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Investment Industry Association and Law firm Davis give “thumbs down” to new capital markets act

Investment Executive | James Langton | Mar 21, 2022

rules and regulation - Investment Industry Association and Law firm Davis give “thumbs down” to new capital markets actIn January 2021, the province’s Capital Markets Modernization Taskforce released a sweeping set of recommendations designed to help rejuvenate the markets, facilitate capital formation and enhance industry competition while also bolstering investor protection. The centrepiece of that vision — replacing traditional securities (and derivatives) legislation with platform legislation — is getting a “thumbs down” from the investment industry.

As Investment Executive went to press, the government had not published all feedback received during the consultation, but responses from industry groups and others showed strong resistance to both specific elements of the proposed new legislation and to its overall vision.

The government’s bill would alter the balance between the securities law, which is overseen by the legislature, and the detailed rules that are under the direction of the Ontario Securities Commission (OSC). Modelled on a similar approach taken in British Columbia, the proposed CMA aims to take a “platform-based” approach, setting out broad regulatory principles in the legislation and giving the OSC more authority to create detailed requirements.

See: 

CSA Responds to Ontario Capital Markets Modernization Taskforce Report: NCFA – The present system is simply not good enough

OSCs Investor Advisor Panel calls for dramatic shift in approach to regulatory oversight

New Ontario securities law to reset regulatory balance

C.D. Howe says Ontario should pause the new Capital Markets Act to first modernize the existing Securities Act for current times

Sources Say: Federal and provincial governments shutting down Cooperative Capital Markets Regulatory project

The Investment Industry Association of Canada (IIAC) said in its submission that it supports the idea of flexible regulation but questions “the tangible benefits” of adopting entirely new legislation to achieve that goal. Instead, the IIAC suggested revisions to existing legislation and rules could be accomplished “without the market disruption that may be caused by new legislation.”

There could be unintended consequences to the new regime, the trade group noted, as the industry will have to assess its compliance and firms will have to revise their policies and procedures — and possibly client documentation — to conform.

“Given the government’s focus on burden reduction, we would encourage the ministry to pursue many of the laudable goals of the taskforce through alternative means, including any necessary amendments to existing legislation, before replacing the [Securities Act] altogether,” the IIAC stated.

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