Jump to content

Canadian securities regulation

Add links
From Wikipedia, the free encyclopedia

This is an old revision of this page, as edited by Noisy Neighbor (talk | contribs) at 13:05, 2 July 2021. The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

See also: Reference re Securities Act and Reference re Pan‑Canadian Securities Regulation

Canadian securities regulation is managed through the laws and agencies established by Canada's 10 provincial and 3 territorial governments. Each province and territory has a securities commission or equivalent authority with its own provincial or territorial legislation.

Unlike other major federations, Canada has no securities regulatory authority at the federal government level. Nonetheless, most provincial security commissions operate under a passport system, so that approval of one commission essentially allows for registration in another province. However, concerns about the system remains. For example, Ontario, Canada's largest capital market, does not participate in the passport regimen.[1]

Securities regulators from each of the provinces and territories have joined to form the Canadian Securities Administrators (CSA).[2]

Concerns about the provincial system of securities regulation have led to repeated calls for a national securities system in Canada. As of June 2021, the Canadian government is working towards establishing a national securities regulatory system to provide:

  • Better and more consistent protection for investors across Canada.
  • Improved regulatory and criminal enforcement to better fight security-related crime.
  • New tools to better support the stability of the Canadian financial system.
  • Faster policy responses to emerging market trends.
  • Simpler processes for businesses, resulting in lower costs for investors.
  • More effective international representation and influence for Canada.[3]

List of securities regulators in Canada

Each provincial securities regulator is either a self-funded commission or an entity funded within a larger government department. Regulators (and their respective parent departments, if any) for each province include:[4][5]

The Canadian Securities Regulatory System

As noted, Canada has no securities regulatory authority at the federal government level. Instead, each province and territory has a securities commission or equivalent authority and its own piece of provincial or territorial legislation.

Provincial governments began to establish regulatory agencies in 1912 with Manitoba; two decades later, the Privy Council of Canada decided in Lymburn v Mayland, [1932] A.C. 318 that such legislation is authorized under the provincial property and civil rights power.

Each provincial securities regulator is either a self-funded commission or an entity funded within a larger government department, typically under the respective Justice department. The securities regulator administers the province's securities legislation and, correspondingly, promulgates its own set of rules and regulations. The regulator relies on the work of two national self-regulatory organizations—the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA)—for most aspects of the regulation of the organizations' member firms and their employees. Accountability for securities regulation extends from the securities regulator to the Minister responsible for securities regulation and, ultimately, the legislature, in each province.[15]

The largest of the provincial regulators is the Ontario Securities Commission (OSC). Other significant provincial regulators are the Alberta Securities Commission, British Columbia Securities Commission, and the Autorité des marchés financiers (Québec).

Public education on financial literacy, investment, and financial decision-making is a secondary focus of the provincial regulators. The OSC set up the non-profit organization Investor Education Fund (IEF) for this sole purpose. Funded by the OSC but acting independently, IEF's primary goal is to provide Canadians with financial tools and information to improve financial literacy.

Canadian Securities Administrators

The provincial and territorial regulators work together to coordinate and harmonize regulations, policies, and practices regarding Canadian capital markets through the Canadian Securities Administrators (CSA). All in all, the CSA is an umbrella regulatory organization that serves Canadian markets, securities issuers, and investors. The major provincial securities regulators also participate in various international co-operative organizations and arrangements.[2]

The CSA has focused its efforts on:

  • Developing uniform rules and guidelines for securities market participants.
  • Coordinating approval processes.
  • Developing national electronic systems through which regulatory filings can be made with and processed by all jurisdictions.
  • Coordinating compliance and enforcement activities.

