The Cooperative Capital Markets Regulatory System Patricia Callon Chief Legal Officer & Director, Stakeholder Outreach and Communications Canadian Securities Transition Office Portfolio Management Association of Canada Compliance Officers’ Network December 10, 2013
History - Recommendations for Change 1935 • Royal Commission on Price Spreads • Proposes federal “Investment Securities Board’ 1964 • Royal Commission on Banking and Finance • Proposes cooperative regulatory body 1967 • Ontario Securities Commission • Proposes joint body called “CANSEC” 1979 • Federal government • Proposals for a Securities Market Law for Canada 1994 • Federal draft MOU • Proposes “Canadian Securities Commission” 2003 • Wise Persons’ Committee • Proposes comprehensive federal securities legislation 2006 • Crawford Panel (Ontario) • Proposes a common regulator & common securities law 2009 • Expert Panel on Securities Regulation • Proposes “Canadian Securities Commission” 2
Path to a Cooperative System • Proposed Canadian Securities Act May 2010 • Federal Statute with voluntary provincial participation • Referred to the Supreme Court of Canada July 2010 • Transition Plan • Vision and process for Canadian Securities Regulatory Authority April 2011 • Supreme Court hearing on proposed act • All provinces but Ontario argue it would be unconstitutional • Supreme Court opinion on proposed act Dec 2011 • Not within Parliament’s jurisdiction as currently drafted • Both levels have authority; cooperative approach available Mar 2012 • Government proposes cooperative approach • Consulting interested provinces and territories Mar 2013 • Government reiterates cooperative proposal • Announces plan for federal-only initiative if no timely agreement • Agreement in Principle for cooperative system Sep 2013 • British Columbia, Ontario & Canada • Others invited to join July 2015 • Target date for new Capital Markets Regulator • Based on uniform provincial/territorial act and complementary federal act 3
Proposed Canadian Securities Act - 2010 Comprehensive securities legislation covering: All matters currently included in provincial securities laws Derivatives (both exchange-traded and over-the-counter) Systemic risk Criminal offences related to capital markets 4
Supreme Court Reference - 2011 The Question: “Is the proposed Canadian Securities Act within the legislative authority of the Parliament of Canada?” The Answer: The Securities Act as presently drafted is not valid under the general branch of the federal power to regulate trade and commerce under s. 91(2) of the Constitution Act, 1867. 5
Supreme Court – Cooperative Approach “ It is open to the federal government and the provinces to exercise their respective powers over securities harmoniously, in the spirit of cooperative federalism.” (para 9) 6
Federal Position — Budget 2013 “The Government’s preferred approach … is through a common securities regulator established cooperatively with provinces and territories. “If a timely agreement cannot be reached on a common regulator, the Government will propose legislation to carry out its regulatory responsibilities consistent with the decision rendered by the Supreme Court of Canada.” 7
Agreement in Principle – September 2013 The governments of British Columbia, Ontario and Canada agree to move towards a cooperative capital markets regulatory system All provinces and territories are invited to participate in the proposed system “By pooling provincial and federal expertise, the cooperative securities regulator will contribute to a stronger economy, improve investor protection and better respond to increasingly competitive, dynamic and global capital markets.” Joint press release, September 19, 2013 8
Cooperative Legislation A uniform act adopted by each participating province and territory • addresses all areas currently addressed by provincial and territorial securities legislation A complementary federal act • applies throughout Canada • addresses criminal matters and matters relating to systemic risk 9
Cooperative Capital Markets Regulator Administering both federal and provincial legislation and a single set of regulations Operationally independent Self funded through a single set of fees Directed by an expert board of independent directors Overseen by a Council of Ministers 10
Structure of Regulator Executive head office in Toronto Regulatory office in each participating jurisdiction Nationally integrated executive management team Effective leadership and international voice Adjudicative tribunal with capital markets expertise Responsive to investors, regions and market sectors 11
Objectives Better protect investors Enhance Canada’s financial services sector Support efficient capital markets Better manage systemic risk related to capital markets Be more transparent and accountable to Canadians 12
Target Milestones Jan 31 2014 • Memorandum of Agreement • Draft cooperative legislation attached Mar 31 2014 • Draft initial regulations • Publish for comment • Integration agreements May 30 2014 • For integrating each provincial/territorial regulator into the Cooperative Capital Markets Regulator • Enact cooperative legislation Dec 31 2014 • Uniform provincial/territorial legislation by each province/territory • Complementary federal legislation by Parliament July 2015 • Capital Markets Regulator • Target launch date 13
What the Parties Said — Responsive to Markets “…builds on the strong foundation of the current system, improves enforcement, and is responsive to regional markets such as B.C.’s venture capital markets,” “I hope other jurisdictions give serious consideration to joining the cooperative system.” Honourable Michael de Jong Minister of Finance, British Columbia 14
What the Parties Said — More Jobs and Growth “…provide increased protection for investors, strengthen the competitiveness of Canada’s economy, lower costs and enhance the reputation of Canada’s financial services sector leading to more jobs and growth,” “…it is in the best interests of all provinces and will help our businesses grow.” Honourable Charles Sousa Minister of Finance, Ontario 15
What the Parties Said — Cooperative Federalism “This is a commendable example of cooperative federalism working to address today’s market realities,” “All of us listened and we came together, putting aside our differences to focus on a common goal: to modernize our capital markets and to make them more competitive.” Honourable James Flaherty Minister of Finance, Canada 16
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