Upload
gladys-higgins
View
215
Download
0
Tags:
Embed Size (px)
Citation preview
1
NATIONAL CAPITAL MARKETS POLICY MAKING IN CANADA
1st Annual Securities Law SymposiumAssociation of Corporate CounselLawrence E. RitchieOctober 1, 2014Osler, Hoskin & Harcourt LLP
2
Legislators and Governments
Courts
Securities Regulators
Stock Exchanges and
Self-Regulatory Organizations
Laws and Regulations
Interpretative Principles of
Common Law
Rules, National and Multi Lateral
Instruments and Policy Statements
Rules and Conditions of
Membership or Participation
Where Does Regulation Come From?
Interpretations of “Public Interest”
The current Canadian legal and regulatory framework reflects our Federal System
• 13 securities regulators accountable to 13 governments
• Partially harmonized securities statutes and approaches to regulation
• Different strategic directions and priorities
• Cooperation through the Canadian Securities Administrators, but no national accountability
• Not able to easily and effectively address rapidly changing environment
3
Canadian Securities Administrators
Chair, Vice-Chair and Secretariat
Manitoba Securities
Commission
Autorité des marchés financiers
British Colombia Securities
Commission
Financial and Consumer Affairs
Authority of Saskatchewan
Nunavut Securities Office
PEI Office of Superintendent of
Securities
Nova Scotia Securities
Commission
Newfoundland Office of the
Superintendant of Securities &
Financial Services Regulation Division
Alberta Securities Commission
Ontario Securities Commission
Office of Superintendent of Securities, Yukon
Northwest Territories
Securities Office
New Brunswick Financial and
Consumer Services
Commission
The current Canadian Capital markets regulatory framework “co-ordinated” by the CSA
4
Passport System
• MI 11-102 – Passport System was adopted by the ‘passport jurisdictions’ in 2008 (being all the provinces and territories except ON) pursuant to a 2004 memorandum of understanding among the passport jurisdictions with a goal to “move ahead with a passport system for an improved securities regulatory framework, to develop highly harmonized securities laws..., and to explore further options to consolidate and/or strengthen coordination and consistency of securities laws among provinces and territories...”.
• Basics: prospectus materials, a request for exemptive relief, or a submission to become a registrant is reviewed by the principal regulator (so for a BC company, the BCSC etc). There is a deemed receipt, a deemed decision, or a deemed registration from the non principal regulators once a receipt is issued, a decision made, or a firm or individual registered by the principal regulator.
• According to 11-102CP – Passport System, the passport system “gives each market participant a single window of access to the capital markets in multiple jurisdictions.” The single window of access being the market participant’s principal regulator.
5
Autorité des marchés financiers
Canadian Securities Administrators
Chair, Vice-Chair and Secretariat
Manitoba Securities
Commission
British Colombia Securities
Commission
Financial and Consumer Affairs
Authority of Saskatchewan
Nunavut Securities Office
PEI Office of Superintendent of
Securities
Nova Scotia Securities
Commission
Newfoundland Office of the
Superintendant of Securities &
Financial Services Regulation Division
Alberta Securities Commission
Ontario Securities Commission
Office of Superintendent of Securities, Yukon
Northwest Territories
Securities Office
New Brunswick Financial and
Consumer Services
Commission
The Passport System
6
Non-harmonization of securities legislation
• As of 2012:– Approximately 120 carve-outs in the National
Instruments– 3 Multilateral Instruments– More than 800 local rules
7
Continued Disharmony
• Proposed Amendments to NI 58-101 Disclosure of Corporate Governance Practices
• OSC Staff Notice 15-702 Revised Credit for Cooperation Program• Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-
Counter Markets• Proposed Multilateral Instrument 45-107 Listing Representation and
Statutory Right of Action Disclosure Exemptions• Proposed OSC Rule 24-503 Clearing Agency Requirements and Related
Companion Policy• Proposed New Crowdfunding Exemptions• Proposed Changes to Prospectus Exemptions
8
“As an investment banker and a securities regulator, I’ve seen the inefficiency that flows from our current system of each of our 13 provinces and territories having its own securities commission. It leads to not only inefficiency, but it leads to an impact on enforcement and on the oversight of systemic risk.”
