On August 25, 2015, the participating jurisdictions of the proposed Cooperative Capital Markets System (the Cooperative System) published for comment a revised consultation draft of the uniform provincial/territorial Capital Markets Act (CMA) and draft initial regulations. The comment period is open until December 23, 2015. Additional draft initial regulations will be published for comment in the coming months, including a harmonized set of prospectus exemptions and a fee regulation.

Who's Participating?

The governments of Canada, British Columbia, Ontario, Saskatchewan, New Brunswick, Prince Edward Island and Yukon have signed the Memorandum of Agreement regarding the Cooperative System.

What's New?

Consultation drafts of the CMA and the federal Capital Markets Stability Act (CMSA) were previously published for comment by the participating provincial jurisdictions in September 2014 (National Securities Regulator Moves Forward; Draft Legislation Published). The revised consultation draft CMA reflects the same structure and same general approach as in the initial consultation drafts. For example, the "platform" approach to capital markets regulation has been maintained, in which fundamental provisions of the law are set out in the CMA while detailed requirements are addressed in regulations, representing a significant change from the more prescriptive approach taken by the Ontario Securities Act.

There are, however, numerous changes and clarifications reflective of comments received from industry groups, investor advocates and law firms on the initial consultation drafts, as well as of ongoing policy development by the participating provincial jurisdictions. These changes are discussed in detail in the commentary accompanying the draft CMA, and include:

  • Modifications to certain terms and definitions including narrowing the definition of "market participant" and revising the definition of "misrepresentation" to be more in line with the Ontario and Saskatchewan securities acts;
  • Changes to provisions relating to tribunal review of trade repositories and clearing agencies, such that trade repositories are now subject to tribunal review while clearing agencies are no longer subject to a stay pending tribunal review;
  • Revisions to procedural requirements for auditor oversight organizations, including what information is required to be provided to the Chief Regulator for the Cooperative System and how confidential information is dealt with;
  • Various modifications to the insider trading and whistleblower provisions, including expanding protections to employees reporting internally to their employers and adding provisions regarding reporting of self-regulatory agencies;
  • Changes to provisions relating to regulatory proceedings, orders and exemptive relief, and the ability to vary or revoke decisions made under the CMA;
  • Modifications to compliance and enforcement provisions which provide clarity on the definition of investigator as well as broaden investigators' powers;
  • Changes to certain terms used relating to civil liability and the addition of clarifying language to the provisions dealing with privilege specifying that nothing in the CMA is to derogate from solicitor-client privilege; and
  • New provisions detailing the general and specific regulation-making authority under the CMA as well as other changes to the regulation-making process.

Draft initial regulations, which were not released with the initial consultation draft of the CMA, have also now been published. The draft initial regulations have been adapted from current national and multilateral instruments, forms and policies, but contain a variety of changes intended to fit them under the CMA and to establish a single set of requirements across the participating jurisdictions. They also contain new derivatives provisions based on those in Ontario's Securities Act, including some that are not yet in force. Prospectus exemption regulations have not yet been included, but are expected to be published in the coming months, or provisions reflecting the existing passport system, which is expected to be replaced with a new interface mechanism to be agreed upon with non-participating jurisdictions.

Non-Participating Jurisdictions

There remains some opposition to replacing the existing securities regulatory framework with the new Cooperative System, particularly in Quebec, Alberta and Manitoba. The Quebec government, which views the Cooperative System as encroaching on provincial powers, recently announced that it will ask the province's Court of Appeal to rule on the constitutionality of the Cooperative System. In Alberta, former Finance Minister Doug Horner and former Premier Jim Prentice had each publicly expressed concerns with the Cooperative System, while Alberta's newly-elected NDP government has yet to publicly state its position regarding the Cooperative System.

Timeline and Additional Information

The Cooperative System was originally intended to be operational in the fall of 2015, but with the December 23, 2015 deadline for comment on the revised draft legislation and initial regulations, it is clear the legislation will not be passed until at least 2016. The participating jurisdictions have not proposed a revised timeline or expected operational date. For further details on the Cooperative System as well as news and current information, refer to its website at: http://ccmr-ocrmc.ca/.