The Cooperative Capital Markets Regulatory System Patricia Callon - - PowerPoint PPT Presentation

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

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• Royal Commission on Price Spreads
• Proposes federal “Investment Securities Board’

1935

• Royal Commission on Banking and Finance
• Proposes cooperative regulatory body

1964

• Ontario Securities Commission
• Proposes joint body called “CANSEC”

1967

• Federal government
• Proposals for a Securities Market Law for Canada

1979

• Federal draft MOU
• Proposes “Canadian Securities Commission”

1994

• Wise Persons’ Committee
• Proposes comprehensive federal securities legislation

2003

• Crawford Panel (Ontario)
• Proposes a common regulator & common securities law

2006

• Expert Panel on Securities Regulation
• Proposes “Canadian Securities Commission”

2009

Path to a Cooperative System

3

• Proposed Canadian Securities Act
• Federal Statute with voluntary provincial participation
• Referred to the Supreme Court of Canada

May 2010

• Transition Plan
• Vision and process for Canadian Securities Regulatory Authority

July 2010

• Supreme Court hearing on proposed act
• All provinces but Ontario argue it would be unconstitutional

April 2011

• Supreme Court opinion on proposed act
• Not within Parliament’s jurisdiction as currently drafted
• Both levels have authority; cooperative approach available

Dec 2011

• Government proposes cooperative approach
• Consulting interested provinces and territories

Mar 2012

• Government reiterates cooperative proposal
• Announces plan for federal-only initiative if no timely agreement

Mar 2013

• Agreement in Principle for cooperative system
• British Columbia, Ontario & Canada
• Others invited to join

Sep 2013

• Target date for new Capital Markets Regulator
• Based on uniform provincial/territorial act and complementary federal act

July 2015

Proposed Canadian Securities Act - 2010

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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

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.

Supreme Court Reference - 2011

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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

• ut its regulatory responsibilities consistent with the

decision rendered by the Supreme Court of Canada.”

7

Agreement in Principle – September 2013

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 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

Cooperative Legislation

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 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

Cooperative Capital Markets Regulator

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 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

Structure of Regulator

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 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

Objectives

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 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

Target Milestones

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• Memorandum of Agreement
• Draft cooperative legislation attached

Jan 31 2014

• Draft initial regulations
• Publish for comment

Mar 31 2014

• Integration agreements
• For integrating each provincial/territorial regulator into the Cooperative

Capital Markets Regulator

May 30 2014

• Enact cooperative legislation
• Uniform provincial/territorial legislation by each province/territory
• Complementary federal legislation by Parliament

Dec 31 2014

• Capital Markets Regulator
• Target launch date

July 2015

What the Parties Said — Responsive to Markets

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“…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

What the Parties Said — More Jobs and Growth

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“…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

• ur businesses grow.”

Honourable Charles Sousa Minister of Finance, Ontario

What the Parties Said — Cooperative Federalism

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“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