A series of missed deadlines is partly responsible

By James Langton | May 2015

The march toward the proposed co-operative capital markets regulator (CCMR) has slowed to a crawl. The CCMR's planned launch is being pushed back by a year amid serious concerns about the practical impact of proposed legislation to create the new regulator and repeated delays in its proposed rules.

In mid-April, the federal government quietly signalled the project's latest, most significant delay. The news came buried in an announcement that the Yukon has signed on to the initiative, and that a committee has been established to help to nominate the CCMR's inaugural slate of directors. Despite these hints of apparent progress, the real news is that expectations for the regulator's launch have been pushed back to the autumn of 2016 from the autumn of this year.

The cause of the delay is the reaction that the feds and the participating provinces (Ontario, British Columbia, Saskatchewan, New Brunswick and Prince Edward Island) received to the draft legislation that was published last September, as well as because of a series of missed deadlines for publishing the CCMR's proposed rules.

Originally, the goal was to publish legislation that will be needed to launch the CCMR in January 2014. However, that didn't happen until September of last year. And when the proposed legislation was published, many comments - even those from fervid supporters of the plan for a co-operative national regulator - complained that of the difficulty in analyzing the proposals, given that the proposed regulations were not published at the same time.

Those draft regulations originally were to be issued in March 2014. They have been delayed a couple of times, and were supposed to be released in "early spring" of this year. But, now, the participating governments say, the draft regulations aren't going to be ready until the summer.

When the rules finally are ready for publication, revised versions of the draft provincial and federal legislation will have to be released again, too.

There are two legislative components to this project: uniform provincial legislation that will cover traditional aspects of securities law, which has to be adopted in the various participating jurisdictions; and, complementary new federal legislation to cover areas of supposed "national significance," such as systemic risk, national data collection and related criminal law.

Now, the plan is that the whole package of proposed rules and legislation will go out for a 120-day comment period. The plan is to finalize both tiers of legislation and to have them passed by the various participating jurisdictions by June 30, 2016, with the goal of launching the CCMR in the autumn of next year.

However, in the meantime, there will be a federal election, which represents its own significant source of uncertainty for the project (not to mention the prospect of more missed deadlines).

"I'm sure [the project's participants] prefer not to diminish their momentum by taking more time drafting, but they know the regulations are crucially important," says Neil Gross, executive director of the Canadian Foundation for Advancement of Investor Rights (a.k.a. FAIR Canada), a Toronto-based investor advocacy group.

Indeed, the fact that the draft regulations were not issued along with the draft legislation last autumn was particularly problematic because the model envisions enshrining more of the detailed requirements in the rules, rather than in law, to make the new regime more flexible. Many comments complained that it was hard to assess the legislation in isolation.

Although the participating governments have promised that the draft regulations will largely mimic the existing rules, that may be easier said than done, as there are existing differences among the provinces and the chance to rewrite the rule book from scratch represents an alluring opportunity to tinker.

For example, Gross says, he hopes that when the draft regulations finally are released, they "will reveal a commitment to implementing key investor protection measures."

In the meantime, the participating governments are trying to emphasize the latest signs of progress toward creating the CCMR: the fact that the Yukon is joining the initiative, and the imminent naming of a committee to nominate the CCMR's board.

Ardent supporters of the CCMR project are clinging to these traces of progress, too.

"The addition of the Yukon makes the CCMR [system] that much closer to reality," says a statement from the Investment Industry Association of Canada (IIAC), a longtime supporter of national regulation. "The remaining outlying provinces need to consider their decision to join in terms of an operational co-operative regulator rather than supporting the status quo."

The major holdouts remain Alberta and Quebec, along with a handful of other provinces and territories. Yet, the IIAC maintains: "With more than half of domestic capital market activity under the CCMR umbrella, pressure on the outlying provinces will continue to intensify in the coming months."

Certainly, the participating governments are eager for that to happen, and they continue to call on those reluctant provinces to get on board. The council of ministers that is overseeing the project (co-chaired by federal Finance Minister Joe Oliver and B.C.'s Finance Minister Michael de Jong) is planning to meet in Vancouver this summer to review the project's status.

In the meantime, the council has appointed a committee to seek out candidates for the CCMR's inaugural board. The council will appoint that initial board, which, in turn, will be responsible for guiding the integration of the existing regulators into the new national regulator.

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