Cooperative capital markets: Comments on the consultation

  • July 28, 2016

In May the federal government moved one step closer to creating a national securities regulator by opening up consultations on a revised Capital Markets Stability Act (Canada) – revisions based on previous consultations on the 2014 draft.

The CBA’s Business Law Section brought together securities law experts from across the country to comment on the latest draft of the Act. Along with the Canadian Corporate Counsel Association, they previously commented on the 2014 consultation document on the capital markets regulatory system governance and legislative framework, which included the initial draft of the Act, and the 2015 consultation draft of the provincial/territorial legislation and initial regulations.

A repeated recommendation in the latest submission on the Act from the Business Law Section is that the government should extend the time for consultations “to allow for more robust feedback” on the design of the federal regulator for opt-in provinces – British Columbia, Saskatchewan, Ontario, New Brunswick, P.E.I. and Yukon.

On the whole, the Section says it supports many of the changes to the Act in response to previous feedback from stakeholders, but it still has concerns in a number of areas, primarily governance.

The fact that the Capital Markets Regulatory Authority Act has not yet been released for review muddies the waters when it comes to governance, the Section says, as it “leaves many questions about whether and how the Authority has the ability to fulfill (its) distinct mandates.”

Questions left unanswered include how the regulator will be funded, how hearings will occur and the role it will have in the prosecution of offences, as well as how the Authority’s administration and enforcement power will be applied. There is also an overlap between offences under the Capital Markets Act and the Capital Markets Stability Act that must be addressed in order to avoid duplication of efforts, and the proposed Act has few details on the interplay between participating and non-participating jurisdictions.

“Many of the numerous questions the CBA Section has about the governance structure of the Cooperative System cannot be answered without all relevant legislation under the proposed regime,” the Section concludes. “The current approach of releasing various pieces of legislation at different times has made it difficult to assess how the many parts of the Cooperative System will work together and to assess the effectiveness of the governance structure as a whole. The CBA recommends that all relevant legislation be released together, with ample time for robust consultation.”

Among its list of concerns is the question of privacy. The Section requests clarity on whether provincial or federal privacy laws will govern the handling of personal information. It also notes that the “exceptions to the Authority’s confidentiality obligations for disclosure of non-public information remain broad” and suggests that additional safeguards should be included in the Act. It also seeks clarification on the definition of terms used in the Act, including systemic risk, stability, and material, and notes that terms such as “systemically risky” and “systemically important” have no legal meaning, and that there “should be a formal process to make a determination or finding of systemic risk.”

The Section says it would be happy to discuss these and other comments in more detail. It also recommends that the Cooperative Capital Markets Regulator “release final drafts of all relevant legislation together, and to allow time for robust consultation. This will result in a more efficient and effective regime that is complementary with the regulatory schemes in non-participating jurisdictions.”