On July 9, 2014, Canada's Minister of Finance announced that Saskatchewan and New Brunswick have agreed to join the Cooperative Capital Markets Regulatory System that has been proposed by the governments of Canada, British Columbia and Ontario. This announcement marks the first material development towards a Canadian national securities regulator since the framework had been originally proposed in September 2013 (View Update).
A Single Canadian Capital Markets Regulator
The agreement in principle among the government of Canada and the participating provinces contemplates a single Canadian capital markets regulator, with uniform provincial and territorial legislation and complementary federal legislation to govern securities law. Each participating province would have a provincial office providing services similar to current provincial securities regulators, but acting within a national framework. The cooperative system would be governed by the ministers of each participating jurisdiction who are currently responsible for capital markets regulation as well as the federal Minister of Finance who will oversee the regulator and be accountable to participating jurisdictions.
Amendments to Previous Agreement in Principle
With the addition of Saskatchewan and New Brunswick, several key changes to the Cooperative Capital Markets Regulatory System were made, including the following:
There will be two additional regional Deputy Chief Regulators representing capital markets jurisdictions in each of western and eastern Canada. These would be in addition to the Deputy Chief Regulators based in each of British Columbia and Ontario, as well as Alberta and Quebec, should they choose to participate.
The Deputy Chief Regulators representing capital markets jurisdictions in western and eastern Canada will be initially located in Saskatchewan and New Brunswick and will serve a term of five years.
The nominating committees for the expert board of directors and independent adjudicative tribunal will include representation from both major and other participating jurisdictions.
Each regulatory office will be managed by a director who will coordinate the delivery of regulatory functions that are responsive to the needs of local market participants and investors, and will identify local issues for their respective Deputy Chief Regulator's consideration in the development and application of national policies.
Fundamental changes to the Cooperative System will require unanimous approval of the Council of Ministers during the three year period after the date on which the Capital Markets Regulatory Authority commences operations, and approval of at least two-thirds of the Council of Ministers and all major capital markets jurisdictions thereafter.
A transition plan will be developed based on consistent principles to integrate existing securities regulatory entities into the Capital Markets Regulatory Authority.
The regulator will consider requests to accommodate provincial economic development initiatives, where they do not adversely affect the fundamental principles of the Cooperative System or affect markets participants in other jurisdictions.
The addition of Saskatchewan and New Brunswick also shifts the expected operational date of the cooperative system from July 1, 2015 to sometime in the fall of 2015.
Reaction by Other Provinces
While the addition of Saskatchewan and New Brunswick was described by the federal Minister of Finance as "a major step towards a single regulator", the governments of Alberta and Quebec, representing the largest capital markets outside of Ontario, continue to question the proposal.
On July 9, 2014, Quebec Finance Minister Carlos Leitao reiterated his government's opposition to a common securities regulator, calling it "an unnecessary structure". The Alberta Minister of Finance, Doug Horner, expressed his opposition as well: "Today's announcement confirms our long-standing fear that Ottawa will proceed with changes to Canada's securities regulation system without the support of two of its largest markets, Alberta and Quebec. This will leave Canada with a more fractured system than the one we have today. We do not believe that four provinces constitute a critical mass of support for a change of this magnitude."