The most important CSA effort is implementing the Passport regulatory system. Under Passport, a market participant can obtain a decision from its principal regulator and, through a simple filing, have the same decision deemed to be issued under the legislation of all other participating jurisdictions, in essence providing a passport to undertake capital markets activity across Canada. The Passport system covers prospectus filings, registration of securities firms and individuals, and certain types of discretionary exemptions. Ontario is recognized by the other jurisdictions as a principal jurisdiction for Passport decisions but the Ontario Securities Commission (OSC) has not adopted the passport rule itself. As a result, Ontario market participants have access to other jurisdictions through the Passport system but participants from other jurisdictions do not have access to Ontario. Instead, the OSC follows a "mutual reliance" policy in which it decides in each case whether to accept the decision of the principal regulator. Ontario says it supports the harmonization and improved coordination of securities regulation in Canada; however, it does not wish to participate in the passport system because it would prefer the creation of a national securities regulator.

Concerns About the Current Structure

On February 21, 2008, the Government of Canada appointed an Expert Panel on Securities Regulation to provide advice and recommendations on securities regulation in Canada.[16][17] On January 12, 2009, the Panel released its final report, in which they highlighted several concerns with the current structure, along with a draft Securities Act to the federal Minister of Finance and the provincial and territorial ministers responsible for securities regulation.[16][18]

First, the Panel was concerned that the fragmented structure, requiring decisions to be coordinated across up to 13 jurisdictions, makes it difficult for Canadian securities regulators to react quickly and decisively to capital market events.[19] One illustration of this difficulty was the adoption in September 2008 by some of Canada's international counterparts, including the United States and the United Kingdom, of restrictions of short-selling of certain stock as a temporary stability measure. The Canadian response lagged behind the coordinated efforts of the United States and the United Kingdom and was not uniform across the provinces. A second illustration was the delay between the freezing of the non-bank asset-backed commercial paper (ABCP) market in August 2007 and the release of a consultation paper by the Canadian Securities Administrators to seek input on a number of proposals that aim to prevent similar capital market failures in the future.[20] The Panel found that the fragmented Canadian securities regulatory structure is prone to foster slow securities regulatory responses, which makes Canada vulnerable to market and reputational risks.

Second, the Panel expressed concern that the Canadian system of provincial mandates is incongruent with the national response required to address developments in capital markets that are increasingly national and international in scope.[21] They found that one of the important lessons from the recent capital markets crisis throughout 2008–2009 is that systemic risk is increasingly presenting itself in capital markets rather than being solely confined to banking institutions. The Panel reported that effectively addressing systemic risk requires the coordination and collaboration of all financial sector regulators in Canada. It also requires working effectively with international counterparts. The Panel did not believe that the multiple provincial and territorial securities regulators are able to work effectively as part of a national systemic risk management team, as structural challenges will likely compromise its ability to be proactive, collaborative, and generally effective in helping to address larger capital market issues on a timely basis. A delayed response, which is poorly managed by any one of the securities regulators, could have a detrimental impact on the integrity of Canada's capital markets as a whole.

Finally, the Panel reported that the current structure fundamentally misallocates resources, causing securities regulation to be less efficient and effective. Resources must be devoted to keeping 13 separate securities regulators operating in Canada. This is inefficient as each jurisdiction dedicates a different level of resources to securities regulation, which causes the intensity of policy development, supervision, and enforcement activities to vary across the country. In addition, most efforts are duplicated, which results in unnecessary costs, overstaffing, and delays. Canadians, in turn, are afforded different levels of investor protection depending on the jurisdiction in which they reside or invest, while market participants will continue to be burdened with undue compliance costs, even with the full implementation of the passport system. Market participants will still have to pay fees in up to 13 jurisdictions. They will still have to deal with the general inefficiencies associated with differences between provincial statutes and regulations, the ongoing use of local rules, and variations in the interpretation of national rules.[22]

Canadian Securities Transition Office

The Canadian Securities Transition Office (Template:Lang-fr) is a federal organization that was created to assist in the establishment of a Canadian securities regulation regime and a Canadian regulatory authority.[23] In other words, its mandate is to help develop capital-markets regulatory capabilities falling within the jurisdiction of the Government of Canada.[24]

