresee managing that side of the equation, what you think the effects will have on the formation of early-stage capital for fledgling companies in this country and making sure we have that part of our economy as robust and strong as possible. That’s an important part of managing our long-term financial risks.

Mr. Cowan: I like to joke on this proposal or this project that I first heard about the quest for a Canadian national securities commission when I was in university. In fact, it goes back to 1935 when it was first mentioned in Parliament with the royal commission on price spreads, no doubt in response to many things going on south of the border with the 1933 and 1934 acts in the United States.

Nonetheless, the issue you raise is central to the proposed CMRA and central to me personally as someone who has worked at all levels of the capital markets and is interested and attuned to the challenges of small- and medium-sized financing. In particular, the comprehensive nature of the Canadian capital market system which, through a network of independent and bank-owned dealers and other market participants, has always punched above its weight in providing an ecosystem for small and medium-sized enterprises to graduate up through the ranks from the Venture Exchange, for example, to the Toronto Stock Exchange.

There are several things in this proposed agency that address that. First is the memorandum of agreement itself sets out, as the objectives for the agency, that capital formation and providing access to capital for businesses is very important as we consider regulation.

The next is the agency is being constructed in a way that makes sure regional perspectives, whether it be Nova Scotia or British Columbia, who may have a different experience or expertise around small and medium enterprise, are brought to the table and are very much part of the policy-making process to ensure that our constant goal of finding the right balance between risk and innovation and between regulation and capital formation is there and uppermost in everyone’s minds.

We are also currently in the organizational design for this agency. We are ensuring the policy-making process makes sure that everybody has a voice and can feed those ideas into the policy development process.

Senator C. Deacon: What do you think it’s going to take to get other provinces like Alberta, Quebec and Manitoba to come on board? A miracle? This is such an important national initiative. The competition is outside of Canada. It’s not between provinces in Canada. We have got to be very focused outward in making sure we have the most competitive economy. This is not something I need to convince you of, clearly.

What do you think it’s going to take? That national initiative is important. Whenever one of our provinces is not at the table, I think it’s unfortunate.

Mr. Cowan: We are closer than we have ever been on this project. The legislation is largely completed. There are some outstanding issues the participating provinces are working on. It’s now about the political will and commitment to get this over the goal line.

From my perspective, with five provinces, particularly with Nova Scotia stating its intention to join, we have more than enough critical mass to get this up and running and prove the efficiencies to both investor protection and capital formation that will be the hallmark of this agency.

I’ll take a miracle, but I’m convinced we will create one just by proving it works. I have all of these $1 bets around the country. I’m convinced that over time as we prove this works, others will be inclined to come on board.

The rest, of course, we’ll leave to the politicians.

Senator C. Deacon: A few others around the country will bet you a lunch and gladly pay. It’s something that will make a big difference in our country if you succeed.

Senator Wallin: Some of us have been working on this for a long time. Maybe I didn’t hear this in your earlier remarks: What has the finance minister of Canada said to you about this, if you can share?

Mr. Cowan: We have had an indication from the finance minister as well as his staff they are supportive of this initiative. They continue to support it as we build the organization.

Senator Wallin: Do you anticipate any other action? You are out there doing it. Do you expect any action on their part, say, in upcoming budgets? In these omnibus bills you often find little sentences somewhere on page 432 that say, “We are going ahead with . . . .”

Mr. Cowan: To your earlier comment, we’ll take great miracles, we’ll take small ones and we’ll take them wherever we get them.

We do have an outstanding Supreme Court decision. We are expecting the decision any week. The hearing was on March 22. The standard timeline is about six months to a decision. We’re looking forward to that. Assuming it’s a positive decision, I’m hopeful that will be a rallying point on the project.

Senator Wallin: Thank you.

[Translation]

Senator Verner: In order for you to be able to

[English]

— to put on record what we discussed earlier —

[Translation]

we spoke about the case before the courts involving Quebec and Alberta. As you know, there is no appetite at all in Quebec to be part of this organization. Moreover, the issue has been discussed for a long time. I was a colleague of the late Minister Jim Flaherty when the idea first saw the light of day.

You have told us that, even so, there is currently a good spirit of cooperation between the organization in Quebec and your own. Can you tell us more about that?

[English]

Mr. Cowan: Thank you. Central to the proposed agency, the CMRA, as set out in the memorandum of agreement is a mandate to work seamlessly and co-operatively with non-participating provinces. To that end I have reached out to the other provinces to build the foundation of relationships that would ultimately allow us to have that co-operation. The primary objective is ensuring operations are seamless for market participants wherever they may be located.

This works in multiple tiers. Primarily it is a government-to-government discussion right now, which is where the conversations are occurring. The intention and goal is to have co-operation.

[Translation]

Senator Verner: Can we conclude that, should the Supreme Court side with the provinces that do not wish to be part of the organization, that you will continue to cooperate to the same degree with Quebec or Alberta? I do not want to speak for the Albertans, but will the structure of your organization allow you to work with Quebec when they are not part of it?

[English]

Mr. Cowan: Yes, most definitely. Everything in the system, from organizational design to the principles and objectives set out in the memorandum of agreement, is designed to ensure seamless co-operation with non-participating provinces.

The Chair: Thank you very much, Mr. Cowan. That was a very interesting presentation.

