The government authorities working on improving the Canadian securities regulatory system through the implementation of a passport system and more harmonized rules have published a progress report on their efforts.

Last year, governments from 12 provinces and territories entered into a Memorandum of Understanding pledging to pursue a passport system, to develop highly harmonized securities laws, and to explore further options to consolidate and/or strengthen co-ordination and consistency of securities laws. Ontario is the only province not participating, it insists that a single regulator would be more beneficial.

The passport system was implemented earlier this year. Other key commitments in the MOU include: developing and implementing highly harmonized securities laws by the end of 2006; completing a fee review to ensure that the fee structure is consistent with the concept of a passport system by the end of 2006; and, by the end of 2007, exploring options for further reform.

The authorities suggest that the passport system will be strengthened to make use of the broader delegation and/or mutual recognition powers provided through legislative amendments and expanded to include additional areas of securities laws as they become more highly harmonized.

They note that ministers are committed to making significant progress on further harmonizing and streamlining securities laws (which includes legislation, regulations and rules) in 2006. It is anticipated that, in 2006, key rules and areas of legislation that are currently not well harmonized and/or simplified will be targeted as priorities for harmonization and simplification.

Investor protection is a guiding principle in the highly harmonized and simplified securities laws project, the report says. “Regulatory requirements under consideration during the course of this project will be examined to ensure that they are designed to provide the highest reasonable level of investor protection. In addition, enhanced investor protection through expanded civil liability provisions and increased maximum penalties for contraventions of securities laws are being considered, in jurisdictions in which they are not already in place, for legislative reform in 2006.”

The ministers also intend to move forward with a fee review as committed to under the MOU. The structure of fees and the way fees are collected will be examined. The MOU recognizes that jurisdictions will retain the authority to set and collect fees. However, work will commence on addressing the principles of fee collection that would apply under a full passport system.