Paul Fitzgerald and Tracey Kernahan have produced a client update on the announcement by the Minister of Finance that the provinces of British Columbia, Ontario, Saskatchewan and New Brunswick and the Canadian federal government have signed a memorandum of agreement formalizing the terms and conditions of a cooperative capital markets regulatory system.  The announcement also included consultation drafts of uniform provincial securities legislation and complementary federal legislation.

The federal government has been pursuing a cooperative capital markets regulatory system since 2011 when the Supreme Court of Canada ruled that the federal government did not have the power to regulate capital markets on its own.  Currently, each of the 10 provinces has its own regulatory regime and securities regulator.

As discussed in the update, the key features of the Cooperative System are:

  • A single regulator known as the Capital Markets Regulatory Authority (CMRA) which will be operationally independent.  The CMRA will administer a single set of rules and will be supervised by an independent board of expert directors.  The CMRA will have a regulatory division responsible for CMRA’s policy, regulatory operations, advisory services and enforcement functions led by a chief regulator.  It will also have an independent tribunal to adjudicate enforcement and other administrative proceedings.  The CMRA will have an executive head office in Toronto and a nationally integrated executive management team.  Each participating province will have a regulatory office in the province that will continue to provide the services currently provided by the provincial regulator.  The target date by which the CMRA will be set up is the fall of 2015.
  • A legislative framework consisting of two key pieces of legislation, a uniform provincial Capital Markets Act enacted in each participating province and the federal Capital Markets Stability Act:
    • The uniform act will harmonize and modernize existing provincial securities legislation and create a “platform” for detailed requirements on the subject matters to be provided in accompanying regulations.
    • The federal act will enable the CMRA to make regulations to manage the systematic risks of the national capital markets and equips the CMRA to collect data and information for the purpose of monitoring capital markets.  This includes the power to regulate systemically important market structure entities such as trading facilities, market intermediaries and credit rating organizations. In addition, the Federal Act will modernize criminal offences related to the capital markets.
  • Accountability through an oversight council composed of the minister responsible for regulating capital markets in each of the participating provinces and the Canadian Minister of Finance.

Draft initial regulations for the cooperative system are to be released on December 19, 2014.  Public comments on the draft provincial and federal legislation are due by November 7, 2014.

To read our client update, please click here.