The effort to craft a de facto national regulator through a new model of federal-provincial co-operation is now all but dead, as the organization charged with steering implementation of the new regulator is being shuttered.
The Capital Markets Authority Implementation Organization (CMAIO), which was established in July 2015 to guide the launch of an independent capital markets regulatory authority (CMRA), has put its operations on pause, and is laying off its staff.
“The federal government remains committed to working with the provinces and territories to establish a national securities regulator in Canada,” said Katherine Cuplinskas, press secretary with the office of the Deputy Prime Minister and Minister of Finance. “We are disappointed by the Board of Directors’ decision to temporarily pause the operations of the CMAIO. We look forward to the resumption of this important work once participating jurisdictions implement the necessary reforms to their securities legislation.”
In a statement, the CMAIO said it “has taken steps to preserve knowledge, assets and work product. CMAIO’s work can be resumed at a future time when there is greater certainty around Cooperative System launch timelines.”
Nonetheless, the pause effectively kills any hope for the vision of a federal-provincial co-operative regulator that was championed by former federal finance minister Jim Flaherty in a deal struck in 2013 between the feds, Ontario and British Columbia.
While Ontario had long favoured a national regulator, that deal offered hope by securing buy-in from other provinces and the federal government.
Over time, Saskatchewan, New Brunswick, Newfoundland, Nova Scotia, Prince Edward Island and the Yukon signed on to the idea too.
The project was built to work under parameters set out by the Supreme Court of Canada in its rulings on the constitutionality of national regulation and the division of powers between the provinces and the federal government — seemingly overcoming a key stumbling block that had thwarted previous efforts to implement national regulation.
Yet Alberta, Manitoba and Quebec never bought in, and the project never attracted enough political will to push it over the finish line.
Originally, the federal government committed up to $30 million to finance the implementation of the cooperative model.
According to the CMAIO’s latest annual report, approximately $19.8 million of that funding had been used through March 31, 2020, and the organization said its management “believes that the maximum funding of $30 million is not sufficient to complete an effective launch of CMRA.”
In the meantime, the CMAIO board took pay cuts, the organization reached agreements with the Ontario Securities Commission and the Financial and Consumer Services Commission of New Brunswick to pay the salaries of their staff who were seconded to the project, and the CMAIO paused certain work to help preserve its funding.
“Steps taken to reduce and defer spending included postponing the recruitment of additional staff and delaying work on initiatives that would become stale dated,” the organization noted in its 2020 annual report.
In Ontario’s latest provincial budget, the government said it intends to launch a consultation on replacing its existing securities and derivatives legislation with a new act crafted to facilitate the implementation of the CMRA, the Capital Markets Act (CMA).
This followed a recommendation from a provincial government task force, which called for the adoption of new, modern legislation, while acknowledging that the CMRA project didn’t have any immediate prospect of success.
That conclusion has now been confirmed with the decision to scrap the CMAIO.