Decision Time Coming for Proposed Changes to Canada’s Securities Regulators and Stock Exchanges

The constitutionality of the Canadian federal government’s proposed national securities regulator will be considered by the Supreme Court of Canada beginning in April 2011. Earlier this month, the B.C. government filed a legal brief with the Court in which it argues that federal Finance Minister Jim Flaherty’s plan strays into areas of provincial jurisdiction and should not proceed as proposed.

In B.C.’s February 8 press release, Finance Minister Colin Hansen stressed that the province is not opposed to the further harmonization of securities regulation in Canada. He noted that “There is still good support for a national securities regulator, but we must ensure the model is effective, stable and constitutionally sound. It must build on the strong foundation of the provincial regulatory system, improve enforcement, and be responsive to regional economies – such as B.C.’s vibrant venture capital markets.”

B.C. joins the provinces of Alberta, New Brunswick and Quebec in formally opposing the proposed implementation plan for a national securities regulator.

Just a day after the B.C. announcement, news came that a merger agreement had been reached by the operators of the Toronto Stock Exchange (TSX) and the London Stock Exchange (LSE). Stock exchanges are quasi-regulatory bodies because they establish and monitor compliance with the requirements companies must meet to trade on the exchange. The day the TSX-LSE news broke, Canadian market experts were quick to express concerns about how the current TSX listing obligations could be changed or complicated as a result of the merger.

In a lengthy joint press release by the parties to the transaction, the very short answer to this question is set out in a single sentence under the heading “Regulatory”: as the various exchanges’ operations go global, listing requirements will apparently “remain local”.

To be completed, the trans-Atlantic merger requires a variety of approvals from governments, courts and shareholders. It must also be considered by several of Canada’s provincial securities commissions.

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