Its mandate includes helping to prepare for the successful administration of the proposed federal Capital Markets Stability Act; providing support for the establishment of the Cooperative Capital Markets Regulatory System; and providing advice to the Canadian Department of Finance's Financial Sector Policy Branch.[24]

The Transition Office is tasked with leading all aspects of the transition towards a federal Canadian securities regulator, including the development of the proposed federal Securities Act and the accompanying regulations; collaborating with provinces and territories, and developing and implementing a transition plan for organizational and administrative matters.[25]

History

Background

Over the past 45 years, the majority of studies by independent expert and academic analysts have come out in favor of establishing a Canadian securities regulator, beginning with the Porter Report in 1964[26] and the Kimber Report in 1965.[27] In the most recent decade, the push for a national regulator has been particularly strong, with reports delivered from the Wise Persons Committee,[28] the Crawford Panel,[29] and the Expert Panel on Securities Regulation.[16]

In their final report in January 2009, the Expert Panel made a series of recommendations, the most important being the establishment of a Canadian securities regulator to administer a single Securities Act for all of Canada. The Expert Panel provided a recommended transition path to bring this about, with one key step being the creation of a transition and planning team to oversee the transition to a federal regulatory system.[30]

On 22 June 2009, the Government of Canada acted on this recommendation and announced the launch of the Canadian Securities Transition Office to lead Canada's effort to establish a Canadian securities regulator.[31]

Development

The Canadian Securities Transition Office was implemented in July 2009 by the Government of Canada through the Canadian Securities Regulation Regime Transition Office Act.[23]

Doug Hyndman was made the Chair and Chief Executive Officer of the Transition Office, and Bryan Davies the Vice-Chair. Hyndman had been Chair of the British Columbia Securities Commission since 1987; Davies had been Chair of the Canada Deposit Insurance Corporation since 2006, and previously the Chief Executive Officer and Superintendent of the Financial Services Commission of Ontario.

All Canadian jurisdictions have been invited and encouraged to join in the Government of Canada's effort, which will build on the existing infrastructure and expertise of the provincial and territorial securities regulators. On 15 October 2009, the federal government announced the appointment of an Advisory Committee of ten Participating Provinces and Territories to the Transition Office with representatives from Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Ontario, Saskatchewan, British Columbia, Yukon, Northwest Territories, and Nunavut.[32] The Advisory Committee provided advice to the Transition Office on the transition to a Canadian securities regulator to ensure that each of the participating governments' interests is represented in the work of establishing a Canadian securities regulator.

In its first year, the Transition Office and the Government of Canada completed two key steps in transitioning to a Canadian securities regulator:[33]

  • On 26 May 2010, the federal government tabled for information in the House of Commons the proposed Canadian Securities Act.[34] The proposed Act was built on provincial securities regulation and harmonized existing legislation in the form of a single statute. It benefits from the work of the Expert Panel on Securities Regulation and other reform efforts and reflects domestic and international best practices. It proposed significant improvements in terms of governance, adjudication, financial stability, and regulatory and criminal enforcement, as well as provision for a wide scope of authority to regulate financial instruments and participants in capital markets.[35]
  • On 12 July 2010, the Transition Office delivered its Transition Plan for the Canadian Securities Regulatory Authority to the Minister of Finance and the ministers responsible for securities regulation of the participating provinces and territories.[36]

Concurrent with releasing the proposed Canadian Securities Act, the federal government referred the proposed Act to the Supreme Court of Canada for its opinion on the following question: "Is the annexed proposed Canadian Securities Act within the legislative authority of the Parliament of Canada?" The Supreme Court heard the reference on 13 and 14 April 2011.[37] On 22 December that year, the Supreme Court returned its decision, finding the proposed Canadian Securities Act to be beyond the constitutional authority of Parliament under the general trade and commerce power. More specifically, the proposed Act as drafted would not be valid under the general branch of the federal trade and commerce power under section 91(2) of the constitution.[38] However, the court indicated that some aspects of the Act could be valid under that power. It also noted that it had not been asked for its opinion on the extent of Parliament's legislative authority under other heads of federal power, including the interprovincial and international trade branch of section 91(2). The court concluded that a cooperative legislative approach through which the federal and provincial governments exercise their powers collaboratively would be possible.