Honourable Joe OliverMinister of Finance, Canada
(Globe & Mail, April 23, 2014)
10
11
If only we could have a SINGLE regulator ….
• One statute and approach to regulation
• One board of directors and executive team
• One strategic direction and set of priorities
• One voice internationally
• Integrated, empowered local offices applying national standards
• Designed to address rapidly changing environment
12
History - Recommendations for Change
• 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 Canada1979
• Federal draft MOU• Proposes “Canadian Securities Commission” 1994
• Wise Persons’ Committee• Proposes comprehensive federal securities legislation2003
• Crawford Panel (Ontario)• Proposes a common regulator & common securities law2006
13
Path to a Cooperative System
• Expert Panel on Securities Regulation• Proposes “Canadian Securities Commission” and a Path to get there (“Transition
Office” established2009• Proposed Federal Securities Act tabled in ParliamentMay 2010• Transition Plan
• Vision and process for Canadian Securities Regulatory AuthorityJuly 2010• Supreme Court Reference hearing on proposed act
• All provinces but Ontario argue it would be unconstitutionalApril 2011• Supreme Court opinion on proposed act
• Not within Parliament’s jurisdiction as currently drafted• Both levels have authority; cooperative approach available Dec 2011
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
14
The Question: “Is the proposed Canadian Securities Act within the
legislative authority of the Parliament of Canada?”
Argument’s Focus: General branch of the trade and commerce power
The answer: No 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.
15
Supreme Court Reference (2011)
“In sum, the proposed Act overreaches genuine national concerns.
“While the economic importance and pervasive character of the securities market may, in principle, support federal intervention that is qualitatively different from what the provinces can do, they do not justify a wholesale takeover of the regulation of the securities industry which is the ultimate consequence of the proposed federal legislation.”
16
Supreme Court — Overreach
Supreme Court — Federal Jurisdiction
Areas of federal jurisdiction: Fair, efficient and competitive markets (para. 117) The integrity and stability of Canada’s financial
system (para. 123) National data collection (para. 121) Prevention of and response to systemic risks
(para. 128) Other matters that are “genuinely national in
scope and qualitatively distinct from those falling under provincial heads of power.” (para. 70)
17
Supreme Court — Provincial Jurisdiction
Areas of provincial jurisdiction: Investor protection (para. 128) Trades or occupations within a province (para.
117) Local markets (para. 115) Day-to-day, routine and/or administrative
aspects (para. 125)
18
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.
“The experience of other federations in the field of securities regulation, while a function of their own constitutional requirements, suggests that a cooperative approach might usefully be explored, should our legislators so choose, to ensure that each level of government properly discharges its responsibility to the public in a coordinated fashion.”
(para 9)
19
20
Path to a Cooperative System
• Government reiterates cooperative proposal• Announces plan for federal-only initiative if no timely
agreement
Mar 2012
Mar 2013
• Government proposes cooperative approach•Consulting interested provinces and territories
21
• Agreement in Principle for cooperative system• British Columbia, Ontario & Canada• Others invited to join
Sep 2013
• Amended Agreement in Principle for cooperative system• Saskatchewan and New Brunswick join
July 2014
22
Proposed 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
23
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
Structure of Regulator
Board of Directors
Regulatory Division Chief Regulator
Deputy Chief Regulators
Adjudicative Division Chief Adjudicator
Associate Chief Adjudicators
25
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
Proposed Cooperative Legislation
26
Consultation Draft: Provincial Capital Markets Act
•Consultation draft released on September 8, 2014
• Comment period ends November 7, 2014
•Notable Features:– Intended to promote flexibility in responding to market developments
• Leaves detailed requirements to regulations
– Consolidation and enhancement of enforcement tools under the Authority
27
Provincial Capital Markets Act: Structure
• Part 1 Interpretation• Part 2 Recognized Entities• Part 3 Designated Entities and Other Market Participants• Part 4 Registration• Part 5 Prospectus Requirements• Part 6 Trading in Derivatives• Part 7 Disclosure and Proxies• Part 8 Take-Over Bids and Issuer Bids• Part 9 Market Conduct• Part 10 Orders, Reviews and Appeals• Part 11 Administration and Enforcement• Part 12 Civil Liability• Part 13 Civil Liability for Secondary Market Disclosure• Part 14 General• Part 15 Regulations, Forms and Policies
28
