Canadian securities regulation is managed through the laws and agencies established by Canada's 10 provincial and 3 territorial governments. Each province and territory has a securities commission or equivalent authority with its own provincial or territorial legislation.
Unlike other major federations, Canada has no securities regulatory authority at the federal government level. Nonetheless, most provincial security commissions operate under a passport system, so that approval of one commission essentially allows for registration in another province. However, concerns about the system remain. For example, Ontario (Canada's largest capital market) does not participate in the passport regimen.Ontario Securities Commission Notice 11–904
Securities regulators from each province and territory have joined to form the Canadian Securities Administrators (CSA).
Concerns about the provincial system of securities regulation have led to repeated calls for a national securities system in Canada. As of June 2021, the Canadian government is working towards establishing a national securities regulatory system to provide: better and more consistent protection for investors across Canada; improved regulatory and criminal enforcement to better fight security-related crime; new tools to better support the stability of the Canadian financial system; faster policy responses to emerging market trends; simpler processes for businesses, resulting in lower costs for investors; more effective international representation and influence for Canada.Fact Sheet on Proposed Canadian Securities Act, fin.gc.ca
List of securities regulators in Canada Each provincial securities regulator is either a self-funded commission or an entity funded within a larger government department. Regulators (and their respective parent departments, if any) for each province include:
Alberta Securities Commission; British Columbia Securities Commission; Manitoba Securities Commission – under the Manitoba Financial Services Agency; the Chair reports to the legislature through the Minister of Finance; Financial and Consumer Services Commission (New Brunswick) – arm's length, self-funded, independent Crown Corporation established by the provincial government on 1 July 2013; Financial Services Regulation Division, Digital Government and Service NL (Newfoundland and Labrador); Office of the Superintendent of Securities (Northwest Territories) – under the Legal Registries division, Department of Justice; Nova Scotia Securities Commission; Nunavut Securities Office – under the Department of Justice; Ontario Securities Commission (OSC) – the largest of the provincial regulators; PEI Office of the Superintendent of Securities Office (Prince Edward Island) – under the Department of Justice and Public Safety/Office of the Attorney General; Autorité des marchés financiers (Quebec); Financial and Consumer Affairs Authority of Saskatchewan; Office of the Yukon Superintendent of Securities.
Canadian securities regulatory system Canada has no securities regulatory authority at the federal government level. Instead, each province and territory has a securities commission or equivalent authority and legislation. Provincial governments established regulatory agencies beginning with Manitoba in 1912; two decades later, the Privy Council of Canada decided in Lymburn v Mayland AC 318, that such legislation is authorized under the provincial property and civil rights power.
Each provincial securities regulator is either a self-funded commission or an entity funded within a larger government department, typically under the respective Justice department. The securities regulator administers the province's securities legislation and, correspondingly, promulgates its own set of rules and regulations. The regulator relies on the work of the national self-regulatory organization—the Canadian Investment Regulatory Organization (CIRO)—for most aspects of the regulation of the organization's member firms and their employees. Accountability for securities regulation extends from the securities regulator to the Minister responsible for securities regulation and, ultimately, the legislature in each province.
The largest of the provincial regulators is the Ontario Securities Commission (OSC). Other significant local regulators are the Alberta Securities Commission, British Columbia Securities Commission, and the Autorité des marchés financiers (Québec).
Public education on financial literacy, investment, and financial decision-making is a secondary focus of the provincial regulators. The OSC created the non-profit organization Investor Education Fund (IEF) for this sole purpose. Funded by the OSC but acting independently, IEF's primary goal is to provide Canadians with financial tools and information to improve financial literacy.
Canadian Securities Administrators The provincial and territorial regulators work together to coordinate and harmonize regulations, policies, and practices regarding Canadian capital markets through the Canadian Securities Administrators (CSA), an umbrella regulatory organization that serves Canadian markets, securities issuers, and investors. The major provincial securities regulators also participate in various international co-operative organizations and arrangements.
The CSA has focused its efforts on: Developing uniform rules and guidelines for securities market participants. Coordinating approval processes. Developing national electronic systems through which regulatory filings can be made with and processed by all jurisdictions. Coordinating compliance and enforcement activities.
