On September 8, 2014, the governments of Canada, British Columbia, Ontario, Saskatchewan and New Brunswick announced the signing of a memorandum of agreement formalizing the terms of the Cooperative Capital Markets Regulatory System (the Cooperative System), the proposed national securities regulator for Canada. Draft provincial and federal legislation that would implement the Cooperative System has now been released for public comment. The legislation not only seeks to harmonize securities regulation but also introduces changes to existing legislation in order to "update and modernize" securities laws.

This latest step towards establishing a national securities regulator follows earlier developments, including the signing of an agreement in principle to establish the Cooperative System by British Columbia, Ontario and Canada on September 19, 2013 (Federal, Ontario and BC Governments Announce New Securities Regulator) and an amended agreement signed with Saskatchewan and New Brunswick on July 9, 2014 (Saskatchewan and New Brunswick join Cooperative Capital Markets Regulatory System).

Proposed Legislation for Cooperative System Published for Comment

The release of draft legislation by the participating governments is a significant development towards the establishment of the new Cooperative System.

The materials published for public comment include: (i) draft uniform provincial securities legislation (the provincial Capital Markets Act or PCMA), which would be proposed for enactment by each participating province and territory, and (ii) complementary federal legislation (the federal Capital Markets Stability Act or CMSA) which addresses such matters as criminal offenses, national data collection and systemic risk.

In releasing the draft legislation, the participating governments indicated that the legislation is intended to harmonize the regulatory approaches taken by the participating provinces and to update and modernize existing securities laws. While many aspects of the proposed legislation incorporate existing provincial legislation, several significant regulatory changes are included that may affect issuers, including:

• a move to a "platform" approach on such matters as continuous disclosure, proxy requirements, take-over bids and trading in derivatives, which sets out the fundamental legal provisions while leaving detailed requirements to be addressed in regulations (which have not been published);
• new enforcement mechanisms, such as whistle-blower provisions and prohibitions against "unjust deprivation", "benchmark manipulation" and "attempted market manipulation";
• regulation of systemically important market infrastructure entities (such as trading facilities, clearing houses, credit rating organizations and capital markets intermediaries) and systemically risky practices; and
• modifications to the civil liability (including secondary market liability) provisions, including to available defences and limitation periods.

Comments on the proposed legislation are requested by November 7, 2014. The participating governments expect that, following the receipt of comments, the provincial and federal legislation will both be enacted by June 30, 2015, with the Cooperative System operational in the fall of 2015. A website has been established that provides more information about the Cooperative System along with news and current information at: http://ccmr-ocrmc.ca/.

Broader Adoption Remains Unclear

To date, Alberta and Quebec, two of Canada's four largest capital market jurisdictions, have opposed a national securities regulator and have stated that they do not intend to join the Cooperative System. However, with Jim Prentice becoming premier of Alberta, it is possible that Alberta's position could shift. Mr. Prentice, a former cabinet minister in the federal Conservative government, had publicly supported the idea of a national securities regulator while in that role, although more recently he has expressed reservations about the proposed system. Alberta's Finance Minister, Doug Horner, has proposed an alternative to the Cooperative System which would leave day-to-day securities regulation to individual provinces but allow for the establishment of a national enforcement agency and adjudicator tribunal, both headquartered in Toronto.