Following the Supreme Court of Canada's decision, the Government of Canada announced that it was exploring with provinces the possibility of working jointly to establish a common securities regulator.

In 2013, the Government of Canada signed an agreement in principle with the governments of British Columbia and Ontario to establish a federal-provincial Cooperative Capital Markets Regulatory System. Since then, five other provinces and one territory have joined the Cooperative System.[33]

To support the establishment of the Cooperative System, participating governments created the Capital Markets Authority Implementation Organization in 2015 to lead the work to integrate the participating regulatory organizations into the Capital Markets Regulatory Authority. Also in 2015, the Transition Office began work to prepare for the successful administration of the proposed federal Capital Markets Stability Act, complementary federal legislation to the Canadian Securities Act.[33]

In 2018, the Supreme Court of Canada found the proposed federal Capital Markets Stability Act to be within federal jurisdiction and the implementation of a pan-Canadian securities regulator as contemplated within the Cooperative Capital Markets Regulatory System to be permitted by the constitution.

Cooperative System

The Cooperative Capital Markets Regulatory System is a federal–provincial system being designed to streamline Canada's capital markets regulatory framework to protect investors, foster efficient capital markets, and manage systemic risk while preserving strengths of the current system.[39][40]

Jointly engaged in the implementation of this system are the federal Government of Canada and the governments of British Columbia, Ontario, Saskatchewan, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, and Yukon, under an interim body called the Capital Markets Authority Implementation Organization (CMAIO; Template:Lang-fr, OMAMC).[40]

The CMAIO’s purpose is to assist in transitioning to and implementing a single, operationally-independent Capital Markets Regulatory Authority (CMRA) contemplated for the Cooperative System.[39] Once created, the CMRA will be the single regulator administering the proposed uniform provincial-territorial Capital Markets Act, a single set of regulations, and complementary federal Capital Markets Stability Act. When passed, these acts and the regulations would form the legislative cornerstones of the new Cooperative Capital Markets Regulatory System.

The Transition Office provides office space and administrative, technical, and financial support to the CMAIO.[33]

In 2021, the development of legislation to create the Cooperative System was put on hold as the participating governments needed to rework their plans in response to the COVID-19 pandemic. CMAIO operations were paused, effective 31 March 2021.[40]

CMAIO leadership

The CMAIO Board of Directors is accountable to the Council of Ministers, composed of the federal Minister of Finance and the provincial and territorial Ministers responsible for capital-markets regulation in each participating jurisdiction.

The Council consists of:

In July 2016, the Council of Ministers appointed an initial Board of Directors for CMAIO, composed of industry experts broadly representative of the regions of Canada. On 31 March 2021, CMAIO paused operations and the following Directors remain on the Board:[41]

