It’s Time for Ottawa to Revive the Push for Capital Market Regulation

To: The Department of Finance 

From: Paul C. Bourque and Douglas Hyndman 

Date: August 5, 2026 

Re: It’s Time for Ottawa to Revive the Push for Capital Market Regulation   

Canada’s financial system, particularly its capital markets, need stronger oversight to protect them from systemic risk and criminal activity. 

We need to become more resilient and enhance investor confidence in our financial markets if we are to thrive in a new world order that is changing fast and becoming less stable.  

Twenty years ago, Finance Minister Jim Flaherty launched a push for a federal securities regulator with comprehensive jurisdiction over the capital markets. This effort intensified as the 2008 global financial crisis unfolded. Over the next two years, the federal government created the Canadian Securities Transition Office to lead and manage the project and published a draft Canadian Securities Act. 

The draft legislation included the traditional objectives of protecting investors and promoting a fair and efficient market and added two elements: (1) a goal to contribute, “as part of the Canadian financial regulatory framework, to the stability of the financial system,” and (2) securities-related criminal prohibitions and provisions to strengthen criminal investigations, prosecutions, and penalties. 

In 2011, the Supreme Court of Canada ruled that the core of the draft legislation was unconstitutional in attempting to usurp provincial jurisdiction over the day-to-day regulation of securities markets. However, the court found that aspects of the legislation related to data collection and management of systemic risk, as well as criminal law provisions, were matters of federal jurisdiction. 

Following this setback, the federal government worked for several years with willing provinces toward a “Cooperative Capital Markets Regulatory System,” through which governments would jointly establish a capital markets regulatory authority to administer both new uniform provincial legislation and proposed new federal legislation. However, that project ultimately fizzled out, leaving the federal government with only one practical way forward: Adopt and implement its proposed Capital Markets Stability Act, which would address data collection, systemic risk management, and criminal matters. Unfortunately, the effort to pursue this path was cut short in 2021 when Parliament voted down the funding needed to continue the work. 

After the global financial crisis, other major countries reformed their regulatory structures to build the capacity to monitor and mitigate systemic risks to the capital markets and financial system. Because the stability act was not adopted, Canada continues to manage this critical function without a single point of political or legislative authority for standardizing and collecting national financial market data. 

The responsibility for national financial market systemic risk oversight is fragmented among a variety of federal and provincial agencies and committees that are responsible for different financial market segments and have differing mandates and priorities. 

In a more turbulent world, lacking a single view of comprehensive financial market data, we are exposed to financial risks from sources like leveraged trading, cyber-attacks, artificial intelligence, and cryptocurrencies, to name only a few, while lacking adequate capacity to protect our financial system. To fill this gap, we need an expert team with the legal and administrative tools to track these risks and intervene to mitigate them. 

Canada also lacks an effective deterrent to criminal activity in our capital markets. Despite notorious instances of serious criminal misconduct in Canadian capital markets over many years, consequences for serious and complex, financial market crimes are infrequent. The RCMP’s securities enforcement team has obtained convictions in only 12 cases since 2008, not a record that will deter the sophisticated fraudsters who use our markets to prey on investors. 

We need modernized laws and a team of investigators and prosecutors who can combat complex financial crimes that cross provincial and national borders.

Until it was abruptly terminated, the capital markets stability act project would have filled these two significant gaps in our financial regulatory framework. It is now more important than ever for the federal government to finish this job.  

Paul C. Bourque is a senior fellow at the C.D. Howe Institute, and Douglas Hyndman is a former Chair of the British Columbia Securities Commission and former Chair and CEO of the Canadian Securities Transition Office. They are authors of C.D. Howe Institute Commentary 722, “Finish the Job: Completing Canada’s Capital Markets Reform Agenda.” 

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The views expressed here are those of the authors. The C.D. Howe Institute does not take corporate positions on policy matters.