Laying the Foundation for a National Securities Regulator
The federal government has pressed ahead with its objective of establishing a national securities regulator under a voluntary regime that enables provinces and territories to opt in by choice. In late May of this year, the proposed Securities Act (Canada) was unveiled by the Finance Minister, and in mid-July, the Canadian Securities Transition Office (CSTO) delivered its key planning document entitled Transition Plan for Canadian Securities Regulatory Authority.
The proposed Canadian Securities Act was created with input from the CSTO and the 10 participating provinces and territories (non-participants are Québec, Alberta and Manitoba). It harmonizes existing legislation, reflects domestic and international best practice, and proposes improvements in a number of areas — including corporate governance, adjudication, and regulatory and criminal enforcement, among others.
The proposed act was not introduced into Parliament as a bill. Rather, in an effort to obtain some legal certainty, the federal government referred it to the Supreme Court of Canada, concurrent with its release, for the court’s opinion on the following question: "Is the annexed proposed Canadian Securities Act within the legislative authority of the Parliament of Canada?" This federal constitutional reference case is expected to take anywhere between 10 and 24 months, and a hearing is scheduled for April 2011. The Provinces of Alberta and Québec continue their strong opposition to a national securities regulator, and each has initiated their own constitutional references in their respective courts of appeal. Both hearings are expected to take place in early 2011.
The Transition Plan for Canadian Securities Regulatory Authority was released in mid-July of this year by the CSTO, the principal organization leading and managing the transition to a Canadian securities regulator. It is the CSTO’s roadmap for establishing the Canadian Securities Regulatory Authority (CSRA), the regulatory body established under the proposed act. The Transition Plan sets out the CSTO’s vision for the CSRA and its regulatory approach, as well as proposals for the governance structure, organization design and implementation. There has been much speculation about the possible location of the CSRA’s head office. Without committing to any specific plan, Doug Hyndman, Chair and CEO of the CSTO, has recently been active in the press with his view that the location of the CSRA’s Chief Regulator should not matter as the goal is the creation of a single and final decision- and policy-maker on securities matters. Mr. Hyndman has made the point that in Canada — with its diverse local economies and market conditions — centralizing regulation in just one place would be "throwing the baby out with the bath water."
The Transition Plan anticipates the launch of the CSRA by July 2012. The next phase of the transition will require deeper involvement of the participating provinces and territories, as well as continued input from stakeholders. In the coming months, participating provinces and territories will be required to enter into various agreements indicating their actual commitment to proceed with the CSRA. However, the looming showdown in two courts of appeal and the Supreme Court of Canada over the constitutional power of the federal government to put in place a national securities regulator is likely to dominate the headlines in first half of 2011 — and ultimately, the CSTO’s next steps.