One has to wonder how serious the Crawford Committee is about this recommendation. Its report contains no cost-benefit analysis on the numerous recommendations in their report which, if implemented, would lead to a new explosion in regulatory and compliance costs.

In fact, it is quite clear that the Crawford Committee ignored the advice of a former Chair of the OSC, James Baillie, who commented, “Regulate only to the minimum extent needed to respond to an identified policy concern. This might seem so obvious as not to require a statement, but I am constantly amazed at the extent to which regulatory initiatives are adopted in various aspects of our society without articulating this criterion or using it as a test to determine the appropriate scope of the regulation.”

The Crawford Committee has recommended new regulation in a number of areas without articulating what the actual policy concern is. For example, its report fails to explain why any organization that chooses to regulate the standards of practice and the business conduct of its members should be recognized and subject to OSC oversight.

While emphasizing the need for national regulation, the Crawford Committee has actually driven another nail into the coffin of the latest drive for a national regulator by showing a complete lack of sensitivity for regional interests. Stephen Sibold, the Chair of the Alberta Securities Commission, noted in a recent speech that junior companies often struggle to find the statutory minimum of three directors who are willing to serve on their boards.

Ignoring this reality, the Crawford Committee stated that all companies should have audit committees, and that the OSC should have rule-making authority over their functions and responsibilities. It also expressed the belief that the OSC’s counterparts in other provinces and territories should have similar powers so that they all can work together to establish common standards.

The Crawford Committee scoured the globe in its search for new powers for the OSC, and pulled together a huge arsenal. However, the committee clearly ignored the checks and balances that exist in the structures of many regulators to ensure excessive and abusive use of their powers is minimized.

For example, in the UK’s new Financial Services Authority, administrative enforcement decisions are made by the Regulatory Decisions Committee, which is operationally independent of both the Authority’s Board and staff. In Hong Kong, in advance of their securities commission being granted stronger administrative powers, an independent body called the Process Review Panel was established to review the commission’s internal practices and audit its actions to ensure that procedures were followed properly and given effect to due process.

Ignoring its own recommendation on cost-benefit analysis was not the only act of hypocrisy in the Crawford Committee’s recommendations. The committee recommended that the Office of the Superintendent of Financial Institutions should not have the power to override generally accepted accounting principles (GAAP) for federally regulated financial institutions.

One of the reasons cited for this recommendation is concern that the use of this override can distort comparability of reported results among financial institutions and with other entities. However, there was no recommendation to remove the OSC’s rule-making powers over accounting standards that provide it with a similar override. By using its override powers, the OSC would impair comparability of reported results between reporting issuers in Ontario and other Canadian issuers.

Oddly enough, one group that will benefit from the implementation of the Crawford committee’s recommendations is retired administrators of non-profit hospitals. The committee recommends that mutual fund managers be required to establish governance bodies, and suggests this group as a source of possible directors.

The Crawford Committee had a real opportunity to make Ontario a more attractive place to invest by proposing smart regulation – focused towards clearly identifiable problems for which no market solution exists and designed to minimize the cost burden imposed. They blew it. Instead, it proposed taking Ontario further down the path towards a world-class reputation for spiraling regulatory and compliance costs.