Canadian securities regulation

Canadian securities regulation is managed through the laws and agencies established by Canada's 10 provincial and 3 territorial governments. Each province and territory has a securities commission or equivalent authority with its own provincial or territorial legislation.

Unlike other major federations, Canada has no securities regulatory authority at the federal government level. Nonetheless, most provincial security commissions operate under a passport system, so that approval of one commission essentially allows for registration in another province. However, concerns about the system remain. For example, Ontario (Canada's largest capital market) does not participate in the passport regimen.

Securities regulators from each province and territory have joined to form the Canadian Securities Administrators (CSA).

Concerns about the provincial system of securities regulation have led to repeated calls for a national securities system in Canada. As of June 2021, the Canadian government is working towards establishing a national securities regulatory system to provide:

better and more consistent protection for investors across Canada;
improved regulatory and criminal enforcement to better fight security-related crime;
new tools to better support the stability of the Canadian financial system;
faster policy responses to emerging market trends;
simpler processes for businesses, resulting in lower costs for investors;
more effective international representation and influence for Canada.

List of securities regulators in Canada

Each provincial securities regulator is either a self-funded commission or an entity funded within a larger government department. Regulators (and their respective parent departments, if any) for each province include:

Alberta Securities Commission;
British Columbia Securities Commission;
Manitoba Securities Commission – under the Manitoba Financial Services Agency; the Chair reports to the legislature through the Minister of Finance;
Financial and Consumer Services Commission (New Brunswick) – arm's length, self-funded, independent Crown Corporation established by the provincial government on 1 July 2013;
Financial Services Regulation Division, Digital Government and Service NL (Newfoundland and Labrador);
Office of the Superintendent of Securities (Northwest Territories) – under the Legal Registries division, Department of Justice;
Nova Scotia Securities Commission;
Nunavut Securities Office – under the Department of Justice;
Ontario Securities Commission (OSC) – the largest of the provincial regulators;
PEI Office of the Superintendent of Securities Office (Prince Edward Island) – under the Department of Justice and Public Safety/Office of the Attorney General;
Autorité des marchés financiers (Quebec);
Financial and Consumer Affairs Authority of Saskatchewan;
Office of the Yukon Superintendent of Securities.

Canadian securities regulatory system

Canada has no securities regulatory authority at the federal government level. Instead, each province and territory has a securities commission or equivalent authority and legislation. Provincial governments established regulatory agencies beginning with Manitoba in 1912; two decades later, the Privy Council of Canada decided in Lymburn v Mayland [1932] AC 318, that such legislation is authorized under the provincial property and civil rights power.

Each provincial securities regulator is either a self-funded commission or an entity funded within a larger government department, typically under the respective Justice department. The securities regulator administers the province's securities legislation and, correspondingly, promulgates its own set of rules and regulations. The regulator relies on the work of the national self-regulatory organization—the Canadian Investment Regulatory Organization (CIRO)—for most aspects of the regulation of the organization's member firms and their employees. Accountability for securities regulation extends from the securities regulator to the Minister responsible for securities regulation and, ultimately, the legislature in each province.

The largest of the provincial regulators is the Ontario Securities Commission (OSC). Other significant local regulators are the Alberta Securities Commission, British Columbia Securities Commission, and the Autorité des marchés financiers (Québec).

Public education on financial literacy, investment, and financial decision-making is a secondary focus of the provincial regulators. The OSC created the non-profit organization Investor Education Fund (IEF) for this sole purpose. Funded by the OSC but acting independently, IEF's primary goal is to provide Canadians with financial tools and information to improve financial literacy.

Canadian Securities Administrators

The provincial and territorial regulators work together to coordinate and harmonize regulations, policies, and practices regarding Canadian capital markets through the Canadian Securities Administrators (CSA), an umbrella regulatory organization that serves Canadian markets, securities issuers, and investors. The major provincial securities regulators also participate in various international co-operative organizations and arrangements. On 12 January 2009, the Panel released its final report, in which they highlighted several concerns with the current structure, along with a draft "Securities Act" to the federal Minister of Finance and the provincial and territorial ministers responsible for securities regulation.