See also

References

  1. ^ Ontario Securities Commission Notice 11–904
  2. ^ a b "CSA | ACVM". www.securities-administrators.ca. Retrieved 2021-05-13.
  3. ^ Fact Sheet on Proposed Canadian Securities Act, fin.gc.ca
  4. ^ http://securities-administrators.ca/aboutcsa.aspx?id=80
  5. ^ "Regulatory and Investing Links". www.iiroc.ca. Retrieved 2021-05-13.
  6. ^ "Province of Manitoba | msc - Home". mbsecurities.ca. Retrieved 2021-05-13.
  7. ^ "About the FCNB | New Brunswick Financial and Consumer Services Commission (FCNB)". fcnb.ca. Retrieved 2021-05-13.
  8. ^ "Securities Regulation". Digital Government and Service NL. Retrieved 2021-05-13.{{cite web}}: CS1 maint: url-status (link)
  9. ^ "Office of the Superintendent of Securities :: Justice". www.justice.gov.nt.ca. Retrieved 2021-05-13.
  10. ^ "Nova Scotia Securities Commission". Nova Scotia Securities Commission. Retrieved 2021-05-13.
  11. ^ "Department of Justice". nunavutlegalregistries.ca. Retrieved 2021-05-13.
  12. ^ Toolkit, Web Experience (2016-08-22). "Securities". www.princeedwardisland.ca. Retrieved 2021-05-13.
  13. ^ "Financial and Consumer Affairs Authority of Saskatchewan". fcaa.gov.sk.ca. Retrieved 2021-05-13.
  14. ^ "Current reporting issuer list for the Office of the Yukon Superintendent of Securities". yukon.ca. 2019-07-29. Retrieved 2021-05-13.
  15. ^ Expert Panel Final Report and Recommendations, expertpanel.ca
  16. ^ a b c Expertpanel.ca
  17. ^ Government of Canada Appoints Expert Panel to Review Securities Regulation, fin.gc.ca
  18. ^ Minister of Finance Welcomes Report on a Single Securities Regulator for Canada, fin.gc.ca
  19. ^ "Final Report". www.expertpanel.ca. Retrieved 2021-06-16.
  20. ^ For information on the non-Bank ABCP crisis in Canada, see Chant, John. "The ABCP Crisis in "The ABCP Crisis in Canada: The Implications for the Regulation of Financial Markets." Expert Panel on Securities Regulation (2009)
  21. ^ "Final Report". www.expertpanel.ca. Retrieved 2021-06-16.
  22. ^ "Final Report". www.expertpanel.ca. Retrieved 2021-06-16.
  23. ^ a b Branch, Legislative Services (2015-03-31). "Consolidated federal laws of canada, Canadian Securities Regulation Regime Transition Office Act". laws-lois.justice.gc.ca. Retrieved 2021-05-14.
  24. ^ a b "Home". csto-btcvm.ca. Retrieved 2021-05-14.
  25. ^ Mandate: Canadian Securities Regulator Transition Office fin.gc.ca
  26. ^ "Report of the Royal Commission on Banking and Finance." Ottawa: Queen's Printer. 1964.
  27. ^ "Report of the Attorney General's Committee on Securities Legislation in Ontario." Toronto: Queen's Printer. 1965. Kimber Report.
  28. ^ "Wise-adverties.ca". Archived from the original on 2010-07-12. Retrieved 2010-07-06.
  29. ^ Crawfordpanel.ca
  30. ^ Expert Panel Final Report, expertpanel.ca
  31. ^ Minister of Finance Announces Launch of Canadian Securities Regulator Transition Office, fin.gc.ca
  32. ^ Minister of Finance Appoints Advisory Committee on Canadian Securities Regulator, fin.gc.ca
  33. ^ a b c d "Current role". csto-btcvm.ca. Retrieved 2021-05-14.
  34. ^ Government of Canada Moves to Protect Canadian Investors, fin.gc.ca
  35. ^ Backgrounder: A New Canadian Securities Regulatory Authority, fin.gc.ca
  36. ^ Transition Plan for the Canadian Securities Regulatory Authority, csto-btcvm.ca
  37. ^ Supreme Court of Canada, scc-csc.gc.ca Archived June 14, 2011, at the Wayback Machine
  38. ^ "Archived copy". Archived from the original on 2012-02-02. Retrieved 2011-12-22.{{cite web}}: CS1 maint: archived copy as title (link)
  39. ^ a b "About". CCMR. Retrieved 2021-05-14.
  40. ^ a b c "Capital Markets Authority Implementation Organization (CMAIO) | Organisme de mise en place de l'Autorité des marchés des capitaux (OMAMC)". www.cmaio.ca. Retrieved 2021-05-14.
  41. ^ "Capital Markets Authority Implementation Organization (CMAIO) | Organisme de mise en place de l'Autorité des marchés des capitaux (OMAMC)". www.cmaio.ca. Retrieved 2021-05-14.
Retrieved from "https://en.wikipedia.org/enwiki/w/index.php?title=Canadian_securities_regulation&oldid=1031588939"