An effort more than half a century old to forge something like a national securities regulator for Canada is finally close to fruition after the release of draft regulations this summer, securities lawyers say.
“For creating a co-operative regulator, I think we’re over the hump. I think we’re there,” says Heather Zordel, a partner in Cassels Brock and Blackwell LLP’s securities group and a member of the expert panel on securities regulation tasked by the federal government with advising it on the matter. “I’m very excited about that coming to fruition.”
“The release of the revised consultation draft of the uniform act — the capital markets act for the provinces and territories and the regulations — that is a significant milestone,” says Kathleen Ritchie, a partner at Gowling Lafleur Henderson LLP’s Toronto office and a member of the Ontario Securities Commission’s securities advisory committee.
Canada is the only G20 country that doesn’t have a national securities regulator. Efforts to create one have been on the table for decades but they’ve run into opposition from some provinces. Alberta and Quebec challenged a renewed effort by Ottawa to impose a single regulator on the provinces in 2009. In 2011, the Supreme Court of Canada ruled in their favour but it allowed a co-operative approach in which provinces are free to opt in or out. The federal government then unveiled its co-operative version in 2013 with immediate backing from Ontario and British Columbia. Since then, Saskatchewan, New Brunswick, Prince Edward Island, and the Yukon have come on board as well.
This summer saw three major developments in Ottawa’s push for a common regulating body: the appointment of a chairman to head the regulator, the establishment of an interim regulator, and the release of a draft new law and regulations governing securities. The province expectes the new authority to be operational next fall with a head office located in Ontario.
A month later, the ministers released a revised draft of the capital markets act with draft initial regulations and other materials. Finance ministers of the federal government and participating jurisdictions are inviting comment on the draft act and regulations until Dec. 23, 2015.
Drawing up the draft regulations was a “mammoth exercise,” says Zordel. “There’s a myriad of differences amongst how things are done in different provinces, and so what we’re seeing is an effort to pull them together.”
There’s very little that’s substantially new in the draft regulations, securities lawyers say, because a priority for planners has been to make the transition to the common regulator as seamless as possible for participating jurisdictions.
“There’s no question that the parties wanted to try and minimize the number of changes that would affect market participants, and to the extent that there are changes, they’re really with a view to harmonizing amongst the participating jurisdictions,” says Ritchie.
David Surat, senior legal counsel with securities law firm AUM Law PC, says the release of the draft regulations provoked a sigh of relief among some in the securities industry who feared it would mean a raft of new rules.
“With the last version of the act that went for comment, people were a little concerned that a lot of the substance seemed to be deferred to the regulations and they hadn’t been published yet,” he says. “I think there was some concern that there were going to be sweeping changes to the status quo and I think this version that’s been published will make it very clear to people that it’s very much the status quo for the large majority of existing rules. So I think that will get some positive reaction from the street. . . . They haven’t used it as an excuse to make new policy.”
The draft legislation, says Surat, is “platform legislation,” meaning much of its substance is in the regulations rather than the act itself. That means that, once enacted, all of the legislatures of the participating jurisdictions won’t have to approve changes because the regulating body will have the authority to amend the regulations.
An obvious advantage of having a single regulator to replace those in each of the participating jurisdictions is the simplicity and uniformity it will mean for issuers of securities, says Surat.
“To the extent that you can minimize all these local differences and have a single rule, it makes it a lot easier for market participants,” he says.
“It’ll be essentially one-stop shopping. . . . I do think it will be a much more streamlined result and it will be easier for issuers and marketers, including securities lawyers, to do what they do.”
The new regulator will also “present a more unified face to the world,” says Zordel.
“It creates a body that is federal in nature. So when you have the prime minister and finance minister travelling around the world . . . the minister of finance speaks for Canada. And yes, we have some other jurisdictions that he’s going to work with. But we need to be able to go into international meetings dealing with financial issues with somebody who’s going to be respected globally as representing the country. And so that’s a very important thing.”
One of the biggest hurdles in the process, says Zordel, was addressing the fears of some provinces that the creation of a national regulator could be the thin edge of the wedge in terms of intrusion by Ottawa on traditional provincial areas of jurisdiction.
“The Supreme Court decision was helpful in putting a limit on it,” she says. “They said the federal government doesn’t have the authority to just step into this space and they have to negotiate. . . . And once we decided that it was a negotiation, then everybody can say, ‘What is it that we want to achieve?’ and ‘Let’s negotiate,’ and that’s what they’ve done.”
There was also some fear that the creation of a single regulator would amount to “an Ontario takeover,” she says.
Having a single regulator will also likely better protect investors by improving the enforcement of securities rules, she says. “Having different protection based on where you live in the country is not ideal.
[The creation of the new regulator] also means that we will be able to more effectively use our resources nationwide to maximize the bang for the buck, so to speak, as far as what we’re doing in enforcement.”
Whether other Canadian jurisdictions will join the six that are now participating, according to Ritchie and Zordel, is uncertain. “There’s hope now that Nova Scotia is getting close,” says Zordel, adding she also hopes the recently elected NDP government in Alberta will be willing to take a fresh look at whether to join.
On the other hand, she says, the absence of those parties at the table hasn’t been a problem. “It makes it easier to try and get some degree of agreement on something like regulations when you’ve got fewer parties at the table,” she says. “So it actually works fine.”
On July 24, finance ministers of the participating jurisdictions announced that the first chairman of the capital markets regulatory authority would be William Black. A former president and chief executive officer of insurance company Maritime Life and a member of the Order of Canada, Black has experience serving on the boards of numerous organizations, according to a news release jointly issued by the ministers.
He also ran unsuccessfully for the leadership of the Nova Scotia Progressive Conservative party in 2006.
