The Canadian federal government has now released a draft of its
proposed national Securities Act (the "Draft
Act"). It has also referred the Draft Act to the Supreme Court
of Canada for its opinion as to whether the Act is within the
legislative authority of the Parliament of Canada - in other words,
whether it is "constitutional". If implemented, the Draft
Act would, among other things, establish a national Canadian
securities regulatory authority (the "CSRA"). The
governments of Québec and Alberta have filed court
challenges in their provinces against the plan for a national
securities regulator, and Manitoba has so far declined to endorse
such a plan. All of the other jurisdictions appear to support a
national approach to securities regulation.
If the Supreme Court finds that the Draft Act is constitutional, it
is expected that the Government will move to have a final version
of the Act enacted by Parliament and the CSRA established by
This Flash provides a high level overview of the Draft Act. Davies
was pleased to have had the opportunity to provide comments to the
Transition Office on an earlier version of the Draft Act.
Highlights from the Draft Act
Who will be subject to the Act?
The Draft Act provides for a voluntary regime - each province and
territory would be entitled to "opt in" to the
Structure of the Act
The Draft Act is a "platform" style. It sets out
fundamental principles and rules but leaves detailed requirements
and exemptions to be set out in the regulations to the Act. Until
the regulations are released, it will be difficult to assess the
substantive differences between the Draft Act and existing
provincial and territorial securities legislation. The Government
has stated that the regulations (like the Draft Act) will be
largely based on existing provincial securities regulation. If
established, the CSRA would have the authority to make regulations,
subject to a public consultation and publication process, and the
consent of the Minister of Finance.
Establishment of the CSRA
The Draft Act would establish the CSRA as a self-funded, crown
corporation with a board of directors appointed by the federal
cabinet. The CSRA would report to parliament through the Minister
of Finance and be comprised of two divisions; a regulatory division
led by a chief regulator, and a securities tribunal that will
conduct enforcement hearings and be led by a chief
Financial Stability and Scope of
One of the stated objectives of the CSRA is "to contribute, as
part of the Canadian financial regulatory framework, to the
integrity and stability of the financial system." To support
this objective, the CSRA would have the power to gather information
from market participants and to share such information with other
regulatory authorities in Canada or elsewhere for the purpose of
contributing to the integrity and stability of the financial
The CSRA would have authority to regulate a broad range of market
participants, including dealers, advisers, investment fund
managers, exchanges, clearing agencies, SROs, credit rating
organizations, trade repositories and auditor oversight
organizations, as well as a broad range of instruments, including
exchange traded and over the counter derivatives.
The Draft Act provides for securities-related criminal offences
that are equivalent to those in the Criminal Code, such as
securities fraud, market manipulation, prohibited insider trading
and misrepresentation. These provisions would apply in all
jurisdictions, including those that elect not to opt into the Act.
Federal and provincial governments would have concurrent
jurisdiction over these criminal offences, although the provinces
will have a right of first refusal for prosecution of these
offences. The CSRA would have increased powers to investigate
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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