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
26 Oct 2018, Other, Vancouver, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

30 Oct 2018, Other, Toronto, Canada

Please join us for discussions on recent updates and legal developments in pension and employee benefits as well as employment law issues.

12 Nov 2018, Other, Toronto, Canada

Stories aren’t falsehoods. Stories are the root of all effective human communications: they motivate, animate and clarify. If you aren’t telling stories, you probably aren’t getting your point across.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
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
Registration (you must 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