The Canadian minister of finance recently announced that British Columbia, Ontario, Saskatchewan, New Brunswick and the Canadian federal government (the Participating Jurisdictions) have signed a memorandum of agreement formalizing the terms and conditions of a cooperative capital markets regulatory system (the Cooperative System). The publication of the memorandum of agreement is accompanied by consultation drafts of uniform provincial securities legislation and complementary federal legislation. Capital markets in Canada are currently regulated by separate securities authorities in each of the 10 provinces and 3 territories of Canada.

This recent announcement follows last year’s announcement that the governments of British Columbia, Ontario and Canada had agreed in principle to establish a Cooperative System. This July, New Brunswick and Saskatchewan agreed to join the Cooperative System. The announcement reiterates the federal minister of finance’s earlier invitation to the other provinces and territories of Canada to participate in the Cooperative System.

The memorandum of agreement signed by all the Participating Jurisdictions sets out the framework for the Cooperative System. This system is designed to increase investor protection through more consistent and active compliance activities and effective enforcement, to support efficient and globally competitive Canadian capital markets, to identify and manage systemic risk on a national basis and to allow the proposed single regulator to represent Canada at the international level on capital market regulation. The key features of the Cooperative System are:

  • The Cooperative System will have an oversight council composed of the minister responsible for regulating capital markets in each of the provincial Participating Jurisdictions and the Canadian minister of finance.
  • The Cooperative System will have a single regulator known as the Capital Markets Regulatory Authority (CMRA), which will be established jointly by the Participating Jurisdictions and operationally independent. The CMRA will operate under a single set of regulations, will be supervised by an independent board of expert directors and will administer the uniform provincial legislation and federal legislation described below. The CMRA will have a regulatory division responsible for CMRA’s policy, regulatory operations, advisory services and enforcement functions led by a chief regulator. It will also have an independent tribunal to adjudicate enforcement and other administrative proceedings. The CMRA will have an executive head office in Toronto and a nationally integrated executive management team. Each provincial Participating Jurisdiction will have a regulatory office in its jurisdiction that will continue to provide the services that such provincial securities regulators currently provide. The CMRA is targeted to be operational by the fall of 2015.
  • The legislative framework for the Cooperative System consists of two key pieces of legislation – a provincialCapital Markets Act (the Uniform Provincial Act) enacted in each Participating Jurisdiction and the federalCapital Markets Stability Act (the Federal Act):  
    • The Uniform Provincial Act will harmonize and modernize the existing securities legislation of the provincial Participating Jurisdictions. The provincial legislation will be “platform” legislation and detailed requirements on the subject matters will be provided in accompanying regulations to provide greater regulatory flexibility. The Uniform Provincial Act will include transitional provisions and be accompanied by implementation legislation.
    • The Federal Act enables the CMRA to make regulations to manage the systemic risks of the national capital markets and equips the CMRA to collect data and information to monitor capital markets. The Federal Act sets out the framework for the CMRA to regulate market structure entities such as trading facilities, market intermediaries and credit rating organizations. In addition, the Federal Act will modernize criminal offences related to the capital markets.

Copies of the federal announcement, memorandum of agreement, consultation drafts of the Uniform Provincial Act and the Federal Act and related documentation can be accessed here. Draft initial regulations for the Cooperative System are targeted to be released for public comment on December 19, 2014. Public comments on the draft provincial and federal legislation are due by November 7, 2014.