Hellen Siwanowicz, McMillan LLP
Canada is the only industrialized country in the world that does not have a national securities regulator. There is no equivalent of the U.S. Securities and Exchange Commission in Canada and it is unlikely that Canada will have a national securities regulator in the foreseeable future.
Securities laws in Canada are regulated by the 13 provincial and territorial governments because Canada’s Constitution Act, 1867 recognizes provincial jurisdiction over securities regulation under subsection 92(13), “Property and Civil Rights”. Each province and territory in Canada has its own equivalent of the Securities Act (Ontario). Even though there is no national securities regulator in Canada, over the past several decades there have been significant efforts made to harmonize securities regulation throughout Canada. Harmonization efforts have certainly made it easier for capital markets participants and their advisors to navigate the web of requirements but the fact remains that in Canada there are still 13 securities regulatory authorities that administer 13 separate sets of securities laws.
One of the major impediments to implementing a national securities regulator in Canada may be that our current regime of securities regulation works quite well. However, notwithstanding the general efficiency of the current regime, there have been discussions for decades about the benefits of a national securities regulator in Canada. Some proponents have argued that our current system makes it more time consuming and expensive to raise capital in Canada than is necessary and that given the competitive nature of the global capital markets today, Canada should be doing whatever it can to make its capital markets more accessible.
In 2010, the federal government released the proposed Securities Act (Canada) (the “Act”), which would have created a single national regulator overseeing securities regulation in Canada. Predictably, some provinces argued that the proposed Act infringed on provincial jurisdiction over securities laws under our Constitution. The federal government also initiated a reference to the Supreme Court of Canada (the “SCC”) asking whether the federal government had the legislative authority to enact the proposed Act.
In 2011, the SCC rejected the federal government’s arguments in favour of a national securities regulator and ruled that the proposed Act was within the jurisdiction of the provinces as it fell within provincial authority over “Property and Civil Rights” under our Constitution. Accordingly, each provincial and territorial legislature and the securities regulator in each of these jurisdictions is permitted to develop and administer securities laws in a manner that best serves its local market. The SCC noted that “the policy question of whether a single national securities scheme is preferable to multiple provincial schemes is not one for the Court to decide.”
After the SCC decision, the federal government went back to the drawing board. The latest attempt by the federal government to create a national securities regulator started in 2013 when the former federal Finance Minister Jim Flaherty unveiled a new version of a national securities regulator based on a cooperative approach. As of the present date, various provincial and territorial governments – Ontario, British Columbia, New Brunswick, Saskatchewan, Prince Edward Island and Yukon (the “Participating Jurisdictions”) – have entered into a Memorandum of Agreement with the federal government to participate in the Cooperative Capital Markets Regulatory System (the “Cooperative System”). Participation in the Cooperative System is voluntary.
Under the Cooperative System, two pieces of proposed legislation, the provincial Capital Markets Act (the “CMA”) and the federal Capital Markets Stability Act would be enacted to implement a consistent securities regulatory framework in the Participating Jurisdictions. Initial drafts of the proposed legislation were published for comment in 2014. The CMA is expected to replace the existing securities legislation in the current Participating Jurisdictions.
The proposed legislation under the Cooperative System has elicited much commentary from the legal and academic community. Two major areas of concern are the adequacy of the consultative process in connection with the proposed legislation and the lack of clarity regarding the interface between the Participating Jurisdictions and the non-Participating Jurisdictions.
Again quite predictably, certain jurisdictions, including the Provinces of Alberta and Quebec, have voiced opposition to the Cooperative System. Both provinces have indicated support for the current system of harmonized securities regulation in Canada.
Recently, the Finance Minister of the Province of Alberta, Joe Ceci, stated that the Alberta government would not deviate from its longstanding opposition to a national securities regulator because it believes that only the Alberta Securities Commission can understand Alberta’s unique needs and best serve its goals. Not only is the Province of Quebec not a Participating Jurisdiction in the new Cooperative System, it has applied to the Quebec Court of Appeal for a decision on the constitutionality of the Cooperative System. The federal Finance Minister, Bill Moreau, stated that the new federal Liberal government favoured a collaborative national securities regulator but, interestingly, the Cooperative System was not mentioned recently as one of the government’s top priorities.
Only time will tell whether the political will exists in Canada to continue with the implementation of the Cooperative System, which to date has been rejected by the Provinces of Alberta and Quebec, two economically important jurisdictions in Canada.
Hellen Siwanowicz is a Partner at McMillan LLP.