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ing NewsM Issue 98 December 2002 Harold MacKay has a message for ugaming On November 15, 2002 Harold Publicly traded gaming companies MacKay, a Special Advisor to Fi- such as Great Canadian Gaming, nance Minister John Manley, pre- IGT, and Bally Gaming are subject sented the minister with hs recommen- to both bodies. dations on a process to be used to Inherent to the responsibilities of determine the best securities regulatory each is an obligation, while ensuring system for Canada. Securities regula- the probity of their industries, to Ivan Sack tors being those agencies - such as the foster confidence by removing arbi- Complaints about direct costs in- Ontario Securities Commission, trariness; to basing decisions upon whtch each province and territory has curred in dealing with multiple ju- rules which are clearly laid out and risdictions; and to do background checks on, and en- interpreted; to identify and minimize sure the continued suitability of com- unnecessary impediments to com- the indirect costs which companies panies to trade on Canada's stock ex- merce; and to promote growth within incur as they set aside staff and changes. In particular, MacKay fo- the economy. travel to respond to regulators. cused his attention on a process Much of this will sound familiar to through which the minister could en- Security regulators operate in 13 provinces and territories. There are both operators and suppliers within sure that Canada has a modem and our industry and, we suspect, to many efficient securities regulatory system. self-funded and autonomous securi- ties commissions in Quebec, On- gaming regulators. So why you ask, should someone tario, Manitoba, Alberta, and British While MacKay did not identify this, involved in the gaming industry care Columbia. The remainder are struc- we would add to the list of complaints about recommendations made to re- tured within, or report to government the exclusion of small entrepreneurs. form securities commissions? line departments. Wearing our other hat, that of confer- Because securities commissions and Within the gaming regulatory sector ence organizer, we every year invite gaming commissions do many of the there are self-funded and au- companies to exhibit their products on same things and have many of the tonomous commissions in Nova Sco- our exhibition floor. In our follow up same impacts upon their client groups. tia, Quebec, Ontario, Manitoba, calls we are often told by smaller com- Each has jurisdiction over a province Saskatchewan, and Alberta. Regu- panies that they would like to sell to or territory and each, since it performs lators in the remaining jurisdictions casinos and lotteries but that they can- a quasi-judicial role having been given are, like their securities colleagues, not afford the money and time it takes the right to make independent deci- structured within, or report to gov- to become registered without first hav- sions, is a gatekeeper into an industry. ernment line departments. ing an order in hand, and that no one Each writes its own regulations, does MacKay identified a range of prob- will commit to an order without their its own background checks, ensures lems with the present cross-country first becoming registered. compliance with its regulations, and system of securities oversight: For example, it costs $5,000 plus each establishes a fee whch its client Excessive cost and time delays background investigation costs to be- group must pay for the services which come registered in Manitoba and it performs for it. that flow from complymg with different laws, regulations, rules $15,000, plus investigation costs, to Both are also subject to many of the and policies. become registered in Ontario. Mani- same criticisms from their client toba refunds a portion of its $5,000 fee groups regarding cost, duplication, and Complaints about the different if its costs do not total this amount the time taken to make decisions. One interpretations which various while Ontario does not. hears the question of who regulates cornmissions give to regulations which appear the same. Many companies, large and small, also the regulators? complain about the open-endedness of -Page 2 Canadian GAMING News - the investigative process. About the paragraph which talks about how the Earth Future Foundation and the fact that, even after you pay your ini- casino, which by the way will hap- government keeping what was left tial fee you still have no idea of how pen to put millions into the govern- over. much extra you may be required to pay ment's pocket, will stimulate local Since PEI has a very small population, for the background check. industry. We then come across some this lottery would give it the ability to Canada's securities regulators were of these local companies and are told get around constraints associated with initially urged by their industry to rec- that they are not able to become only being able to sell tradtional lot- ognize one another's registrations - a involved. tery products into its own market. practice commonly known as reciproc- There is obviously a paramount need As this Internet lottery had the poten- ity. The advantage was that if your for gaming regulators to ensure the tial to poach lottery players from other background check was completed in integrity of games, operators and provinces, the Interprovincial Lot- Alberta and you were registered to suppliers. However, this is not the tery Corporation (ILC), on Septem- trade your company's stock on the issue here. The issue is will this ber 7, 2000, filed an application with Alberta exchange you, for example, integrity be ensured by regulators the Ontario Superior Court aslung for would not have to repeat this exercise operating independently of one an- a declaratory judgment to the legality to have your shares traded on the other (with an annual conference for of the Prince Edward Island lottery. Toronto exchange. informal exchanges); by separate When the government of PEI indcated Securities regulators, however, op- regulators who ease the burden for that it would also make a reference, posed this saying that they could not suppliers by reducing duplication, or the ILC placed its court action on hold delegate, or abdicate their responsibili- will this integrity be ensured by one pending a decision by the PEI Court of ties to the legislatures to which they national gaming regulator as may Appeal. happen in the securities industry? are ultimately accountable. Commis- Up until now all governments, PEI sions which considered themselves to Unlike in the securities industry, this included, have interpreted the Crimi- have 'high' standards also feared they decision will not be forced upon nal Code to mean that only provincial might be forced to accept information gaming regulators and politicians by governments, or their agents, can op- from others they considered to have multi-billion dollar companies erate 'lottery schemes' in Canada. 'lower' standards. threatening to walk away. Quite the They have also agreed that Section Regulators are also very strong profit contrary. Most politicians with 207 (3) (c) prohibits all governments centres for government. Virtually ev- gaming responsibilities are not there from using computers to conduct ery regulator in the country collects long enough to initiate such a move draws, and have agreed that provincial fees which exceed its operating costs. and it is unhkely that it will come governments can only sell within their Each government would lose a portion from large suppliers since the exclu- own boundaries. The Interprovincial of this if companies could shop juris- sionary nature of the present system Lottery Corporation was then created dictions and go to the lowest bidder. works to their advantage. In our to sell tickets, such as 6/49, across all system, a call for change can only jurisdictions. Despite opposition from the regulators, come from the regulators them- some politicians, including Mr. Man- selves. Forward looking individuals On April 24, 2002 the PEI Supreme ley, are today seekmg to move in the who would perhaps agree to create Court, in an unanimous decision, de- direction that industry wants to go - their own Wise Person 's Committee cided against the Earth Lottery with one national securities regulator. to make recommendations as to how that province's Minister of Finance, They are considering a national securi- regulators can do more to open up the Honourable Pat Mella saying that ties regulator, not because they have access to the Canadian gaming in- 'the province will live with the ruling'. become centralists, but because large dustry. All thought this meant that this initia- corporations are threatening to give up tive was dead. their registrations on Canadian stock PEI still pursues Not so. The province had a 30-day exchanges and move to the New York period to file a motion of appeal with and NASDAQ exchanges. Internet lottery the Supreme Court of Canada and it By the way, we hope that Mr. MacKay Last fall and winter we wrote of a dld this on May 24. has not been paid a lot to write his proposal by the Government of In its motion it has requested that the report as, having identified the problem Prince Edward Island and Lottery Supreme Court review two issues. quite succinctly, all he has done is Management Inc., to create an In- The first is if the Internet lottery would propose a WisePerson 's Committee to ternet lottery. The lottery would be be conducted and managed in Prince study it further. And then again, there known as the Earth Lottery. Edward Island and the second is if the are times when thls can be considered lottery would be operated on or an achievement. As we understand, the government would contract with Lottery Man- through a computer.

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