The Canadian Securities Administrators have published a strategic plan for the next three years. The CSA plan to shift the regulatory focus from trading to advice-giving focus on disclosure review, increase harmonization, and update rules governing sales practices, among a host of other ambitious plans.
The plan identifies five major challenges for CSA members:
- the complexity of the regulatory regime;
- the need for faster regulatory responses;
- gaps in the regulation of investment funds;
- escalation in national enforcement issues; and
- the mismatch of the regulatory system with the structure of the market.
The plan proposes several strategies to deal with these challenges. To reduce the complexity of the regulatory regime, the CSA plan to develop harmonized/uniform legislation, rules and policies, to streamline rules and policies and the process of making them, to use plain language and to extend the mutual reliance concept into other areas as much as possible.
In the next few years the regulators propose to develop a plan to eliminate differences in local instruments; harmonize registration-reporting obligations; harmonize continuous disclosure requirements for reporting issuers; develop a national policy on escrow requirements; harmonize requirements for distributions to persons outside the local jurisdiction; and harmonize resale restrictions.
The CSA also plan to develop and apply a standard to eliminate outdated CSA notices and national policies, to use plain language in all communications and instruments, to develop drafting guidelines for notices, national instruments, and national policies, and to develop a permanent registration system.
To respond more quickly and effectively to regulatory and market issues, the regulators propose to: develop a project management process to set priorities for projects and ensure that they are completed on deadline; to establish a screening process to focus resources on the most important issues and determine the most economical and effective regulatory response to each issue; and to rely on a lead jurisdiction to pursue policy and rule-making projects on a mutual reliance basis.
With regard to investment funds, the CSA are developing an approach to mutual fund governance and regulation of mutual fund managers, developing regulatory principles for capital accumulation plans, harmonizing regulation of mutual funds and segregated funds, and updating the regulation of fund of funds.
The escalating number of national and international enforcement cases is pushing the CSA to establish investigation, settlement and hearing procedures to be followed for enforcement cases that have national impact. The regulators also plan to establish criteria for determining which cases are treated as national and what form of cooperation should be followed.
They also propose revised CSA policies governing regulation of SROs initially focusing on the proposed new market regulation organization, participating in a database to automate information sharing among North American enforcement agencies, and developing an approach to improve public access to regulators through a CSA Web site.
Finally, the regulators plan to address the mismatch between regulation and the market by shifting the focus of rules and oversight for both registrants and issuers to the advising function and the secondary markets where the majority of the activity is today. The CSA will develop core standards for continuous disclosure review and a coordinated program of review. They promise to develop a common set of continuous disclosure requirements for reporting issuers, too.
As well the CSA proposes developing a national instrument to implement an integrated disclosure system for offerings and continuous disclosure filing, and develop legislation to create a civil liability regime for continuous disclosure. The regulators also propose the development of a regulatory framework to allow Alternative Trading Systems to operate in competition with exchanges, and to develop an approach to the shift in emphasis from trade execution to provision of advice.
From an operational point of view, the CSA plan to develop a Uniform Securities Transfer Act to update the legal framework for securities holdings and transfers in Canada. The regulators will also determine whether to allow the use of foreign GAAP and International Accounting Standards for financial reporting in Canada’s capital markets.
Other plans include developing new policy on disclosure standards for oil and gas properties, developing new policy to set out standards for fair and timely disclosure, and developing amendments to the mutual fund sales practices rule.
Finally, the CSA plan to develop the System for Electronic Data on Insiders, update the System for Electronic Document Analysis and Retrieval and develop the new National Registration Database.