One approval will carry nationwide, easing capital-raising for firms already listed in Canada
Ontario has committed to join Canada's securities regulatory passport system, a move that would fold the country's largest capital market into an arrangement every other province and territory has used since 2008.
Ontario's finance minister, Peter Bethlenfalvy, announced the commitment on July 15 at a Charlottetown meeting of federal, provincial, and territorial finance ministers.
The federal Department of Finance called the step an important milestone in improving regulatory harmonization and reducing barriers to interprovincial trade, the McCarthy Tétrault said, though Ontario has not yet completed the legal and regulatory steps needed for formal implementation and no effective date has been set.
The passport system lets companies obtain prospectus receipts, exemptions, and registrations across multiple jurisdictions through a single principal regulator, Norton Rose Fulbright noted.
All other provinces and territories adopted it when Multilateral Instrument 11-102 took effect in March 2008, McCarthy Tétrault said.
Ontario, home to Canada's largest capital market, stayed outside: where another jurisdiction acts as principal regulator, prospectus filings and many registration and exemptive relief applications must currently clear both that regulator and the Ontario Securities Commission.
For a company based outside Ontario, clearing its home regulator has never been enough on its own, wrote J. Ari Pandes, a finance professor at the University of Calgary's Haskayne School of Business, in a Calgary Herald opinion piece.
To raise money from Ontario investors, such a company also faced a second review, added fees, and delay at the OSC, even though other provinces already accepted Ontario's approvals, Pandes said.
Once Ontario joins, he wrote, one approval in any Canadian jurisdiction will carry nationwide.
Ontario has long viewed the passport as less desirable than a single national regulator, per Norton Rose Fulbright.
The odds of a national regulator have faded since the Supreme Court of Canada's 2011 decision in Reference re Securities Act and the wind-down of two national transition bodies.
Earlier this year, the OSC's chief executive, Grant Vingoe, told the Standing Senate Committee on Banking, Commerce and the Economy that entering the "two-way passport" was ultimately a political decision for the Ontario government, McCarthy Tétrault reported.
Bethlenfalvy said he had "directed the Ontario Securities Commission to build upon discussions for Ontario's full participation," tying it to broader trade reform.
Ontario joining is "an important step" toward a more competitive economy, he said, but only if other extra-provincial trade barriers come down too, McCarthy Tétrault reported.
In his release, Bethlenfalvy added that Ontario expects other provinces to keep removing barriers as passport terms are negotiated, "to unleash an estimated additional C$200 billion to Canada's GDP," Norton Rose Fulbright reported.
The OSC has not formally responded but has commented through its social media accounts.
Vingoe was quoted as saying: "We look forward to continuing discussions with members of the Canadian Securities Administrators, and our government, about the terms of Ontario's participation."
The Canadian Securities Administrators said in 2021 that bringing the OSC into the passport would significantly cut regulatory burden by speeding decisions, including on financings, and removing the costs of dealing with multiple regulators, McCarthy Tétrault reported.
A coalition of capital markets associations welcomed the commitment, saying it would make it easier for firms to operate and raise capital across Canada while reducing duplication and costs.
TMX Group's chief executive, John McKenzie, called the move "a significant step forward for economic cooperation in Canada" in a LinkedIn post, and credited Bethlenfalvy and Ontario Premier Doug Ford.
The passport will not by itself spark a wave of new listings, Pandes cautioned, though it should make raising capital simpler and cheaper for companies already listed in Canada.
He contrasted a subdued domestic market, where five operating companies have gone public on the TSX this year in capital-raising deals, with a booming US market.
According to the Calgary Herald piece, investment-banking fees at the six largest US banks rose about 45 percent in the second quarter, merger activity climbed roughly 80 percent to about US$1.5tn, and companies raised a record US$251bn in equity in the first half.
Bethlenfalvy has directed the OSC to lead implementation talks with the CSA, and the terms of Ontario's participation remain conditional, McCarthy Tétrault noted.
