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Capital markets regulatory framework and enforcement

Things to know

  • Securities law is primarily a matter of provincial/territorial jurisdiction whereby each province/territory has
    • (i) enacted legislation that governs securities transactions, as well as supporting rules, instruments and policies; and
    • (ii) established a securities commission or similar securities regulatory agency; and
  • Canada does not currently have a national securities regulator.  While there is an umbrella organization – the Canadian Securities Administrators (CSA), whose objective is to “improve, coordinate and harmonize”  securities regulation in Canada – ultimate jurisdiction for the regulation of securities laws remains with the provinces and territories.
  • Criminal prosecution of securities violations is a matter of federal jurisdiction, with the RCMP and local law enforcement agencies responsible for the enforcement of the securities-related provisions of the Criminal Code of Canada. Provincial and territorial securities regulators do not have authority to investigate criminal matters or to pursue criminal prosecutions relating to securities law violations; rather these regulators are responsible for both the administrative and (to varying extents) quasi-criminal enforcement of securities laws in Canada. 
  • Since 2013/2014, the provinces of British Columbia, Ontario, Saskatchewan, New Brunswick, Prince Edward Island, Yukon and the Government of Canada have been jointly engaged in the establishment and implementation of a single operationally independent cooperative securities regulator - the Cooperative Capital Markets Regulatory (CCMR). The CCMR will administer as-yet enacted federal capital markets legislation and a common provincial legislative regime. The provinces of Alberta and Québec are currently opposed to this initiative.
  • Due in part to the multilateral nature of the Canadian securities landscape, Canada has historically not been seen as a fierce pursuer of white collar criminal convictions.  However, Canada is coming under increasing international pressure to strengthen and expand its enforcement efforts.
  • There is extensive information sharing between the various provincial securities regulators in Canada and with international regulators - including the SEC - pursuant to various Memoranda of Understanding.
  • Over the past several years, a number of non-traditional enforcement tools have been introduced at both the federal and provincial levels to help combat white collar crime, including
    • the implementation of a no-contest regime as part of the Credit for Cooperation Program, seeking to enhance self-reporting, self-policing and self-correcting of conduct that runs afoul of securities laws (Ontario);
    • the implementation of legislation for the automatic reciprocation of other securities regulatory authorities’ decisions (Alberta, New Brunswick, Nova Scotia and Québec);
    • the implementation of whistleblower initiatives to encourage individuals to come forward with tips on possible violations of securities laws in exchange for anti-reprisal protections (Ontario and Québec); and
    • a series of amendments have been proposed to Canada’s Criminal Code including the introduction of a deferred prosecution agreement (DPA) regime.

Things to do

  • The dynamic relationship between business conduct, regulated activity and criminal law consequences must be fully understood when doing business in Canada.
  • Businesses should watch for trends in the area of securities regulation in Canada.  For example, securities regulators in Canada appear to be increasingly focused on protecting retail investors (including seniors), actively monitoring and assessing the impact of their recently implemented regulatory initiatives (such as whistleblower initiatives and no-contest settlements), promoting cybersecurity resilience, and evaluating the use of embedded compensation structures. 
  • Businesses should pursue appropriate risk management strategies which reflect the complex interdependencies of the legal and regulatory environment in which their business is conducted, including engaging outside subject matter expertise in the areas of risk management and regulatory matters.  See: Proactive crisis management: Expecting the unexpected 
  • Businesses need to have access to trusted advisors that will enable them to stay on side of continually changing regulations and legal requirements.
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