The decision last week by the Capital Markets Authority Implementation Organization (CMAIO) to “pause” its operations didn’t come as a surprise to many in the investment industry.
“I am not surprised with this announcement — it has been a long time coming,” said Rebecca Cowdery, a securities lawyer with Borden Ladner Gervais LLP in Toronto. While a national regulator would be ideal, Cowdery said, the proposed cooperative regulator — which never got buy-in from Quebec, Alberta or Manitoba — was “too cumbersome” to be much of an improvement on the existing system.
Last week, the CMAIO, which was established in 2015 to guide the launch of a national capital markets regulatory authority, put its operations on pause and laid off its staff. The organization said that it could resume its work in the future “when there is greater certainty around cooperative system launch timelines.”
The national project had become an initiative without a champion and an obstacle to advancing securities regulation policy in the country, experts suggested.
“At this stage, it’s better to recognize the reality that the political will and the momentum just wasn’t there to get [a national regulator] over the finish line,” said Jean-Paul Bureaud, executive director of investor advocacy group FAIR Canada. “It’s probably a good thing to pull the plug, so to speak.”
But Bureaud said he remains concerned about investor protection in the absence of a national regulatory body. “The [regulatory] system is already very complicated, but to have different rules in different provinces just further complicates things,” he said. “I do think that it’s important that those charged and given the power to [regulate capital markets] take a national look at these things, because our markets are national.”
However, some industry members said the decision to shutter the CMAIO could allow Ottawa and the provinces to move on from the idea of a national regulator and focus on improving Canadian capital markets securities regulation.
Cowdery said she hopes the decision to pause the CMAIO “will allow resources to go to where they are needed most,” such as improving the Canadian Securities Administrators’ (CSA) “passport” system to allow Ontario to join and committing to national regulatory uniformity among all provinces and territories “with a minimum of provincial carve-outs.” She added that a “harmonized, uniform regulatory fee structure is long overdue” and said she hopes that the sidelining of the cooperative regulator will allow for greater focus on the CSA’s current initiative to review the self-regulatory system.
Ian Russell, president and CEO of the Investment Industry Association of Canada, said he believes that provinces that were against joining the cooperative regulator may be more amenable to working with their peers on common initiatives now that plans for a national regulator have been shelved. In recent years, the CSA has been more effective at advancing policy, such as the client-focused reforms, Russell noted. “[The commissions] are working much better together compared to 10 years ago” he said.
Like Cowdery, Russell said he hopes that an “effective [CSA] passport” system can be developed that could include Ontario. He also said he would like to see Ottawa move forward on establishing a national systemic regulator to monitor risks in the marketplace — something the federal government has the power to do without getting buy-in from the provinces.
Bureaud said he’s also eager to see if the federal government decides to move forward with a national systemic regulator. “The issues around financial risks and stability have not disappeared,” Bureaud said. In fact, with the economic dislocation caused by Covid-19 and investors chasing yield in a low-rate environment, the need for systemic risk management has only increased, he suggested.
The Portfolio Management Association of Canada (PMAC) has long advocated for a national securities regulatory system, arguing that a national regulator would increase investor protection, strengthen global competitiveness and aid in the management of systemic risk.
“We remain hopeful that as part of a post-pandemic pan-Canadian economic recovery plan, the provinces, territories and the federal government will see fit to relaunch this important initiative,” said Katie Walmsley, president of PMAC, in a release. “As the only G20 country without a national regulator, Canada needs to modernize on this front for the benefit of all Canadians.”
Last week, a spokesperson with the office of the Deputy Prime Minister and Minister of Finance expressed the disappointment at the CMAIO’s decision and said the government “look[s] forward to the resumption of this important work once participating jurisdictions implement the necessary reforms to their securities legislation.”