Provincial Capital Markets Act:Designation Order
• Additional regulatory tool in addition to “recognition” or “registration”
• Allows certain entities to apply for a designation order to be designated as a trade repository, credit rating organization, investor compensation fund, dispute resolution service, information processor or marketplace
• This designation will be required for certain market activities – e.g., in connection with issuing a credit rating
• Designated entities are not required to regulate their members or participants, but it is expected that the Authority will impose requirements through designation orders and the regulations
29
Provincial Capital Markets Act:Takeover Bids
• Will be dealt with in the regulations
• Harmonizes Ontario’s regime with the other CSA jurisdictions
30
Provincial Capital Markets Act:Derivatives Regulation
• “Derivatives” broadly defined to allow for a flexible regulatory framework
• Not all derivatives and derivatives trading is regulated
• Certain derivatives will fall within the definition of “security”; others will not
31
Provincial Capital Markets Act:Civil Liability
• Reverses the burden of defence for certain defences in primary market actions, including the reasonable investigation defence
• Civil right of action for insider trading and related offences
32
Provincial Capital Markets Act:Auditor Oversight Organizations
• Provisions are similar to current BC, Sask and NB legislation
• Anticipated that Ontario would repeal the Canadian Public Accountability Board Act (Ontario), 2006
• Decisions of auditor oversight organizations are subject to review by the Tribunal
33
Provincial Capital Markets Act: Strengthening Enforcement
• Common database will contain information from surveillance, complaints, reviews and investigations
• Facilitate better cooperation with law enforcement agencies and other regulatory authorities
• Enhanced powers to obtain production orders and compel records and information from market participants
• Relaxes Ontario’s confidentiality requirement for compelled evidence and instead permits the Chief Regulator to prohibit the communication of information related to the investigation for a specified period
34
Provincial Capital Markets Act:Whistleblower Protection
• Prohibits employers from retaliating against employees for providing information to the Authority, testifying in a related proceeding or expressing an intention to do so
35
Consultation Draft: Federal Capital Markets Stability Act
• Consultation draft released September 8, 2014
• Comment period ends November 7, 2014
• Notable Features:– Enhanced powers for data collection
• To be prescribed in regulations
– Regulation of market infrastructure entities, credit rating organizations, and intermediaries
– Intended to monitors and address systemic risks
36
Capital Markets Stability Act:Approach
• National data collection powers to monitor activity in capital markets and detect and mitigate systemic risks
– Regulations regarding information collection and retention
– Coordinate data collection with other regulatory authorities
• Empowering the Authority to take decisive action across Canada to address threats to financial stability
• Cooperate with coordinate with other regulatory authorities to reduce the burden on market participants
37
Capital Markets Stability Act:Addressing Systemic Risk
• Allows Authority to designate market entities – e.g., trading facilities, clearing houses, intermediaries, etc. – as systemically important market infrastructure entities
• Allows Authority to designate products and practices as systemically risky
• Thereafter empowered to make regulations and, in certain cases, orders, to address the systemic risk posed by the entity, product or practice
38
Capital Markets Stability Act:Addressing Systemic Risk
• Empowers Authority to make a temporary order of national application to prohibit a practice or activity, suspend or restrict trading in a security or derivative, or suspend or restrict trading on a trading facility.
• Subject to the oversight of the Minister of Finance of Canada
39
Target Milestones
•Draft initial regulations•Publish for commentDecember 19 2014
•Enact cooperative legislation• Uniform provincial/territorial legislation by each province/territory• Complementary federal legislation by Parliament
June 30 2015
•Capital Markets Regulator•Target launch date
Fall 2015
Ongoing Debate
Quebec has indicated an intention to challenge the proposed legislation.
Alberta has announced its own proposed model for securities regulatory reform which would retain provincial commissions and agencies.
“Today’s announcement confirms our long-standing fear that Ottawa will proceed with changes to Canada’s securities regulation system without the support of two of its largest markets, Alberta and Quebec. This will leave Canada with a more fractured system than the one we have today.”
Honourable Doug Horner Minister of Finance, Alberta
Statement on National Common Securities Regulator, July 9, 2014
40