Canada is the only major industrialized country without a national securities regulator. Dealing with 13 different securities regulators—each with different rules and fees—has made managing assets here difficult.

But in September, the finance ministers of B.C., Ontario and Canada agreed to establish a co-operative markets regulatory system with a common body administering a single set of regulations designed to protect investors, support efficient capital markets and manage systemic risk. Participation by the other provinces and territories is voluntary, but the ministers hope the rest will join.

This agreement is the latest attempt to move toward establishing a single securities regulator in Canada. In 2011, the Supreme Court of Canada said the then-proposed National Securities Regulator overstepped the federal government’s constitutional authority, ruling that securities matters fell under property and civil rights—a provincial power under the Constitution. The court did note, however, that systemic risk falls under federal jurisdiction.

Expected Benefits
The new capital markets regulator (CMR) will lead to more nationally consistent compliance activities, as well as improved co-ordination with police and prosecution authorities across Canada. The CMR will have one uniform securities act adopted by each participating jurisdiction, addressing all matters of securities legislation currently residing with the provinces and territories. There will be a complementary federal act to address issues relating to systemic risk in national capital markets. The new CMR will be independent, funded through fees that financial institutions already pay for being registered with a securities commission.

A single regulator will provide more efficient and transparent policy regulation across Canada, which will ultimately benefit all investors. For example, having a national body that investigates matters such as insider trading and fraud across the country will ensure a more streamlined process. This will improve investor protection, because regulations will be enforced more effectively.

Having most of the provinces and territories participate in a co-operative regulator will also keep Canada relevant in the global capital markets. It will likely attract more investment providers, which will give Canadian pension funds more available solutions—anything that is offered by foreign asset managers, advisors or other financial intermediaries. Under the new regime, these players will face fewer hurdles when doing business in Canada.

Implementation
The timeline for this initiative is tight, and it remains to be seen if the other provinces and territories will opt in. Quebec and Alberta have voiced concern that a single regulator is an attempt by the federal government to indirectly overstep its constitutional powers. The deal calls for all participating jurisdictions to agree on the terms and conditions of the new system by Jan. 31, 2014. Provincial and federal legislation will need to be enacted by Dec. 31, 2014.

The executive leadership of the new regulator will be a nationally integrated team with its head office in Toronto. There will also be offices in each participating jurisdiction, which will provide expertise and capacity to serve market players in those regions. A council of ministers from each participating province will oversee the new CMR.

While there are many details to work out, the proposed single regulator is a step in the right direction, serving to strengthen Canada’s international position and helping investors at home.

Jacqueline Hatherly is chief compliance officer and legal counsel with Greystone Managed Investments Inc. jacqueline.hatherly@greystone.ca

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