The most critical CSA effort is implementing the "'Passport'" regulatory system. Under Passport, a market participant can obtain a decision from its principal regulator and, through a simple filing, have the same decision deemed to be issued under the legislation of all other participating jurisdictions, in essence providing a passport to undertake capital markets activity across Canada. The Passport system covers prospectus filings, registration of securities firms and individuals, and certain types of discretionary exemptions. Ontario is recognized by the other jurisdictions as a principal jurisdiction for Passport decisions, but the Ontario Securities Commission (OSC) has not adopted the passport rule itself. As a result, Ontario market participants have access to other jurisdictions through the Passport system, but participants from other jurisdictions do not have access to Ontario. Instead, the OSC follows a "mutual reliance" policy in which it decides in each case whether to accept the decision of the principal regulator. Ontario has stated support for harmonization and improved coordination of securities regulation in Canada; however, it does not wish to participate in the passport system because it would prefer creating a national securities regulator.
Concerns
On 21 February 2008, the Government of Canada appointed an Expert Panel on Securities Regulation to provide advice and recommendations on securities regulation in Canada.Government of Canada Appoints Expert Panel to Review Securities Regulation, fin.gc.ca On 12 January 2009, the Panel released its final report, in which they highlighted several concerns with the current structure, along with a draft "Securities Act" to the federal Minister of Finance and the provincial and territorial ministers responsible for securities regulation.Minister of Finance Welcomes Report on a Single Securities Regulator for Canada, fin.gc.ca
The Panel was concerned that the fragmented structure, requiring decisions to be coordinated across up to 13 jurisdictions, made it difficult for Canadian securities regulators to react quickly and decisively to capital market events. One example of this difficulty was the adoption in September 2008 by some of Canada's international counterparts, including the United States and the United Kingdom, of restrictions of short-selling specific stock as a temporary stability measure. The Canadian response lagged behind the coordinated efforts of the US and the UK and was not uniform across the provinces. A second example was the delay between the freezing of the non-bank asset-backed commercial paper (ABCP) market in August 2007 and the release of a consultation paper by the CSA. The paper was for input on several proposals to prevent similar capital market failures in the future.For information on the non-Bank ABCP crisis in Canada, see Chant, John. "The ABCP Crisis in "The ABCP Crisis in Canada: The Implications for the Regulation of Financial Markets." Expert Panel on Securities Regulation (2009) The Panel found that the extant regulatory structure is prone to slow responses, making Canada vulnerable to market risks and impacting its reputation.
The Panel also expressed concern that the Canadian system of provincial mandates is not in agreement with the national response required to address developments in capital markets that are increasingly national and international in scope. They found that one of the crucial lessons from the capital markets crisis throughout 2008–2009 (the Great Recession) is that systemic risk is increasingly presenting itself in capital markets rather than confining itself to banking institutions. The Panel reported that effectively addressing systemic risk requires the joint effort of all financial sector regulators within Canada and effective coordination with international counterparts. The Panel did not believe that the multiple provincial and territorial securities regulators could work effectively as part of a national systemic risk management team, as structural challenges will likely compromise its ability to efficiently address larger capital market issues in a timely manner. A delayed response, having been poorly managed by any of the securities regulators, may have a negative impact on the integrity of Canada's capital markets as a whole.
Additionally, the Panel reported that the current structure poorly allocates resources, causing securities regulation to be less effective. Resources are used in keeping 13 separate securities regulators operating in Canada. This is inefficient as each jurisdiction dedicates a different level of resources to securities regulation, which causes the intensity of policy development, supervision, and enforcement activities to vary across the country. Most efforts are duplicated, which results in unnecessary costs, overstaffing, and delays. Canadians, in turn, are afforded different levels of investor protection depending on the jurisdiction in which they reside or invest. At the same time, market participants will continue to be burdened with unnecessary compliance costs, even with the full implementation of the passport system. Market participants have to pay fees in up to 13 jurisdictions, deal with the general inefficiencies associated with differences between provincial statutes and regulations, the ongoing use of local rules, and variable interpretations of national rules.
Canadian Securities Transition Office The Canadian Securities Transition Office () is a federal organization that was created to assist in the establishment of a Canadian securities regulation regime and a Canadian regulatory authority. Its mandate is to help develop capital-markets regulatory capabilities falling within the jurisdiction of the Government of Canada.
Its mandate includes helping to prepare for the successful administration of the proposed federal "Capital Markets Stability Act"; providing support for the establishment of the Cooperative Capital Markets Regulatory System; and giving advice to the Canadian Department of Finance's Financial Sector Policy Branch.