Canada’s decades-long drive to establish a national securities regulator came to a halt on Thursday, and business leaders are urging governments of all stripes to restart work on an organization that can better protect investors and make it easier for companies to raise money.
The Capital Markets Authority Implementation Organization (CMAIO) announced it has shut down and laid off its staff, halting work at a five-year-old agency charged with creating a national regulator. Jill Leversage, chair of CMAIO, said in an interview: “Especially with COVID-19, we found that we had completed all of what we had to do. We were also waiting for reforms in legislation in Ontario and B.C. and could not get a timeline on when all sides would align.”
Canada is the only Group of 20 country without a national securities regulator. Each province and territory is responsible for overseeing its own capital markets. For more than three decades, federal Liberal and Conservative leaders have attempted to unite these regional agencies under a national umbrella. The federal Liberals created the CMAIO in 2016, committing $30-million to the project, along with tens of millions of dollars for programs meant to win support from the provinces.
The federal Finance Department said it was “disappointed” by the CMAIO board’s decision and will restart the project if provinces make the necessary changes to their rules. “The federal government remains committed to working with the provinces and territories to establish a national securities regulator in Canada,” Finance spokeswoman Katherine Cuplinskas said in an e-mail.
“We are disappointed by the board of directors’ decision to temporarily pause the operations of the Capital Markets Authority Implementation Organization,” Ms. Cuplinskas said. " We look forward to the resumption of this important work once participating jurisdictions implement the necessary reforms to their securities legislation.”
Business groups expressed frustration with various governments’ failure to reach agreement on a national project that initially enjoyed broad support.
“This decision on the national securities regulator is emblematic of the challenges we’re facing in Canada, across a host of issues, including interprovincial trade barriers,” said Goldy Hyder, chief executive of the Business Council of Canada, which represents 150 of the country’s largest companies. “We need to get our act together locally, so we are better able to compete globally. Lack of a national regulator has a negative impact on foreign direct investment in Canada, and on capital formation,” Mr. Hyder said.
“We are extremely disappointed that this important initiative has been paused,” said Katie Walmsley, president of the Portfolio Management Association of Canada, which speaks for 290 fund managers with more than $2.8-trillion in assets. She said the benefits of a national regulator are well known and “we remain hopeful that as part of a postpandemic pan-Canadian economic recovery plan, the provinces, territories and the federal government will see fit to relaunch.”
The CMAIO was created to design and build a new co-operative capital markets regulatory system that provinces and territories could voluntarily join. The goal was to streamline regulations to better protect investors, foster efficient capital markets and manage systemic risk, while preserving the strengths of the current system.
After the CMAIO was launched, British Columbia, New Brunswick, Nova Scotia, Ontario, Prince Edward Island, Saskatchewan, Newfoundland and Labrador and Yukon signed on. Quebec and Alberta opposed the concept and never joined. Manitoba, Nunavut and Northwest Territories did not join either.
As subsequent elections brought in new provincial leaders, regimes such as the NDP-led government in B.C. and Ontario’s Progressive Conservatives pulled away from the idea, opting instead to reform provincial regulators.
Maureen Jensen, the former chair and CEO of the Ontario Securities Commission, called the CMAIO’s closing “disappointing but unsurprising” given the headwinds it has faced over the past five years. “I’m actually surprised it took this long to shut down. It was clear that no one was focusing on this during the pandemic, and the organization was essentially powerless because governments put no political capital towards it,” she said in an interview.
Lawrence Ritchie, a partner at Bay Street firm Osler, Hoskin & Harcourt LLP, who served a seven-year term as vice-chair of the OSC, also expressed regrets over the disbanding of the CMAIO. “The news is no doubt disappointing to those of us who have spent time travelling down the road towards a pan-national regulator, and hoped that it would have been achieved a long while ago,” he said.
Mr. Ritchie pointed out that Ontario’s recent move to restructure its securities legislation through a new Capital Markets Act drew from some of the work done by the CMAIO. “It’s a boost of confidence to the initiative’s output,” he said.
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Andrew Willis
Vanmala Subramaniam