On September 8, 2014, the Canadian government and the British Columbia, Ontario, Saskatchewan and New Brunswick governments entered into a memorandum of agreement (Agreement) formalizing the terms and conditions of the cooperative capital markets regulatory system (Cooperative System). Consultation drafts of the uniform provincial capital markets legislation (Provincial Capital Markets Act (PCMA)) and complementary federal legislation (Capital Markets Stability Act (CMSA)) that are proposed for enactment were also released for public comment (Consultation Drafts).
The Agreement follows the September 19, 2013 agreement in principle among the British Columbia and Ontario governments and the federal government to establish the Cooperative System (see our September 2013 Blakes Bulletin: Canadian Federal Government, Ontario and British Columbia Announce Cooperative Capital Markets System), which was amended by the July 9, 2014 amended agreement in principle among the Saskatchewan and New Brunswick governments and the federal government pursuant to which Saskatchewan and New Brunswick joined the Cooperative System (see our July 2014 Blakes Bulletin: Saskatchewan and New Brunswick Join the Cooperative Capital Markets Regulatory System).
The Agreement reflects the Supreme Court of Canada’s 2011 decision that the federal government's previously proposed legislation establishing a national securities regulator was unconstitutional, as falling outside federal jurisdiction (see our December 2011 Blakes Bulletin: Supreme Court Finds Against National Securities Regulator). The Agreement provides that each jurisdiction is acting within its constitutional jurisdiction and is not surrendering its own jurisdiction over the matters in the Agreement. The Agreement contemplates that one single regulator would administer provincial and federal legislation under authority delegated by each participating jurisdiction.
The PCMA, which will be proposed for enactment by each participating province and territory, addresses matters of provincial or territorial jurisdiction in the regulation of capital markets and would replace existing Securities Acts in each of the participating provinces. While the PCMA retains certain key components of current provincial securities legislation, it introduces a number of new elements. Similar to current provincial securities legislation, it addresses requirements relating to recognized and designated entities, registration and prospectuses, continuous disclosure and proxy information circulars’ requirements and issuer bids. In some cases, the provisions are based on existing British Columbia legislation, in other cases the provisions are more closely modelled on that contained in the Ontario legislation. One part of the PCMA addresses trading in derivatives, based on the yet to be proclaimed provisions from the Ontario Securities Act. New provisions are also proposed with respect to a number of matters, including regulating market conduct through the introduction of whistleblowing provisions and prohibitions against benchmark manipulation.
The PCMA continues and accelerates the trend to delegate the development of securities legislation in the form of regulations to be enacted by the regulator as opposed to being contained in legislation passed by provincial legislations.
The complementary federal CMSA addresses systemic risk in national capital markets, national data collection and criminal law matters. While the criminal law provisions of the CMSA generally mirror existing Criminal Codeoffences relating to securities, the CMSA has created certain new criminal offences (including an offence for benchmark manipulation) and several provisions of the CMSA are drafted more broadly than the Criminal Code.
Comments on the Consultation Drafts may be submitted until November 7, 2014. Given the breadth of these two significant pieces of legislation, one at the federal level with many novel provisions and one at the provincial level which will replace existing securities legislation and provide the legal framework for all securities regulation in the four provinces, this appears to be an ambitious deadline for comments.
Under the Agreement, the participating jurisdictions have agreed to use their best efforts to publish draft regulations (which would replace all existing national securities administrator rules in the participating provinces) for public comment by December 19, 2014, enact the PCMA and CMSA by June 30, 2015 and have the Cooperative System operational in the fall of 2015. The participating jurisdictions have reiterated their invitation to participate in the Cooperative System to the six provinces (Alberta, Manitoba, Quebec, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador) and three territories which have not agreed to participate in the Cooperative System.
Given the scope of the new proposed legislation at both the federal and provincial levels, Blakes plans to publish bulletins regarding various aspects of the proposed PCMA and CMSA, particularly having regard to changes to existing provisions, over the following weeks.