Senator Wetston: I just want to emphasize something in this discussion. When Senator Tannas talked about the OECD, it’s important to understand where we fit in the global market. The last recession necessarily did not occur in Canada but we sure felt the impact. If that does not indicate, Mr. Cowan, a global impact of financial markets, I’d like you to comment on that.

I’d also like you to comment on the International Organization of Securities Commissions and provide a bit more information about where we stand globally. I think there are 104 members. Can you confirm whether we are the only country that does not have a national securities commission?

Mr. Cowan: Out of 104, I’m not sure we are the only one. My understanding is it’s variously described as the only OECD country or the only western country. I expect that from 104 there may be one or two others.

Senator Wetston: I can clarify that for you.

My colleagues here should know and understand I worked on this file for five years with Jim Flaherty and others. The memorandum of agreement is a document with which I have a fair familiarity.

The most recent question suggests the cooperative arrangement, which will be important. I’d like you to talk a little about the Canadian Securities Administrators so there is a full appreciation of what occurs now and what you think might be the result in the event that the Supreme Court upholds the memorandum of agreement and the continuation of the work on the CMRA.

We come from different parts of the country. Can you elaborate more on what that might look like in the event Quebec, Alberta and Manitoba decide not to participate in the CMRA should the Supreme Court confirm the legitimacy of the memorandum of agreement and the issues before the court?

Mr. Cowan: My first hope, of course, is ultimately those provinces decide to join. As I mentioned earlier, the memorandum of agreement is structured in such a way that they cannot only join if they choose to do so, but they slot right into the decision-making mechanism that has been outlined. It’s quite comprehensive in the scheme.

The Canadian Securities Administrators is currently the umbrella organization for the 13 different provincial and territorial securities regulators in Canada. The CSA has had many successes in forging harmonization and co-operation between provinces and territories. However, by its very design and nature, it has a structural limit to how far it can go. As capital markets increasingly ignore borders, get more complicated, move more quickly, are increasingly disrupted by technology, a uniform voice and a single entity, in my view, and I think certainly in the views of the framers of this project, will ultimately be far more efficient. This will allow us to overcome the structural limits in the current CSA structure.

For example, notwithstanding the work the CSA does, ultimately each province or territory makes its own decision and there is not the necessity of a single outcome. One of the inefficiencies in Canadian capital markets is while we have much harmonization in our rules, they are still different. That’s an inefficiency and a friction in capital markets. Capital markets, again, that are ignoring borders and moving increasingly at the speed of light.

In terms of how this would work going forward, one of the central mandates in the memorandum of agreement is to negotiate an interface mechanism with the non-participating jurisdictions, again with the goal of seamless operations for market participants.

Senator Tkachuk: The European Union, does each country have its own national securities regulator?

Mr. Cowan: The European Union has a complicated structure where they have both individual regulatory authorities but they also have a combined authority in Brussels and Paris.

Senator Tkachuk: That would be complicated.

Mr. Cowan: Yes. Twenty-eight members of that body.

Senator Tkachuk: I have always been supportive of a national securities regulator because I think it’s important for raising capital. But let’s look at what the countries that — Greece has its own national securities regulator. The Americans have a national securities regulator. Where did all these problems happen? In countries that have them. That’s not the solution, obviously. There has to be something else to it. Even though we’ll have a national securities regulator, that may put us in more jeopardy. It’s possible by the time we get our act together the thing is past and gone. That may be helpful because sometimes doing nothing is better than doing something. What did we learn from what happened in 2008 that the Americans did not do that they should have done, and the Europeans and the rest of the world, that may have prevented the problem? In other words, is there a way to prevent these kinds of problems?

Mr. Cowan: Just a couple of things. First, there have been similar arguments made against the national commission; Canada did well in the financial crisis. The need for a cooperative regulator — and I stress this is cooperative, not national, because we have a limited number of participants. I think it’s a flawed premise because there are so many variables and so many different things that bear on this. Our former Prime Minister said at Davos that probably the central feature is the fact we had a concentrated banking system that put us in a different position than other countries. I think it is a flawed premise to say because we did well in the financial crisis on a relative basis that the need for a cooperative securities regulator is not there. In fact, I’d go farther and say this is all about building the tool box, making sure we have the best tools to optimize the ability to move forward in the face of threats.

Looking at the United States in particular, for example, looking at the central role that AIG played. AIG was regulated by 50 state regulators, but nobody had a national perspective on what they were doing in writing those credit default swaps. The CMSA, the capital markets stability act, is specifically designed to give that national window with national data collection to detect and identify and mitigate these risks in the early stages.

Senator C. Deacon: Just to make sure, but I’m pretty certain I know the answer to the question, but the Investment Industry Association of Canada’s perspective on this is?

Mr. Cowan: They have been very supportive.

Senator C. Deacon: I would expect. I just wanted to make sure.

Mr. Cowan: They have publicly supported this and produced material on it.

Senator C. Deacon: Great. Thank you.

The Chair: Mr. Cowan, thank you very much for being here and thank you for being such a strong advocate for your position and such a balanced advocate as well. Not everyone is convinced around the table. That doesn’t mean your missionary work shouldn’t continue. Thank you very much.

(The committee continued in camera.)