New Financial Regulatory Authority: Sweeping Powers with No Recourse to Appeal.

Financial advisors and members of the business community as a whole who are concerned about a greater anticipated role for financial regulation in Canada will want to track the progress of implementation of a new Capital Markets Regulatory Authority (CMRA) and participate in public consultation.

CMRA had an important inaugural meeting last month, attended by Finance Minister Joe Oliver. Although it currently involves fewer than half of the provinces and territories - specifically  British Columbia, Ontario, Saskatchewan, New Brunswick, Prince Edward Island, Yukon - it is anticipated this regulator will soon have sweeping powers.

The CMRA’s mandate is to enhance Canada’s financial services sector overall by fostering more integrated markets, raising capital from investors across Canada and internationally, and increasing protection for investors. It plans to do this through the single voice of a cooperative regulator, a role that would be empowered to provide more active and consistent presence for financial compliance and enforcement.

While these all sound like noble ends, financial advisors would be wise to pay close attention to the objectives and powers of the CMRA. Some voices in the media, including a series of articles in the Financial Post, have sounded the caution that the CMRA will not only have sweeping information-gathering powers, but that it will also be able to pass that information along to anyone of its choosing (law enforcement, governmental or regulatory agencies, in Canada and anywhere around the world).

In addition, and perhaps of greater concern, it will have the power to apply stiff financial penalties, all without recourse to an appeal in a court of law. These rules extend to virtually anyone connected to capital markets (not only registrants of the financial system), potentially impacting a wide swath of the business community.

The Council of Ministers confirmed at their inaugural meeting the appointment of William A. Black as the first chair of the board of directors of the CMRA. He has served as President & CEO of Maritime Life, and has sat on several boards, including the Bank of Canada, Global Risk Institute, the Shaw Group, Standard Life of Canada, as well as boards in the arts, education, and health-care sectors.

The Council also announced that participating jurisdictions will release updated draft provincial/territorial and federal legislation, as well as an initial draft of proposed regulations, for public comment later this summer.

With strong voices for and against the CMRA as a single regulator, it behooves financial advisors to learn more about this powerful new body in the industry—about additional compliance requirements, and how the CMRA will affect their work and business conduct overall—and to comment on the draft legislation and regulations in the 120-day public comment period after the release of the updated legislation.   Stay tuned to KBR for further updates as the CMRA implementation process unfolds, and visit the CMRA’s site for more information.