Like the grizzled but surprisingly spry Rolling Stones, a band of government officials, regulators, academics, market participants and lawyers regroups every decade or so and tours Canada asking if we want a national securities regulator. Many people say yes, Quebec always says no, and off everyone goes to court to see if the draft legislation is constitutional.

On November 9, 2018, the Supreme Court of Canada finally said yes. In the Reference re Pan-Canadian Securities Regulation (Reference), it held that:

  • The Cooperative Capital Markets Regulatory System (CCMRS) proposed by the governments of Canada, British Columbia, Saskatchewan, Ontario, New Brunswick, Prince Edward Island and the Yukon (Participating Governments) is constitutional; and
  • The draft Capital Markets Stability Act (CMSA) falls within the federal Parliament’s general power to regulate trade and commerce.

The proposed CCMRS has three main components. A model provincial and territorial statute (Model Provincial Act) deals mainly with the day-to-day aspects of regulating securities markets and participants. The draft CMSA focuses on preventing and managing systemic risk and provides for criminal offences relating to capital markets. Finally, the proposed Capital Markets Regulatory Authority (CMRA) would administer the coordinated regime under the supervision of a Council of Ministers, consisting of the ministers responsible for capital markets regulation in each participating province and territory, plus the federal Minister of Finance.

Now that the CCMRS has passed constitutional muster, what’s likely to happen? As we mentioned in our May 2018 bulletin, the Participating Governments (which now include Nova Scotia) have been working toward the launch of the CMRA even as the Reference made its way through the court system. And, as if there weren’t enough acronyms already, the Participating Governments have established a Capital Markets Authority Implementation Organization (CMAIO), which is working with a team from the Canadian Securities Transition Office (CSTO) and regulatory staff from the Participating Governments, to:

  • Draft regulations for the Model Provincial Act;
  • Map the processes to support harmonized rules in local jurisdictions;
  • Design and implement an organizational structure for the CMRA;
  • Develop the tools and protocols to manage systemic risk in Canadian capital markets; and
  • Build the information technology infrastructure to support the new system.

They also will need to develop protocols for working with the regulators in jurisdictions that do not join the CCMRS.

Once the Court’s decision has been fully digested, we can expect to receive a progress report from the CMAIO and an outline of its next steps. We also might see some of the remaining provinces and territories join the CCMRS within the next year or so. We believe, however, that we’re still at least a couple of years before the CCMRS is fully operational. We will continue to monitor progress of this initiative and update you as appropriate.