Canada: Proposal For Canadian Cooperative Capital Markets Regulator: Infrastructure And Regulatory Authority

As we recently discussed, the federal government, Ontario, B.C., Saskatchewan and New Brunswick have agreed to implement a cooperative capital markets regulatory system intended to foster more efficient Canadian capital markets, increase investor protection and manage systemic risk.

Under the proposed cooperative system, participating provincial and territorial jurisdictions would enact uniform legislation addressing all matters in respect of the regulation of capital markets within their jurisdictions. Federal legislation, meanwhile, would address criminal matters and systemic risk across the country in respect of national capital markets and data collection.

A common regulator, the Capital Markets Regulatory Authority (CMRA), would administer the provincial and federal legislation and regulations under authority delegated by the participating jurisdictions, while a Council of Ministers (CoM) would oversee the CMRA and be accountable to participating jurisdictions for the exercise of the CMRA's regulatory powers.

Below, we take a closer look at the cooperative system's structure and governance framework.

Council of Ministers

The CoM would consist of the federal Minister of Finance and the Ministers responsible for the regulation of capital markets in each participating jurisdiction. The CoM would be responsible for, among other things, appointing the CMRA's board of directors, proposing legislative amendments in respect of the cooperative system, approving regulations made by the CMRA's board and providing regulatory policy oversight. The CoM would be co-chaired by the federal Minister of Finance and, on a two-year rotational basis, the Minister from each Major Capital Market Jurisdiction.

Appointments to the CMRA's board would have to be approved by "at least 50 per cent" of CoM members (presumably a tie results in approval), with the federal Minister of Finance and the Minister of each "Major Capital Markets Jurisdiction" holding a veto. A Major Capital Markets Jurisdiction is defined as a jurisdiction that represents at least 10% of the national GDP derived from financial services. Currently, this includes B.C. and Ontario, but would also include Alberta and Quebec should they elect to join the cooperative system.

At least 50% of CoM members and any one of the members from the Major Capital Markets Jurisdictions and the federal Minister would have to agree in order for the CoM to make a request to the CMRA's board to make a regulation. The MOA also outlines the voting requirements for such things as proposing amendments to provincial legislation, requests to the CMRA board to reconsider a regulation and the rejection of a regulation.

The CoM would also be responsible for appointing a nominating committee to recommend candidates for appointment to the CMRA's board and its adjudicative tribunal, both of which we describe further below.

Capital Markets Regulatory Authority

Under the cooperative system, the independent CMRA would have a board of directors, a regulatory division encompassing policy, regulatory, advisory services and enforcement functions and an adjudicative tribunal consisting of an independent tribunal. A regulatory policy forum would also exist within the CMRA for consultation on policy issues.

The CMRA would be responsible for administering the provincial Capital Markets Act and the federal Capital Markets Stability Act (CMSA), as well as exercising regulatory, enforcement and adjudicative functions.

Under the proposed CMSA, the CMRA would be responsible for, among other things (i) monitoring activity in capital markets; (ii) detecting, identifying and mitigating systemic risks related to capital markets; and (iii) coordinating Canada's international involvement in regulating capital markets. Notably, the CMRA also allows the Minister of Finance, in consultation with the CoM, to transfer the administration of any provision of the Bank Act or its regulations from OSFI to the CMRA. Considering OSFI's current ability to assess systemic risk, this provision may prove controversial.

Board of directors

The CMRA's board of directors would be composed of between nine and 12 independent directors (but only five during a transition period) and be responsible for, among other things, setting the CMRA's policy priorities and strategy, supervising the management of the CMRA's business and affairs other than matters related to the tribunal's adjudicative functions, appointing a chief regulator and approving deputy chief regulators and exercising the CMRA's authority to make regulations under the federal and provincial statutes.

Regulatory division

The regulatory division of the CMRA would be led by a chief regulator, accountable to the board of directors, who would be responsible for the management of the division's business and operations. Deputy chief regulators would be responsible for overseeing operations and staff, contributing to policy development and representing the regulatory division in their respective regions.

An executive committee, meanwhile, which would include the chief and deputy chief regulators, would act as the primary executive decision-making body for the regulatory division and provide input to the chief regulator in the discharge of his or her responsibilities, and provide a forum for the integration of regional and functional perspectives.

The CMRA's executive head office would be located in Toronto and include a nationally-integrated executive management team. Regulatory offices, meanwhile, would be afforded to all participating provinces and would have staff and resources commensurate with local capital markets activity and regulatory and enforcement demands. Regional regulatory offices would also continue to provide the range of services currently provided by provincial and territorial regulators and be authorized to make day-to-day decision on regulatory matters. 

While the chief regulator would be based in Toronto, deputy chief regulators would be based in each of the Vancouver and Toronto regulatory offices, as well as in the regulatory offices of other Major Capital Markets Jurisdiction. A deputy chief regulator representing Saskatchewan, Manitoba, Northwest Territories, Nunavut and Yukon (to the extent these jurisdictions participate in the new regime) would be initially located in the regulatory office in Saskatchewan, while a deputy chief regulator representing New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island would initially be located in the regulatory office in New Brunswick.


Members of the adjudicative tribunal would be appointed by the CoM on the recommendation of the nominating committee. The chief adjudicator, designated by the CoM, would be responsible for supervising and directing matters related to the performance by the tribunal of its functions.

Interface with, and accession of, non-participating jurisdictions

Non-participating jurisdictions may join the cooperative system by providing a separate completed signature page to the MOA to all participating jurisdictions. In the meantime, participating jurisdictions agree that the CMRA will use best efforts to implement an interface mechanism with non-participating jurisdictions.

The participating jurisdictions ultimately expect the CMRA to be operational in the fall of 2015.

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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