Canada: Too Many Changes, More Consultation Required: Comments On Proposed Cooperative Capital Markets Legislation

Comments on the consultation drafts of the uniform provincial capital markets legislation, Provincial Capital Markets Act (PCMA), and new federal capital markets legislation, Capital Markets Stability Act (CMSA), (Consultation Drafts) by capital markets stakeholders suggest that additional "robust" consultation is required for the PCMA and CMSA, particularly given the significant changes to securities and capital markets laws that such proposed legislation contemplates.

The PCMA and CMSA arise from the memorandum of agreement (Agreement) entered into by the Canadian government and the British Columbia, Ontario, Saskatchewan, New Brunswick and Prince Edward Island governments (Participating Provinces, and with the Canadian government, the Participating Jurisdictions) relating to the principal components of a proposed cooperative capital markets regulatory system (Cooperative System) and establishing a markets regulatory authority (Authority) under the Cooperative System.

Given the scope of the Consultation Drafts and comment letters, Blakes is publishing a number of bulletins reviewing issues raised by the comments received. This bulletin addresses comments on the consultation process and structure of the legislation. Other bulletins will address other issues, including those relating to the proposed CMSA and civil, regulatory and criminal liability and enforcement.

For more information on the Cooperative System, please see our various bulletins posted on our website.


A number of commenters indicated that further significant consultation on the PCMA and CMSA legislation would be appropriate. The comment period on the Consultation Drafts was 90 days, which was relatively short given the number of significant and substantive proposed changes to provincial securities legislation and the broad scope of the new proposed federal CMSA. One commenter noted that numerous changes were "buried in an avalanche of draft legislation in the context of a fundamental regime change." Many commenters also noted that they were hindered in fully commenting on the Consultation Drafts, given the lack of both a clear exposition of the changes and rationales being provided for them. Many commenters noted the difficulty of commenting on the Consultation Drafts without also being able to review and comment on the initial regulations that would replace all existing national securities rules in the Participating Provinces. The Participating Jurisdictions announced that draft initial regulations were expected to be published for public comment in early spring 2015.


The most common comments related to the extent to which the Consultation Drafts include numerous and, in many cases, significant changes to existing securities legislation, especially that of Ontario. Many commenters argued that in order to facilitate the transition to the Cooperative System, the PCMA should be based on existing securities laws, in particular those of Ontario in which 80 per cent of Canadian capital markets activity takes place, and only introduce changes that are absolutely necessary to achieve the harmonization of securities laws across the Participating Provinces. The comments indicated that any substantive changes to securities laws should be addressed after the Cooperative System is established so that such changes may be fully considered within the proposed consultation and approval process for the Cooperative System.

Such commenters noted several provisions in the Consultation Drafts do not appear to be drawn from existing securities laws, such as a new "obstruction" offence. Commenters remarked there were many changes to the wording of important definitions, such as "misrepresentation," which is a key concept for both prospectus and secondary market issuer and personal liability. It was noted that a change in the definition of "investment manager" would appear to significantly change the current regime in many provinces by requiring registration of investment fund managers in each province where there are investors. It was noted no rationale was provided for these and other changes. Inconsistencies in certain definitions between the PCMA and CMSA, including terms such as "security," "trade," "investment fund" and "underwriter," were also noted.


A number of commenters acknowledged that a "platform approach" to regulation, which involves setting out certain fundamental provisions of capital markets law in the legislation while leaving most requirements and exceptions to be addressed in regulations, may be a necessary feature of the legislation given the difficulty of arranging for the amendment of the legislation by all Participating Provinces. Other commenters noted, however, the potential negatives associated with effectively removing responsibility and accountability from provincial legislatures for capital markets legislation.

Several commenters argued that certain fundamental provisions, including the 20 per cent take-over bid threshold, the two-day cooling-off period for a prospectus offering and marketing rights under a preliminary prospectus, should be set forth in the legislation as is currently the case in many provincial jurisdictions. In addition, several commenters argued that, in light of the platform approach, greater procedural protections are warranted, including removal of, or limitations on, exceptions in the PCMA from the requirement to publish proposed regulations in certain circumstances.


