Ask any securities lawyer who regularly files registration applications across Canada whether every province administers the same securities laws in the same way. Most will answer with a smile. The rules are largely the same. The experience rarely is.
That gap has become one of the least discussed competitive issues in Canada’s capital markets.
Canada has spent more than two decades harmonizing securities regulation. National Instrument 31-103 established a common registration framework for dealers, advisors and investment fund managers. The passport system was intended to reduce duplication by allowing firms to deal primarily with a single regulator while accessing markets across the country.
On paper, the system works well. Registration requirements are substantially the same whether a firm operates in British Columbia, Alberta or Ontario.
What has never been harmonized is the way those rules are administered. Administering securities regulation is an exercise in regulatory judgment. Every securities regulator develops its own expectations, its own supervisory approach and its own way of reviewing applications. That is inevitable. But those differences have become large enough to affect the competitiveness of firms and where firms choose to locate their business.
Ontario deserves particular attention because it occupies a unique position within Canada’s regulatory framework. It is home to the country’s largest capital market and the largest concentration of registered firms, yet it is the only jurisdiction that is not a passport jurisdiction under MI 11-102.
The Ontario Securities Commission has earned a reputation for rigorous oversight. Increasingly, however, that reputation is accompanied by another: a regulatory process that is often unpredictable, iterative and unnecessarily costly.
Whatever the reason, firms and their advisors increasingly view Ontario registration as more burdensome than other jurisdictions in Canada. That perception affects investment decisions and makes Ontario a less competitive jurisdiction in which to establish a registered firm.
Should firms operating under the same national rules face meaningfully different regulatory burdens simply because their principal regulator is located in Ontario?
That question matters because administration has a cost. Every request for additional information consumes management time. Every revision to the policies and procedures manual generates legal fees. Every extra round of questions can delay registration, fundraising, hiring or product launches. None of those costs appear in National Instrument 31-103. They are nevertheless part of doing business in a regulated industry.
Companies already compare taxes, labour markets, office costs and access to talent before deciding where to establish operations. It would be surprising if they ignored regulation. If one jurisdiction develops a reputation for more predictable regulatory administration while applying the same national rules, issuers and registrants will notice. Over time, that becomes a competitive advantage.
A call for performance data
For all the attention paid to harmonization, nobody knows how large these differences really are. The Canadian Securities Administrators (CSA) publishes extensive enforcement and registrant data, but not the metrics needed to compare registration practices.
How long do exempt market dealer registration applications take in each province? How many rounds of questions and comments are typical? How often are terms and conditions imposed or applications withdrawn? Those numbers are not publicly available.
As a result, practitioners rely on anecdotes rather than evidence. Lawyers compare files, compliance officers compare timelines and dealers share experiences. That collective knowledge has value, although it cannot replace transparent performance data.
If regulatory practices are broadly consistent, comparative metrics would reinforce confidence in the system. If they are not, regulators would have objective evidence of where administrative practices have diverged from the passport system’s objectives.
A sensible place to start would be an annual CSA registration scorecard. Processing times, average question and comment rounds, approval timelines, applications approved with terms and conditions and withdrawal rates should all be published. These are basic management metrics that would allow regulators to benchmark performance, identify unnecessary divergence and replace perception with evidence.
Canada has done the hard work of harmonizing its securities laws. It is time to apply the same discipline to how those laws are administered. Until then, Canada’s securities rules may be national, but the experience of dealing with them will remain decidedly provincial.
Nicholas dePencier Wright is a securities and investment funds lawyer and founder of Wright Business Law. His practice focuses on private investment funds, registrant and securities compliance.