Canada: New Cooperative Capital Markets Regulatory System: Proposed Changes To Regulatory And Criminal Enforcement

A memorandum of agreement between the federal government and the governments of British Columbia, New Brunswick, Ontario, Prince Edward Island and Saskatchewan (Participating Provinces) formalizes the terms and conditions of the new proposed cooperative capital markets regulatory system (Cooperative System), which will be administered by a single Capital Markets Regulatory Authority (Authority). For more information on this, please see our September 2014 Blakes Bulletin: Cooperative Capital Markets Regulatory System Agreement and Draft Legislation Released.

Blakes is publishing a series of bulletins regarding various aspects of the proposed Cooperative System. This bulletin focuses on how the Cooperative System will affect substantive and procedural aspects of regulatory and criminal securities enforcement. Our bulletin addressing the civil enforcement aspects of the proposed Cooperative System can be found here.

Consultation drafts of the federal Capital Markets Stability Act (CMSA) and the uniform Provincial Capital Markets Act (PCMA) were released in September for public comment. The consultation period will end on December 8, 2014.


If enacted in their present form, the CMSA and the PCMA will replace the current enforcement provisions of the Securities Acts of the Participating Provinces, and will incorporate certain offences that are presently set out in the Criminal Code into the draft CMSA.

The draft PCMA provides the tribunal established by the Authority (Tribunal) with powers that are not conferred on current securities commissions, such as the review and extension of its own cease trade and freezing orders, and the expansion of the categories of orders that can be issued in the "public interest." Expanded investigative powers are also contemplated, with fewer restrictions on communicating information related to investigations.

With a view to reducing systemic risk, the draft CMSA incorporates expanded offences for securities fraud and falsification of securities documents. It also includes a new offence related to the manipulation of financial benchmarks. Both the CMSA and PCMA provide enhanced protection to cooperating witnesses in investigations of securities-related crimes.


Parts 10 and 11 of the draft PCMA confer certain authority on the Tribunal and address matters of enforcement. The provisions augment enforcement and investigative powers with a focus on achieving a common approach across Participating Provinces.

Information that the Authority obtains from surveillance, complaints, compliance reviews and administrative investigation will be available for use by its personnel across the country in a common database. The Authority will also be able to allocate enforcement resources and expertise across the Participating Provinces. The consolidation of enforcement under the Authority will facilitate cooperation with law enforcement and other regulatory authorities (both foreign and domestic), who will no longer need to coordinate with as many different regulators. Orders obtained from the Tribunal under the PCMA will apply across participating jurisdictions, while orders obtained under the CMSA will apply nationally, all without the need for agreement amongst multiple regulators.


The draft PCMA provides the Tribunal with considerable powers, some of which are not conferred on the current securities commissions. For example, the draft PCMA proposes that the Tribunal may, without prior notice, issue cease trade orders (section 87) and freeze orders to preserve funds, securities or other property (section 91). Such orders are presently reviewable by the court in the first instance. Under the draft PCMA, the review power has been shifted to the Tribunal with a view to consolidating enforcement jurisdiction. The categories of orders that the Tribunal is empowered to make in the "public interest" have also been expanded to include prohibitions from engaging in investor relations activities, and from acting in a management or consultative capacity with respect to activities in the securities market (section 89).

The ability for orders in the public interest to be made on consent has also been added, which could provide regulators with a new option when approaching settlements. In a change across all participating provinces, the draft PCMA would also enable the Tribunal to order the payment of disgorgement or restitution upon a determination following a hearing that a person has contravened capital markets law (section 90(2)). This opens the door for compensation to investors without resort to civil actions.


The changes to investigative powers contemplated by the draft PCMA differ in each of the Participating Provinces because of existing differences in the governing legislation. For example, under the draft PCMA, the Chief Regulator can order "that a market participant provide the Authority with any information, record or thing in the market participant's possession or under its control" without starting a formal review or investigation. No such power exists under the current Ontario or Prince Edward Island legislation, although it does in British Columbia, Saskatchewan and New Brunswick. The very definition of a "market participant" has also been significantly broadened. See our November 2014 Blakes Bulletin: New Proposed Provincial Capital Markets Legislation: What it Means for Registrants and Other Market Participants for more details.

In contrast to the current legislation in Ontario and Prince Edward Island, investigation orders made by the Chief Regulator no longer include mandatory restrictions on communicating information related to the investigation. A change that has been implemented across all participating provinces is the provision for a judge or justice to order that a clearing agency, marketplace or self-regulatory organization provide the names of all persons or entities who traded in a particular security during a particular period. This change would expand the Authority's ability to investigate allegations of market manipulation and insider trading.


The draft legislation contemplates that securities offences that are presently set out in Part X of the Criminal Code will be moved into Part 5 of the CMSA. The draft CMSA criminal provisions modernize, refine, and expand these offences, reflecting the Authority's mandate and focus on systemic risk. For example, the offence for securities fraud now expressly includes conduct relating to "a derivative or the underlying interest of a security or derivative." An expanded forgery offence addresses the falsification of securities or derivative-related documents, including the use of trafficking or possession of such forged documents. A new offence relates specifically to the manipulation of financial benchmarks. Every person commits an offence "if they provide another person with information for the purpose of determining a benchmark knowing that, or being reckless as to whether, the information is false or misleading" or if they "engage in conduct relating to a benchmark with the intent to produce a false or misleading determination of the benchmark."


Like the PCMA, the CMSA contains measures designed to promote "voluntary witness cooperation" or whistleblowing in investigations of securities-related crimes. These measures include the creation of an offence for "retaliation" against employees who provide information about the commission of a Part 5 offence to the Authority or other law enforcement officials, and protections for whistleblowers from civil liability. Notably, these provisions do not go to the lengths of U.S. whistleblower incentives which include, in some circumstances, the making of significant monetary awards to voluntary witnesses.


As was previously the case under the Criminal Code, the attorney general of Canada and the provincial attorneys general will have concurrent jurisdiction over the prosecution of these offences and they will be tried in Superior Courts.

The backgrounder to the legislation asserts that "[t]he inclusion of criminal offences and additional production order powers in the CMSA will better position the Authority to contribute to the investigation of capital markets criminal offences" and subsection 6(1)(d) indicates that the Authority's mandate shall be to "provide leadership and coordination in enforcing criminal law related to capital markets." However, the scope of the role the Authority will play in investigating securities-related crimes and how this role may differ from or overlap with the roles of other law-enforcement authorities remains to be seen.


The ongoing public consultation process could result in substantial revisions to the draft CMSA and PCMA. The platform approach that has been taken in the draft legislation could also result in other important changes to criminal and regulatory enforcement by way of regulations that have not yet been promulgated. The regime that ultimately comes into force could differ from that set out in the draft legislation. However, the proposed changes demonstrate a clear intention to revise the regulatory and criminal securities enforcement in ways that could affect all market participants.

We wish to acknowledge the contribution of Paul Schabas to this publication.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
3 Oct 2019, Seminar, Toronto, Canada

The materials on the Blakes Business Class website are provided for informational purposes only. Accessing this information does not create a lawyer-client relationship.

30 Oct 2019, Other, Toronto, Canada

The materials on the Blakes Business Class website are provided for informational purposes only. Accessing this information does not create a lawyer-client relationship.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions