Governments have numerous regulators in place that oversee financial markets and companies. These regulators each have different duties and responsibilities, enabling them to act independently of each other while working to accomplish similar objectives.
In Canada, supervisory responsibility for the financial sector is divided among the federal government, provincial governments, and national self-regulatory organizations.
Federal oversight bodies
Within the federal government, the Financial Institutions Supervisory Committee (FISC) acts as the chief coordinating body that sets regulatory policy and supervises financial institutions. FISC consists of the Department of Finance and four independent government agencies: the Office of the Superintendent of Financial Institutions (OSFI), the Bank of Canada (BoC), the Canada Deposit Insurance Corporation (CDIC), and the Financial Consumer Agency of Canada (FCAC).
- Department of Finance: manages federal borrowing on financial markets; develops financial sector policy and legislation; represents Canada in various international financial institutions and groups
- OSFI: supervises all domestic banks, branches of foreign banks operating in the country, trust and loan companies, cooperative credit companies, life insurance companies, and property and casualty insurance companies; sets limits on the ability of Canadian banks to leverage their capital; sets target capital ratios that are higher than the international standard
- BoC: primarily responsible for conducting monetary policy by setting interest-rate targets and adjusting credit supply; serves as the key component in the payments system by providing a check-clearing function; serves as the traditional lender of last resort; provides liquidity to the financial system, gives policy advice to the federal government on the design and development of the system, oversees major clearing and settlement systems, and provides banking services to these systems and their participants; conducts ongoing research into issues related to the financial system’s stability and efficiency
- CDIC: promotes and contributes to the financial system’s stability by providing deposit insurance against the loss of eligible deposits at member institutions in the event of failure and acting for the benefit of depositors while minimizing loss
Eligible deposits are automatically covered to a limit of $100,000 (principal and interest combined) per insured category at each CDIC-member institution. Members include banks, federally regulated credit unions, and loan and trust companies and associations governed by the Cooperative Credit Associations Act.
FCAC: ensures that federally regulated financial entities comply with consumer protection measures, promotes financial education and raises consumers’ awareness of their rights and responsibilities
Provincial and territorial regulators
Provincial and territorial regulators administer and enforce rules around how securities are issued, bought and sold and set minimum entry standards for market intermediaries who deal with investors.
They also regulate marketplaces and clearing agencies, oversee the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association of Canada (MFDA), approve individuals and firms for registration based on proficiency and educational requirements and discipline them if needed. They work together to coordinate and harmonize the regulation of Canadian capital markets through the Canadian Securities Administrators (CSA).
Every province and territory has one or more bodies that regulate financial institutions under provincial responsibility:
- Treasury Board and Finance
- Alberta Securities Commission
- Financial Institutions Commission
- British Columbia Securities Commission
- Financial Institutions Regulation Branch
- Manitoba Securities Commission
Newfoundland and Labrador
- Consumer and Commercial Affairs Branch
- Securities Commission of Newfoundland and Labrador
- Office of the Superintendent of Insurance
- Northwest Territories Securities Office
- Financial Services Division
- Nova Scotia Securities Commission
- Government of Nunavut
- Nunavut Office of the Superintendent of Securities
Prince Edward Island
- Consumer, Labour and Financial Services Division
- Prince Edward Island Office of the Superintendent of Securities
- Government of Yukon
- Office of the Yukon Superintendent of Securities
Self-regulatory organizations (SROs)
SROs regulate their members’ standards of practice and business conduct to promote investor protection. The country has two main SROs:
IIROC: sets and enforces rules for investment dealers and equity markets, monitors trading on those marketplaces, approves training courses, and disciplines member firms and individuals
MFDA: regulates the operations, standards of practice and business conduct of mutual fund dealers, and disciplines member firms and individuals
In Quebec, the Montreal Exchange is also considered an SRO. It is the only financial derivatives exchange in Canada, currently listing equity options, options on ETFs, currency options, index derivatives, and interest-rate derivatives.
All of the above Canadian financial regulators seek to protect those who participate in the industries they govern. Their policies may vary, but their areas of coverage often overlap. While most people will never deal directly with these regulators, learning about them is essential as they will affect their lives at some point.