The Canadian Securities Transition Office (CSTO) released its
Transition Plan for the Canadian Securities Regulatory
Authority (the Transition Plan) on July 13, 2010. This follows
the release by the CSTO of the draft Securities Act (the
Draft Act) on May 26, 2010. The federal government has referred the
Draft Act to the Supreme Court of Canada for an opinion as to
whether such legislation is within the legislative authority of
Parliament. If the Supreme Court finds that it is, the intention of
the federal government is to move into the implementation phase,
with a targeted launch date of July 1, 2012 for the new Canadian
Securities Regulatory Authority (CSRA).
While the Draft Act is before the Supreme Court, the Transition Plan will form the basis for discussions between the federal government and the 10 provinces and territories (all but Alberta, Manitoba and Québec) that have agreed to participate in the planning process. Each of these participating jurisdictions will nominate members to the CSTO's Advisory Committee of Participating Provinces and Territories. Representatives of the securities regulators will form a Participating Regulators Committee to provide further advice to the CSTO. By September 2010, each of the participating jurisdictions will be asked to enter into a "Development Agreement" to continue to participate in the development of the CSRA. Subsequent agreements to be negotiated in 2011 will provide for the actual commitment to proceed with the CSRA.
The Transition Plan refers to itself as a "roadmap", with the details of implementation to be worked out through consultations with the two advisory committees referred to above. The following are among the stated key points in the Transition Plan:
- Vision for the CSRA: Seeking the best outcomes for all of Canada, by establishing national standards that meet international expectations and applying them at the local level with an understanding of their effect on markets and investors.
- Regulatory Approach: A risk-based, outcomes-focussed approach, identifying and responding to threats to investors and the integrity and stability of capital markets.
- Governance: CSRA would be a self-funded Crown corporation, reporting annually to Parliament through the federal Minister of Finance. The CSRA will have the following key governance features:
- CSRA would be made up of two divisions:
- Regulatory Division headed by a Chief Regulator, with accountability to the Board of Directors
- Canadian Securities Tribunal headed by a Chief Adjudicator, with accountability to the Board of Directors for administrative matters, but not for its adjudicative decisions or how it conducts hearings
- Board of Directors would be responsible for:
- setting policy direction for the CSRA
- overseeing the CSRA's executive and operations
- making regulations with the consent of the federal Minister of Finance
- Council of Ministers (federal Minister of Finance together with ministers appointed by each of the participating provinces and territories) will meet annually. It will have input on key appointments and policy making, will review CSRA's annual reports and statements of priorities and will participate in a five-year review process.
- Regulatory Policy Forum would be led by the Chairperson of the Board of Directors and will be comprised of senior officials of the Regulatory Division, the Tribunal, the Council of Ministers and Investor Advisory Panel. It will play a consultative role in the CSRA's policy making.
- Investor Advisory Panel consisting of persons with knowledge of, and experience with issues relevant to, investors in securities will represent the interests of investors by advising the Chief Regulator on the CSRA's regulations, policies and practices.
- Location of CSRA: The Transition Plan addresses the much discussed question of where the CSRA would be located by referring to regional and local offices across the country. There is no mention of where the Chief Regulator or Chief Adjudicator would be based, only that there would be significant reliance on electronic communications and on travel by CSRA representatives.
Under the proposed timeline, the Board of Directors will be
selected by October, 2011, before the Draft Act is passed by
Parliament. The CSTO will recommend the initial set of regulations
to the Board of Directors, to ensure that they can be in place
before the launch date of July 1, 2012. These regulations would be
derived primarily from existing national instruments and provincial
and territorial rules. The CSTO also plans to develop regulations
and processes to ensure the continuity of the enforcement of
securities laws. This will include ensuring that past enforcement
orders are continued, that on-going investigations and proceedings
are continued and that proceedings and prosecutions in respect of
past conduct can be brought and sanctions imposed once the CSRA is
A full text of the Transition Plan is available at http://www.csto-btcvm.ca/en/transition-plan.aspx.
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