For those looking for some new reading material, a Capital Markets Act (the “Act”) draft has been released by the Ontario Ministry of Finance. The Act is intended to replace both the current Ontario Securities Act as well as the Ontario Commodity Futures Act, and is responsive to many of the recommendations made in the final report of the Capital Markets Modernization Taskforce (the Taskforce) released in January of this year. Unlike some of the current legislation, the new Act sets out a “platform” framework, where the legislation governing securities and derivatives will be set out, but the detailed requirements will be left to rules,  in order to promote flexibility and allow the OSC to respond to market developments in a timelier manner. The Act will be expanded as suggested by the Taskforce to include in the OSC’s mandate fostering capital formation and competition in capital markets.

The Act will set out the OSC’s powers as well as those of the new Capital Markets Tribunal, which will have adjudicative powers separate from the OSC’s regulatory powers, the latter of which would be exercised by its board or the newly titled Chief Regulator/CEO. A new position, that of Chief Adjudicator, will be responsible for directing the Tribunal’s operations. Further to other legislation released earlier this year, the current Chair and CEO functions at the OSC will also be separated into two positions. If the Act goes forward, commodity futures contracts and commodity futures options would be regulated as derivatives under the Act. A new section in the Act will regulate trading in derivatives, including permitting the OSC to make rules imposing registration requirements on OTC derivatives dealers and advisers.

The Ministry has set out 30 consultation questions throughout its commentary on the new Act, seeking feedback on matters ranging from the appropriate statutory civil liability for distribution of ETF securities, to the impact of including the independent review committee of a private fund to the definition of a “market participant”, to the appropriate requirements for managing conflicts of interest. The deadline for providing comments is January 21, 2022, and we will be providing further analysis and commentary on the draft Act and its implications in upcoming publications.

October 29, 2021