The Panel was concerned that the fragmented structure, requiring decisions to be coordinated across up to 13 jurisdictions, made it difficult for Canadian securities regulators to react quickly and decisively to capital market events. One example of this difficulty was the adoption in September 2008 by some of Canada's international counterparts, including the United States and the United Kingdom, of restrictions of short-selling specific stock as a temporary stability measure. The Canadian response lagged behind the coordinated efforts of the US and the UK and was not uniform across the provinces. A second example was the delay between the freezing of the non-bank asset-backed commercial paper (ABCP) market in August 2007 and the release of a consultation paper by the CSA. The paper was for input on several proposals to prevent similar capital market failures in the future. The Panel found that the extant regulatory structure is prone to slow responses, making Canada vulnerable to market risks and impacting its reputation.

The Panel also expressed concern that the Canadian system of provincial mandates is not in agreement with the national response required to address developments in capital markets that are increasingly national and international in scope. Its mandate is to help develop capital-markets regulatory capabilities falling within the jurisdiction of the Government of Canada.

Its mandate includes helping to prepare for the successful administration of the proposed federal "Capital Markets Stability Act"; providing support for the establishment of the Cooperative Capital Markets Regulatory System; and giving advice to the Canadian Department of Finance's Financial Sector Policy Branch.

History

Background

Over the past 45 years, the majority of studies by independent expert and academic analysts have come out in favor of establishing a Canadian securities regulator, beginning with the Porter Report in 1964 and the Kimber Report in 1965. In the most recent decade, the push for a national regulator has been particularly strong, with reports delivered from the Wise Persons Committee, the Crawford Panel, and the Expert Panel on Securities Regulation.

In their final report in January 2009, the Expert Panel made a series of recommendations, the most important being establishing a Canadian securities regulator to administer a single "Securities Act" for all of Canada. The Expert Panel provided a recommended transition path to bring this about, with one key step being creating a transition and planning team to oversee the transition to a federal regulatory system.

On 22 June 2009, the Government of Canada acted on this recommendation and announced the launch of the Canadian Securities Transition Office to lead Canada's effort to establish a Canadian securities regulator.

Development

The Canadian Securities Transition Office was implemented in July 2009 by the Government of Canada through the "Canadian Securities Regulation Regime Transition Office Act". The Advisory Committee provided advice to the Transition Office on the transition to a Canadian securities regulator to ensure that each of the participating governments' interests is represented in the work of establishing a Canadian securities regulator.

In its first year, the Transition Office and the Government of Canada completed two critical steps in transitioning to a Canadian securities regulator:

On 26 May 2010, the federal government tabled for information in the House of Commons the proposed "Canadian" "Securities Act". The proposed Act was built on provincial securities regulation and harmonized existing legislation in the form of a single statute. It benefits from the work of the Expert Panel on Securities Regulation and other reform efforts and reflects domestic and international best practices. It proposed significant improvements in terms of governance, adjudication, financial stability, regulatory and criminal enforcement, and provision for a wide scope of authority to regulate financial instruments and participants in capital markets.
On 12 July 2010, the Transition Office delivered its Transition Plan for the Canadian Securities Regulatory Authority to the Minister of Finance and the ministers responsible for securities regulation of the participating provinces and territories.

Concurrent with releasing the proposed "Canadian" "Securities Act", the federal government referred the proposed Act to the Supreme Court of Canada for its opinion on the following question: "Is the annexed proposed "Canadian" "Securities Act" within the legislative authority of the Parliament of Canada?" The Supreme Court heard the reference on 13 and 14 April 2011. On 22 December that year, the Supreme Court returned its decision, finding the proposed Canadian Securities Act to be beyond the constitutional authority of Parliament under the general trade and commerce power. More specifically, the proposed Act as drafted would not be valid under the general branch of the federal trade and commerce power under section 91(2) of the constitution. However, the court indicated that some aspects of the Act could be valid under that power. It also noted that it had not been asked for its opinion on the extent of Parliament's legislative authority under other heads of federal power, including the interprovincial and international trade branch of section 91(2). The court concluded that a cooperative legislative approach through which the federal and provincial governments exercise their powers collaboratively would be possible.

Following the Supreme Court of Canada's decision, the Government of Canada announced that it was exploring with provinces the possibility of working jointly to establish a standard securities regulator.

In 2013, the Government of Canada signed an agreement in principle with British Columbia and Ontario governments to establish a federal-provincial Cooperative Capital Markets Regulatory System. Since then, five other provinces and one territory have joined the Cooperative System.

Jointly engaged in the implementation of this system are the federal Government of Canada and the governments of British Columbia, Ontario, Saskatchewan, New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island, and Yukon, under an interim body called the Capital Markets Authority Implementation Organization (CMAIO; , OMAMC).

Jill Leversage, Chair
Andrea Bolger
Harold H. MacKay