Financial services have been officially incorporated into the Canadian Free Trade Agreement (CFTA), effectively providing a way to streamline the regulatory patchwork that impedes interprovincial trade within the sector.
“Ministers welcomed the entry into force of the new financial services chapter under the CFTA,” said the Committee on Internal Trade in a release on Monday. “This represents a significant milestone for the financial services sector.”
The financial services chapter in the CFTA will “improve predictability and transparency in financial services regulations across Canadian jurisdictions, promoting a level playing field and access to new markets that will make it simpler for financial services suppliers to offer services nationwide,” a committee backgrounder says.
The Portfolio Management Association of Canada (PMAC) said in an emailed statement that it “welcomes the continued momentum from ministers to reduce interprovincial trade barriers and strengthen Canada’s internal market.”
Adding financial services to the CFTA “aligns with our long-standing calls to streamline financial services regulation and reduce duplicative requirements across provincial, federal and territorial jurisdictions,” said Laura Paglia, president and CEO of the Canadian Forum for Financial Markets in Toronto. “If you do that, you foster competition, improve efficiency and give Canadians more choice.”
Further, financial services are “critical inputs for many other industries,” Paglia said. Through reduced interprovincial barriers, “what we’re hoping to see is a compounding effect that benefits multiple sectors and supports broader economic growth.” Also, the potential for lower compliance and operational costs frees industry firms to put resources toward innovation, she said.
A recent report from the International Monetary Fund projected that eliminating internal trade barriers could raise Canada’s GDP by nearly 7% over the long run, representing about $210 billion in 2025 dollars. The gains would come from higher productivity, the report said: more efficient allocation of capital and labour, stronger competition, and better scale for high-performing firms.
Reducing regulatory duplication that affects advisors, firms
The CFTA’s financial services chapter provides the potential to address regulatory duplication, including under the Canadian Investment Regulatory Organization (CIRO). The chapter specifically defines “self-regulatory organization” (SRO) and includes an article requiring provinces to ensure that an SRO observes the chapter’s obligations, so that harmonization is prioritized.
“Financial service” is broadly defined. “You see a clear attempt to be as inclusive as possible,” Paglia said.
Further, an article addressing market access says provinces are not to “adopt or maintain any measure” that restricts or puts various limitations on financial services, or the free movement of a financial services supplier. The article is “the workhorse in this provision,” said Ryan Manucha, an interprovincial trade expert and a research fellow with the C.D. Howe Institute in Toronto. It aims to outline “conditions that are unacceptable.”
Paglia provided the example of advisor incorporation, which isn’t yet permitted under CIRO but is in some cases, including by insurance regulators. “This agreement should help recognize that inconsistency as being in restraint of trade and in restraint of financial services available to Canadians,” she said.
Another example: The Office of the Superintendent of Financial Institutions regulates federally incorporated trust and loan companies, and these firms also can incur compliance and administrative costs to meet multiple licensing and registration requirements in provinces where they conduct business. Torys LLP outlined such barriers to the interprovincial provision of financial services in an article last year.
“Just because you now have financial services in the CFTA” doesn’t mean trade barriers are “completely remedied,” Manucha said. But with the agreement, “it looks as though we’re going to have some reduced duplicative extra-provincial licensing issues for trust and loan companies.”
The financial services chapter also has a dispute resolution clause — a “responsible” mechanism to have included, Paglia said, given the uncertainty about how the chapter’s principles will be implemented. With the clause, “there is some recognition that this may not always be clear and easy.” Regarding advisor incorporation, for example, “Canada’s been struggling with that for 28 years,” she said. (Mutual fund registrants were permitted to incorporate beginning in 1998.)
Manucha said the dedicated dispute resolution specifically for financial services reflects “how well tailored” the agreement is.
Building on momentum
PMAC’s statement said the association looks forward to more details.
Michael Thom, managing director of CFA Societies Canada in Toronto, said in an emailed statement that he’d like to see the provinces provide greater direction to their respective regulators and coordinating bodies to “move forward (apace and ambitiously) on mutual recognition and reliance, so that this first very broad version of the chapter [evolves] to something more substantive in terms of how it impacts businesses operating in the sector across Canada, and ultimately everyday Canadians as well.”
Generally, “how this will all play out, we don’t know,” Paglia said. “But it’s certainly an excellent step in the right direction.”
“It’s a fantastic starting place” with “room to keep strengthening,” Manucha said. “I’m very bullish on the potential of this chapter.”
As things stand, “fragmentation across provincial regulatory frameworks remains a key barrier to efficiency, capital formation and competitiveness,” PMAC’s statement said. “Measures that enhance mutual recognition and streamline regulatory processes would help address these challenges and strengthen Canada’s capital markets.”
Specifically, PMAC, along with CFA Societies Canada, has urged the Ontario government to reduce trade barriers by joining the Canadian Securities Administrators’ passport system, which facilitates access to capital markets across multiple provinces. Ontario is the only province that doesn’t participate.
“Ontario’s joining the passport system would improve market access for firms across Canada, ultimately achieving one of the stated objectives of the new financial services chapter under the CFTA,” PMAC’s statement said.
The CFTA came into force in 2017, replacing the 1995 Agreement on Internal Trade. At that time, financial services were, in effect, temporarily excluded. Negotiations to include them concluded last year.
Budget 2025 listed the initiative as a way to promote “an efficient, open and sound financial services sector,” which is key for access to capital for business investment.
The release from the Committee on Internal Trade also said the Canadian Mutual Recognition Agreement on the Sale of Goods, introduced last year, would be expanded this year to include services.