Revised Capital Markets Act: Amendments to Regulatory and Criminal Enforcement Provisions

Blake, Cassels & Graydon LLP

The recently released revised consultation draft of the Capital Markets Act (CMA) for the proposed Cooperative Capital Markets Regulatory System (Cooperative System) includes changes to the proposed rules around regulatory and criminal enforcement. The Cooperative System will be administered by a single Capital Markets Regulatory Authority (Authority). The revised consultation draft is open for comment until December 23, 2015.


A consultation draft of the CMA for the Cooperative System was released in September 2014 for public comment. The consultation period ended on December 8, 2014. A revised version of the draft CMA, which takes into account some of the comments received during the consultation period and draft initial regulations under the CMA (together, the Consultation Drafts), was released in August 2015 along with a chart summarizing comments received and responses to those comments.

The CMA is intended to replace existing provincial and territorial securities legislation in the participating provinces and territories (Ontario, British Columbia, New Brunswick, Saskatchewan, Prince Edward Island and Yukon). Blakes published a series of bulletins regarding various aspects of the Cooperative System and subsequently published a series of bulletins summarizing comments received on the CMA, which can be accessed on our website.

Given the scope of the Consultation Drafts, Blakes is publishing a series of bulletins regarding various aspects of the Consultation Drafts. This bulletin focuses on the changes made to the regulatory and criminal enforcement sections in the revised draft CMA.


Our December 2014 Blakes Bulletin: New Cooperative Capital Markets Regulatory System: Proposed Changes to Regulatory and Criminal Enforcement sets out how the initial draft of the CMA affected the substantive and procedural aspects of regulatory and criminal securities enforcement.

Following the consultation period, several changes were made to the regulatory and criminal enforcement provisions of the initial draft CMA. While the changes are minor, there are noteworthy adjustments to the procedural protections afforded to parties in regulatory proceedings, changes to investigative powers and additional whistleblower protections.

More Procedural Protections

The initial draft CMA provided that the Tribunal may order a respondent to pay (1) an administrative monetary penalty of up to C$1-million per contravention, (2) disgorgement of amounts obtained or losses avoided as a result of a contravention and (3) compensation or restitution. The revised draft CMA clarifies that the Chief Regulator may, with the consent of a party, order that party to make a payment in connection with the settlement of a proceeding or prospective proceeding. Such consent payments are not subject to limits. This change could provide an avenue for resolving regulatory allegations without protracted public proceedings.

The initial draft of the CMA provided that the Authority can make an order according or removing certain designations where the public interest would not be prejudiced. For example, the Authority can determine that an issuer is or is not a reporting issuer, that a particular trade is or is not a distribution, or that a person is or is not an insider. The revised draft CMA provides all persons who would be directly affected by such an order an opportunity to be heard prior to such an order being made. This change provides an added procedural protection for market participants.

Finally, the initial draft of the CMA provided that each of the Authority, the Chief Regulator and the Tribunal can vary or revoke their decisions where they consider that doing so would not be prejudicial to the public interest. The revised draft CMA gives persons directly affected by the initial decision or the proposed varied decision of the Authority or the Chief Regulator the opportunity to be heard prior to the variation decision being made. This added right is not provided for Tribunal decisions, which can only be varied by application of a party.   

Augmented Investigative Powers

The revised draft CMA enables investigators to compel any person to preserve information under that person’s control for the purpose of an investigation. Similarly, the revised draft CMA provides peace officers and other investigators with the ability to apply to a judicial officer for a preservation order against any person with information that will assist an investigation. A preservation order cannot be sought against the person who is the target of the investigation. These preservation powers were not included in the initial draft CMA and could lead to increased responsibilities and costs for market participants who become involved in regulatory investigations.

The lack of explicit carve-outs for privileged information in the investigation portions of the initial draft CMA were the subject of several comments on the initial draft CMA. The drafters declined to make specific changes to the investigative portions of the revised draft CMA, taking the view that investigation powers in the CMA do not override common law privilege. However, a blanket provision was added later in the revised draft CMA that “[n]othing in this Act shall be construed to affect the privilege that exists between a solicitor and his or her client in relation to information or records that are subject to that privilege.”

Increased Whistleblower Protection

In the revised draft CMA, protections for “whistleblowers” have also been amended to include anti-reprisal protection for reporting contraventions of capital markets law to employers, in addition to the proposed protections for reporting to regulators. This change reflects the broader criticism of whistleblower programs that they encourage employees to circumvent their employers’ internal compliance systems in favour of reporting to regulatory authorities for possible compensation. This issue is addressed further in our October 2015 Blakes Bulletin: Proposed OSC Whistleblower Policy Provides Greater Incentive for Employees to Report Misconduct to Regulator.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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