May 8, 2003

Letter from M. Phelps to the Canadian Capital Markets Community

To: The Canadian Capital Markets Community

On March 4, 2003 Finance Minister Manley appointed the Committee I chair to make recommendations to resolve the long-standing debate on the structure of securities regulation in Canada. The Committee has been set up to take a fresh look at the issues free from the constraints that may be felt by government officials or regulators. Our task is to propose a securities regulatory structure that will be in the best interests of Canada.

My colleagues and I believe that it is important to Canada’s economic future that we come to the best possible answer to this question. Without vibrant capital markets we cannot have a strong national economy. It follows that we need to have the best possible structure for securities regulation, in the interests of investors, issuers and intermediaries alike. The prosperity of our country depends upon it.

I am attaching a short consultation paper that solicits your input on the questions that are before us. I strongly encourage you to respond. We are interested in knowing your experiences, good or bad, with the present system. In addition, your views as to what will best serve the national economic interest will be important both to us and to the policy makers who are responsible to take decisions.

The paper outlines a series of questions – the basic question of course is simply "What would be the best securities regulatory system for Canada?"

We are also interested in any views you may have on the underlying issues:

  • The key strengths and weaknesses of the current securities regulatory structure.
  • Whether there is effective enforcement for serious market malfeasance in Canada and how the structure of regulation affects enforcement.
  • How the securities regulatory structure affects the international competitiveness of Canada’s capital markets and, in the long run, the success of the Canadian economy.
  • Efficiency issues associated with the current structure, including cost and time consequences.
  • Regional or local requirements that must be met by an optimal regulatory structure.
  • The capacity of the current system to innovate and to adapt its policies effectively in a fast-changing market environment.
  • The lessons to be learned from the experiences of other countries.

We do not intend these topics to be limiting. If you have views in respect of other matters relevant to the structure of capital markets regulation, we welcome them.

I urge you to participate in this discussion of national importance. As the attached paper indicates, we would like to have your submission by June 30, 2003.

Yours truly,

Michael Phelps