Commenters expressed concern with respect to the absence of provisions addressing the transition to the Cooperative System and the manner in which the Authority will interface with non-participating provinces. It was noted that, unless there was reciprocal recognition among participating and non-participating jurisdictions, such as through the current "passport" system, the system would in fact be less harmonized and more fractured than is currently the case. Commenters noted that a detailed interface mechanism addressing the interface should be made available for public comment.


Market participants are subject to several obligations under the PCMA, including record-keeping requirements and a duty to disclose such records to the Authority. In light of these significant obligations, commenters suggested that the expanded definition of "market participant" captures market actors who are not sufficiently connected to Canadian capital markets to justify such inclusion. For instance, some noted that the definition of market participant in the PCMA includes those exempted from the requirement to be registered under capital markets law, which would have the effect of including all private issuers and foreign issuers offering employee plans, among others, as market participants. In addition, some objected to the inclusion of "control persons" as market participants given that control persons are often simply passive investors, and as such do not have duties to other shareholders.


A number of commenters expressed concern about the costs of establishing and administering the new regime, noting that it is contemplated that all of the existing staff of the commissions of Participating Provinces will join the Authority, and that under both the proposed PCMA and CMSA the Authority will take on significant new responsibilities. Commenters requested information on who would bear such costs and how such costs will compare to costs under the existing framework.


Commenters noted that the draft legislation establishing the Authority has not been released.

Commenters noted that the Agreement was unclear as to whether the Participating Provinces were agreeing not to enact any securities legislation beyond the PCMA. It was also noted that, while federal government approval is potentially required for changes to the provincial PCMA, the Agreement does not provide for Participating Provinces to approve changes to the CMSA. As well, certain commenters noted that any two of British Columbia, Ontario and the federal government can reject regulations made under the PCMA or CMSA, even if approved by a majority of Participating Provinces, which takes on added significance given the use of the "platform" approach where most of the requirements will be contained in regulations. It was also noted that, although the governing board of directors of the Authority is to be "independent," there was no definition of that term provided in the Agreement.

Commenters also noted that the addition to the Agreement providing for exceptions from the regime for "specific economic initiatives" for Participating Provinces left open many questions, such as how such initiatives will be balanced relative to the grounds for which the Authority can refuse to approve such exceptions.


The PCMA provides the chief regulator with very broad powers to require a "recognized entity"—including self-regulatory organizations, exchanges, clearing agencies and auditor oversight organizations—to provide the Authority with any information, record or thing in its possession or under its control relating to the administration or enforcement of capital markets law or the regulation of the capital markets. Several commenters considered this power overbroad, in particular expressing concern that the provision does not contain an explicit exception for information subject to solicitor-client privilege. Certain commenters also emphasized the importance of protecting the privilege associated with information received by the Canadian Public Accountability Board from audit firms in the context of audits.


Several comment letters focused on changes in the PCMA relating to a specific exemption from the definition of "security," which is currently found in provincial securities legislation relating to life insurance contracts that are commonly known as "individual variable insurance contracts" (IVICs). The PCMA provides that IVICs are exempt "unless otherwise provided by the regulations," which commenters argued creates undue confusion and uncertainty with respect to the regulation of IVICs.


There has been no response as of yet from the Participating Jurisdictions as to how the comments will be addressed, whether in the form of revised draft legislation or an enhanced consultation process. As noted, the Participating Jurisdictions have announced draft regulations will be released for comment in early spring 2015.

Given the scope of the proposed PCMA and CMSA, the number of changes from existing legislation, and the number and breadth of comments on these, readers are cautioned that our bulletins may not summarize all matters that may be of interest or concern to them. Readers are encouraged to review the comments or contact Blakes to discuss.

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
1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

3 Nov 2016, Other, Vancouver, Canada

“Risk” is the new black. It’s on the lips of every CEO, CFO, GC and board member — as it should be. Can you spot it? How do you analyze it? Are you equipped to manage it?

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.