As part of a push for the harmonization of the current provincial capital markets legislation across Canada and the establishment of a single capital markets regulator, the federal government and the governments of Ontario, British Columbia, Saskatchewan and New Brunswick announced on September 8, 2014 that they have signed a memorandum of agreement formalizing the terms of a Cooperative Capital Markets Regulatory System (the "CCMR"). The announcement was accompanied by consultation drafts of the proposed federal and provincial legislation.
As discussed in an earlier BLG Alert, the CCMR represents a response to the Reference re Securities Act in December 2011, where the Supreme Court of Canada indicated that "each level of government has jurisdiction over some aspects of the regulation of securities and each can work in collaboration with the other to carry out its responsibilities".
THE PROPOSAL
The provincial and federal acts will be administered by a new regulator, the Capital Markets Regulatory Authority (the "Authority") which will act in accordance with a single set of regulations. The Authority will be comprised of a Regulatory Division responsible for the policy, regulatory operations, advisory services and enforcement functions and an independent Tribunal which will adjudicate enforcement and administrative proceedings. Each participating jurisdiction will have a regulatory office that will continue to provide the services provided by securities regulators today.
Supervisory oversight of the Authority will be provided by an independent board of directors comprised of a range of capital market experts from across the various regions of Canada. The board is in turn accountable to a Council of Ministers comprised of a Minister from each of the participating jurisdictions and the Minister of Finance of Canada.
The uniform Provincial Capital Markets Act, which will be enacted by each participating province and which will replace existing provincial securities legislation, purports to harmonize the approaches taken by the various signatory provinces. The complementary federal Capital Markets Stability Act addresses those areas under federal jurisdiction, equipping the Authority with national data collection powers to monitor activity in capital markets and providing the Authority with the requisite tools to "manage systemic risk related to capital markets on a national basis". The federal statute will also enact capital markets related offences currently included in the Canadian Criminal Code. Both the provincial and federal statutes empower the Authority to make regulations subject to the oversight of the Council of Ministers.
While the proposed Provincial Capital Markets Act is largely consistent with existing provincial securities laws, it adopts a "platform approach" to capital markets regulation. This involves setting out the broad strokes of capital market law in the Provincial Capital Markets Act, while reserving the detailed requirements (including some of those currently set out in provincial securities law) for the regulations to be adopted by the Authority. This approach seeks to promote regulatory flexibility, better allowing the Authority to respond to new challenges. Draft initial regulations, which we expect to be consistent with the existing national instruments, are scheduled to be released by December 19, 2014.
The proposals were accompanied by a backgrounder and commentary which provide a comprehensive overview of the CCMR and the new proposals. Comments on the proposals will be accepted until November 7, 2014.
CONCLUSION
The federal government and four provincial government signatories have developed the CCMR to address the perceived inefficiencies created by Canada's current system of multiple securities agencies with a view to "foster more efficient and globally competitive capital markets" subject to common legislation and a single regulator. Although the signatories have again renewed their invitation for other provinces and territories to participate, it remains to be seen whether additional Canadian jurisdictions join the CCMR.
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