The Canadian, British Columbia, Saskatchewan, Ontario, New Brunswick, Prince Edward Island, and Yukon governments continue working toward the launch of the Capital Markets Regulatory Authority (CMRA). In that respect, on May 8, 2018 they published for comment draft prospectus and related registration exemption regulations under the proposed provincial-territorial Capital Markets Act. The comment period is open until August 7, 2018.

Concurrent with the publication of these draft regulations, however, the participating governments acknowledged that the CMRA will not be ready for launch by the end of 2018, as previously hoped. Due to the significant hurdles faced by the CMRA, this latest in the series of launch delays likely does not come as a surprise to industry participants.

For one thing, it remains uncertain whether certain fundamental aspects of the CMRA’s proposed regulatory system are constitutional. Although the Supreme Court of Canada will be the final arbiter of this question, the Quebec Court of Appeal ruled in May 2017 that the proposed system is unconstitutional in certain respects, particularly with respect to the establishment of a pan-Canadian securities regulator under the authority of a centralized regulator. The Supreme Court heard an appeal from the Quebec decision on March 22, 2018 and likely will release its judgment by the end of September.

Also, unless at least Alberta and Quebec (with their large capital markets) opt into the system, there are concerns that the CMRA could further fragment securities regulation in Canada. For example, the C.D. Howe Institute’s September 2017 report concluded that the CMRA’s inability to achieve participation from all jurisdictions would constrain its ability to, among other things, meet its harmonization and enhanced enforcement objectives.

While we familiarize ourselves with the draft CMRA regulations that have been published to date, we are in wait-and-see mode. If the Supreme Court of Canada overturns the Quebec Court of Appeal’s decision, then the CMRA will gain momentum and a push could be made to bring additional provinces on-board. Until then, the proposed CMRA continues to tread water.