On April 16, 2015, the council of ministers (Council) for the proposed cooperative capital markets regulatory system (Cooperative System) announced that the Cooperative System is now expected to be operational by the fall of 2016, one year later than originally anticipated. The Council also announced that Yukon has agreed to join the Cooperative System and entered into an amended memorandum of agreement (Amended Agreement) with the Canadian government and the British Columbia, Ontario, Saskatchewan, New Brunswick and Prince Edward Island governments relating to the Cooperative System’s principal components. The Council also announced the members of the nominating committee for the board of directors (Board) of the regulatory authority (Authority) under the Cooperative System.
For more information on the Cooperative System, please see the various Bulletins posted on our website.
The original version of the memorandum of agreement entered into in August 2014 (Original Agreement) provided that participating jurisdictions would use their best efforts to publish draft initial regulations that would replace all existing national securities rules in the participating provinces and territories on or before December 19, 2014 and enact the uniform provincial and territorial capital markets legislation, Capital Markets Act (CMA), and new federal capital markets legislation, Capital Markets Stability Act (CMSA), (Consultation Drafts) on or before June 30, 2015. Based on that timeline, the participating jurisdictions expected the Cooperative System to be operational in the fall of 2015.
The Consultation Drafts were released in September 2014 and were open for comment until November 7, 2014 (subsequently extended to December 8, 2014). Extensive comments on the Consultation Drafts were received, suggesting that more robust consultation would be required for the CMA and CMSA, particularly given the significant changes to securities and capital markets laws that the Consultation Drafts contemplated and the difficulty of commenting on the Consultation Drafts without having the opportunity to review the initial regulations. For a summary of the issues raised in the comment letters, please see the following Bulletins:
- April 2015 Blakes Bulletin: Too Many Changes, More Consultation Required: Comments on Proposed Cooperative Capital Markets Legislation
- April 2015 Blakes Bulletin: Commenters Don’t Hold Back: Responses to Civil Liability and Enforcement Provisions of Draft Cooperative Capital Markets Legislation
- May 2015 Blakes Bulletin: Comment Letters on Proposed Federal Systemic Risk Legislation Raise Significant Concerns
The Amended Agreement provides that the participating jurisdictions will use their best efforts to publish the revised drafts of the CMA and CMSA (Revised Consultation Drafts) together with draft initial regulations by the summer of 2015 and enact the CMA and CMSA on or before June 30, 2016. Based on the revised timeline, the participating jurisdictions expect the Cooperative System to be operational in the fall of 2016.
The Original Agreement also contemplated that the participating jurisdictions would agree on legislation and other constating charter documents (CMRA Charter Documentation) that would set out the Authority’s structure, responsibilities and powers. The CMRA Charter Documentation has not been released for comment and the Amended Agreement does not provide a timeline for its release.
MORE LOCAL OFFICES
The Amended Agreement provides for the maintenance of an office of the Authority in each participating territory to address capital markets activity and regulatory and enforcement demands of Yukon and other territorial jurisdictions that may join the Cooperative System. The Original Agreement only provided for regulatory offices in each provincial participating jurisdiction.
NOMINATING COMMITTEE APPOINTED TO RECOMMEND BOARD OF DIRECTORS
The Board will supervise the Authority and be composed of a minimum of nine and a maximum of 12 directors. The Board will be responsible for, among other things, supervising the management of the business and affairs of the Authority, appointing the chief regulator and exercising the Authority’s power to make regulations. The Board’s members will be appointed by the Council, based on recommendations from a nominating committee.
Pursuant to the Amended Agreement, the nominating committee for the initial Board is composed of one member selected by each of the responsible ministers from a major capital market jurisdiction (Ontario and British Columbia and if applicable, Alberta and Quebec), Canada’s Minister of Finance, Saskatchewan’s minister and New Brunswick’s minister.
The Council appointed the following individuals as nominating committee members:
- Neil de Gelder (British Columbia)
- Susan Wolburgh Jenah (Ontario)
- Grant Kook (Saskatchewan)
- David Barry (New Brunswick)
- The Honourable Michael Wilson (Canada)
After the initial Board is established in the coming months, the nominating committee will be composed of:
- One member selected by each responsible minister of a major capital markets jurisdiction and Canada’s Minister of Finance, and an equal number of members selected by the Board from among its members
- One member selected by the provincial and territorial participating jurisdictions that are not major capital markets jurisdictions or if there are more than five provincial and territorial participating jurisdictions that are not major capital markets jurisdictions, two members
Under the Amended Agreement, the nominating committee’s members must be independent of the governments represented by the Council and possess appropriate qualifications and capital markets-related experience. The term “independent” is not defined in the Amended Agreement or the Consultation Drafts.
INTERFACE WITH NON-PARTICIPATING JURISDICTIONS
With the agreement of Yukon to join the Cooperative System, a majority of jurisdictions (provincial, territorial and federal) have now agreed to participate in the Cooperative System. However, given the fact that six provinces and territories, including Alberta, Manitoba and Quebec, have not agreed to join the Cooperative System, commenters on the Consultation Drafts had expressed concern about the manner in which the Authority will interface with non-participating jurisdictions. Commenters noted that unless there was reciprocal recognition among participating and non-participating jurisdictions, such as through a “passport” system, the system would be less harmonized and more fractured than is currently the case. Perhaps in response to this concern, Canada’s 2015 federal budget released on April 21, 2015, stated: “If jurisdictions choose to operate outside the Cooperative System, they will have a constructive partner in the new Authority, with the ultimate goal of providing efficient access to capital markets.” It is unclear whether Alberta’s recent change in government will change the province’s position on the Cooperative System.