Canadian Securities Regulation - Current Structure of The Canadian Securities Regulatory System

Current Structure of The Canadian Securities Regulatory System

Each province has its own securities regulator, which is either a self-funded commission or an entity funded within a larger government department. The securities regulator administers the province’s securities act and, correspondingly, promulgates its own set of rules and regulations. The securities regulator relies on the work of two national self-regulatory organizations, the IIROC (Investment Industry Regulatory Organization of Canada) and the MFDA (Mutual Fund Dealers Association) for most aspects of regulation of the organizations' member firms and their employees. Accountability for securities regulation extends from the securities regulator to the Minister responsible for securities regulation and, ultimately, the legislature, in each province.

The largest of the provincial regulators is the Ontario Securities Commission. Other significant provincial regulators are the British Columbia Securities Commission, the Alberta Securities Commission and the Autorité des marchés financiers (Québec).

The provincial and territorial regulators work together to coordinate and harmonize regulation of the Canadian capital markets through the Canadian Securities Administrators (CSA). The major provincial securities regulators also participate in various international co-operative organizations and arrangements.

The CSA has focused its efforts on:

• developing uniform rules and guidelines for securities market participants;
• coordinating approval processes;
• developing national electronic systems through which regulatory filings can be made with and processed by all jurisdictions; and
• coordinating compliance and enforcement activities.

The most important CSA effort is the implementation of the passport system. Under the passport system, a market participant can obtain a decision from its principal regulator and, through a simple filing, have the same decision deemed to be issued under the legislation of all other participating jurisdictions, in essence providing a passport to undertake capital markets activity across Canada. The passport system covers prospectus filings, registration of securities firms and individuals, and certain types of discretionary exemptions. Ontario is recognized by the other jurisdictions as a principal jurisdiction for passport decisions but the Ontario Securities Commission has not adopted the passport rule itself. As a result, Ontario market participants have access to other jurisdictions through the passport system but participants from other jurisdictions do not have access to Ontario. Instead, the Ontario Securities Commission follows a "mutual reliance" policy in which it decides in each case whether to accept the decision of the principal regulator. Ontario says it supports the harmonization and improved coordination of securities regulation in Canada; however, it does not wish to participate in the passport system because it would prefer creation of a national securities regulator.

Public education on financial literacy, investment and financial decision making is a secondary focus of the provincial regulators. The Ontario Securities Commission (OSC) set up the non-profit organization Investor Education Fund (IEF) for this sole purpose. Funded by the OSC but acting independently, IEF’s primary goal is to provide Canadians with financial tools and information to improve financial literacy.