Of all the obstacles standing in the way of a national securities regulator, language may be the real deal-breaker. The fear that a Toronto-based national regulator would pay only lip service to regional differences – especially language-related ones – remains the biggest reason Quebec refuses to sign on to the creation of a single securities authority.
If other provinces (read: Ontario) really want to get Quebec on board, they need to make it clear they’re willing to support a truly bilingual national commission. That might involve pan-Canadian legislation requiring companies to translate securities filings into French. Many issuers outside Quebec currently argue the costs of doing so are too high.
It’s a major bone of contention, or, if you prefer, une grosse pomme de discorde.
The dominance of English in Canada’s investment industry hit Quebec investors in the pocket this winter as several companies in the burgeoning marijuana sector issued English-only prospectuses when they tapped public markets to raise hundreds of millions of dollars. Since Quebec’s Securities Act requires regulatory filings be made in French, Canopy Growth, Aurora, Cannaroyalty and Harvest One Cannabis were prohibited from offering their shares to Quebeckers.
It was not an isolated case. About half of Canadian companies that go public in any given year bypass Quebec to avoid the extra cost and delay involved in translating regulatory documents. As anyone who has ever read a prospectus knows, securities filings are typically filled with legalese. If you want a French version, Google Translate just doesn’t cut it. Translating a typical prospectus and related documents can cost up to $100,000.
The 1983 amendments to the Quebec Securities Act that made French securities filings mandatory have been a boon to the province’s translation industry, which has lobbied hard to maintain the current rules despite calls for their relaxation from the investment industry. The Investment Industry Association of Canada has advocated moving to a European-style system, in which non-Quebec companies would only have to translate a five-page summary of prospectuses into French.
“Our arguments have fallen on deaf ears for years – and it’s hurting Quebec investors,” Investment Industry Association of Canada president Ian Russell said in an interview. “It’s also putting small Quebec investors at a disadvantage to institutional investors,” which often operate in the so-called exempt market.
Quebec’s securities regulator, l’Autorité des marchés financiers (AMF), has expressed guarded support for the IIAC idea. When questioned this month by La Presse about the missed opportunities Quebec investors face because of French-language documentation requirements, AMF head Louis Morisset said: “It’s a real problem. We apply the law as it exists.”
What investment industry types don’t seem to get, however, is that relaxing the language rules is a political non-starter. But by reassuring Quebec that French would have protected status in a national securities regulator, the investment industry would further the cause it has been championing for decades.
“We are a French society, but there is also the issue of consumer protection,” Parti Québécois MNA Nicolas Marceau said this month. “It is quite reasonable to ensure the people can read [securities] documents in French. It’s not an exorbitant requirement. It’s a normal requirement so investors can make informed choices.”
Premier Philippe Couillard’s Liberal government, trailing in the polls six months before the next election, has made it clear it has no intention of relaxing the language requirements. Indeed, in opposing the proposed Capital Markets Regulatory Authority (CMRA) that Ottawa and five provinces are seeking to create, Quebec argues the current proposal would deprive individual provinces of “the ability for any autonomous legislative action” in the securities field, including setting language requirements.
Ottawa and the participating provinces, including Ontario, contend that securities laws would be written on a co-operative basis by a “Council of Ministers” with representatives from every jurisdiction. While no province would be required to surrender its jurisdiction, each participating province and the federal government would have to pass identical securities legislation.
The Quebec Court of Appeal ruled last year that the proposed arrangement “fetters the parliamentary sovereignty of the participating provinces and is consequently unconstitutional. It subjects the province’s legislative jurisdiction to the approval of an external entity (the Council of Ministers), which is impermissible.”
The case is now in the hands of the Supreme Court of Canada, which heard arguments last month. Quebec argued then that “the real objective” of the CMRA’s proponents is to “uniformize and centralize securities regulation and strip the provinces of the ability for any autonomous legislative action in that field … In short, it is a colourable attempt to amend the Constitution.”
Concessions on language might not on their own win Quebec over. But they would be a start.