On September 8, 2014, the Department of Finance announced that the provinces of British Columbia, Ontario, Saskatchewan and New Brunswick as well as the federal government (the “Coalition”) entered into a Memorandum of Agreement that outlines the framework under which a Cooperative Capital Markets Regulatory System (the “System”) will operate. Accompanying the memorandum are drafts of proposed federal and provincial legislation all designed with the  goal of having a new capital market regulatory authority in place by 2015. Drafts of the proposed legislation are available here: http://ccmr-ocrmc.ca/

The purpose of establishing a cooperative system is to foster more efficient capital markets that will be more competitive globally and to ensure that securities laws are applied consistently. Having a cooperative system will also strengthen the ability to analyze systemic risk on a national basis and allow a single regulator to play an influential role in international capital market initiatives.

The new regime requires that all participating provinces and territories enact uniform legislation (currently known as the Capital Markets Act) that addresses all securities regulatory matters related to their jurisdiction. The Capital Markets Act is designed to update the current provincial and territorial legislation with a focus on flexibility and adapting to a national system of securities regulation. The draft federal legislation, the Capital Markets Stability Act, will address systemic risk in national capital markets, national data collection and criminal matters. Both the provincial and federal legislation have been released for public comment. The deadline to receive comments is November 7, 2014.

The System will be regulated by a single set of regulations administered by the Capital Markets Regulatory Authority (the “Authority”).  A regulatory division of the Authority will oversee policy, regulatory operations, advisory services and enforcement functions and a chief regulator will serve as the chief executive officer of the regulatory division, supported by deputy chief regulators. The enforcement of the national regulations would be implemented by a tribunal of adjudicators, independent of the government, who will be responsible for administrative and enforcement proceedings of the Authority. Proceedings will be held across Canada in English and French. The adjudicative tribunal will be empowered to make orders of national application under the federal Capital Markets Stability Act. The two divisions will collaborate in a Regulatory Policy Forum which will ensure that securities regulation and adjudication is delivered consistently in all respects in participating provinces and territories. 

The System would be governed by a Council of Ministers composed of the federal Minister of Finance and the provincial and territorial ministers responsible for securities regulations in their respective provinces. A board of directors will also be appointed to direct the Authority, which is comprised of independent experts in capital markets.

The regulatory division will be administered through local regulatory offices located in each participating province and territory and will deliver regulatory functions to local market participants and investors. Each local regulatory office will possess decision making authority based on common standards and practices. They will also advocate for the local needs of their region in the development of national policies. The goal is to ensure that the System is efficient and responsive in its delivery of regulation while benefiting from the regulatory expertise across the country in different industries and sectors represented in Canadian capital markets.

With this major development, Canada is now a step closer to national securities regulation. Stay tuned for further updates in future editions of Miller Thomson’s Securities Practice Notes.

Corey Yermus