Expert Panel on Securities Regulation

Creating an Advantage in Global Capital Markets

  1. Stage One: Establishing the Foundation
  2. Stage Two: Transition to the New Regime

Table of Contents

“We do not believe that moving to a single securities regulator would be disruptive to the marketplace if clear transitional provisions were adopted and the majority of provincial securities regulatory staff is initially transferred to the new single regulator.”

Ontario Bar Association

Under the terms of our mandate, we are called upon to provide, in addition to a securities act, a transition path including key steps and timelines for the implementation of the legislation, and changes to the structure of the regulatory system. We are recommending the adoption of a comprehensive national securities act (the “Act”) with the willing participation of provinces. With a key consideration being the minimization of market disruption, we contemplate a staged transition to this new legislation and administration.

I. Stage One: Establishing the Foundation

Following the announcement of the federal government’s intention to move forward, negotiations would commence with the provinces with a view to their participation in a national regulatory system (including discussions as to compensation for foregone revenue). Coincident with such announcement, a transition and planning team (the “Team”) would be created and its budgetary allocation authorized. The Team would support the intergovernmental negotiations, overseeing the transition to a federal regulatory system, as well as planning for the Canadian Securities Commission (the “Commission”) and the independent adjudicative tribunal (the “Tribunal”).

The Team would be expected to negotiate a memorandum of understanding (an “MOU”) with those provinces willing to participate (the “participating jurisdictions”) for the purposes of coordinating implementation of the national regime, given the expected need for a staged transition from the existing provincial regimes. Appendix 7 provides an indication of the potential subject matters which might be covered in such an MOU.

The Team would also, working with the federal government and participating provinces, oversee the preparation of the Act for introduction in Parliament. The Expert Panel has developed the draft Securities Act (see Box 2) to provide a basis for developing a national securities act; however it leaves open a number of issues that would require further consideration. These include determination of the appropriate transition provisions as well as certain institutional structural issues.

Assuming agreement with a sufficient number of jurisdictions, the federal government would introduce the Act. The aim of the federal initiative would ultimately be to move to a comprehensive national regime. In the absence of unanimity on the part of the provinces, the Act would contemplate provisions providing for voluntary provincial participation and limiting the application of the Act to participating jurisdictions during the transition to a comprehensive national regime.

(Box 2)

About the draft Securities Act

The draft Securities Act, which is meant to provide a basis for legislation, together with the accompanying commentary and table of concordance, can be accessed at

In considering the approaches available for drafting a securities act, the Panel chose to build on existing provincial securities regulation by seeking to harmonize existing legislation in the form of a single statute. This choice reflected two key criteria for assessing the available alternatives: first, a desire to simplify transition issues and, second, a desire to mitigate any potential capital market disruption.

The general legislative drafting approach reflected in the draft Securities Act, consistent with many existing provincial statutes, is to include core fundamental provisions in the statute while allowing for more detailed and technical requirements to be implemented through rules. This approach is believed to be more conducive to the development of more principles-based regulation, which, as noted earlier, the Panel recommends.

In the event that a sufficient number of provinces do not participate, we are also recommending that the federal government consider including a market participant opt-in feature in the transition provisions of the Act. Each market participant that is not based in a participating province would be granted the right to opt-in in respect of itself and its related entities and their respective activities. In this way, it would be governed by federal securities legislation to the exclusion of provincial legislation. As a result, market participants based in a participating province would now also have the ability to comply exclusively with the Act and related federal rules for all of their activities, not just in the particular jurisdiction itself but across Canada since these market participants need to be afforded equal treatment with their electing counterparts in non-participating jurisdictions. We expect that this opt-in feature would lose much of its significance when most of the provinces willingly participate. Appendix 8 provides a description of the market participant opt-in feature. Certain members of the Expert Panel noted their strong preference for a cooperative approach to moving forward towards the single securities regulator on a willing participation basis and their corresponding concerns about the market participant opt-in feature.

We would expect that this first stage from inception to Royal Assent would be approximately one year in length.

II. Stage Two: Transition to the New Regime

Following the passage of the Act, there would be a transition period expected to be approximately two years in duration, during which:

  1. The Nominating Committee and the Council of Ministers would be established and the Commissioners of the Commission, the members of the Governance Board, and some of the initial group of adjudicators on the Tribunal, would be appointed;
  2. The initial Chair of the Commission and the Governance Board would be appointed;
  3. Existing rules and regulations of the participating jurisdictions (as well as any additional rules needed in order to fill any gaps between the Act and existing rules) would be adopted as rules or regulations under the Act or redrafted into federal rules or regulations;
  4. The Commission and Tribunal would hire staff, substantially all of whom would initially be drawn from existing employees of participating jurisdiction regulators, and who would share their time upon an agreed basis between the existing participating jurisdiction regulators and the Commission and Tribunal;
  5. The Commission and Tribunal would secure appropriate office space and other assets in the various participating jurisdictions, and as necessary, in any of the non-participating jurisdictions;
  6. The Commission would address interaction with any non-participating jurisdictions in the absence of full participation by all provinces. Although participation would be encouraged, the Commission might also negotiate one or more MOUs with any non-participating jurisdictions for the purpose of coordinating securities regulation by the Commission and Tribunal and the non-participating jurisdictions in a manner analogous with the current passport system as well as for the purpose of mutual recognition in respect of those subject matters not currently part of the passport system; and
  7. The legislation of participating jurisdictions would be repealed effective at the time that the Act and federal rules and regulations became effective, except to the extent necessary to deal with any transitional issues.

Notwithstanding the receipt of Royal Assent, the Act and the ancillary federal rules and regulations would come into force only after a period of time adequate to permit the planning and establishment of the Commission and the Tribunal as well as the preparation, review, and finalization of all ancillary legislation.

Commencing when the Commission was in place, a detailed review would be undertaken of all local laws, regulations, rules, policies, notices, and orders of participating jurisdictions (“local laws and rules”), and all national and multilateral instruments, rules, policies, and notices applicable to participating jurisdictions (“CSA rules”), as well as other subject matters not dealt with in the Act or existing rules.

The Commission would need to be operational for the purposes of undertaking the federal rule-making process for a period estimated to be at least 12 months before the Effective Date. The extent and timing of the repeal and phasing out of local laws and rules and CSA rules in participating jurisdictions would likely need to take into consideration appropriate grandfathering and the survival of such rules to the extent necessary to avoid any unintended consequences for ongoing investigations, proceedings, activities, and orders subject to reasonable “sunset” provisions.

In the event that the transition mechanisms and plans described above not lead to the implementation of a single comprehensive national securities regime in Canada, we suggest that the federal government consider unilateral action to implement such a regime. The advice provided by our special advisor on constitutional law, Peter W. Hogg, Q.C., has confirmed that the federal government has the constitutional authority to do so. This opinion is widely held by constitutional lawyers.