The Government of Québec has introduced the Regulation respecting the diversification of municipal investments through Order in Council 1136-2026. The regulation establishes new investment options and conditions for the Montréal and Québec City, allowing the two largest municipalities in Québec to diversify their investment portfolios while maintaining safeguards designed to protect public funds. The regulation was made under section 99 of the Cities and Towns Act, which authorizes the government to determine additional investments that municipalities may make and establish conditions governing those investments.

The regulation responds to the need for municipalities with significant financial assets to access broader investment opportunities while ensuring responsible management of taxpayer funds. Previously, municipal investment powers were more restricted, limiting the ability of major cities to pursue diversified investment strategies. The new framework allows eligible municipalities to invest in shares of investment funds containing publicly traded equities and highly rated debt securities, provided they adopt appropriate governance and risk management measures.

Under the regulation, Montréal and Québec City may invest money collected from municipal taxes, fees, and other municipal revenues in investment funds that meet specific requirements. These funds may include common or preferred shares issued by corporations listed on recognized stock exchanges under Québec’s Securities Act. They may also contain bonds or other debt securities issued by corporations that have received a minimum credit rating of A- or an equivalent rating from a recognized credit rating organization.

However, the regulation places important restrictions on municipal investment practices. Municipalities cannot borrow money to finance these investments, nor can they use funds held in a sinking fund intended for loan repayment. In addition, investment fund managers must use derivatives or other mechanisms to hedge currency risks when the underlying securities are denominated in foreign currencies.

The regulation also establishes limits on the proportion of municipal funds that may be directed toward these investment vehicles. A municipality’s investment in an investment fund cannot exceed the difference between 25% of the total eligible investment funds available on the date of the proposed investment and the amount already invested. This effectively caps exposure and prevents municipalities from placing excessive portions of their financial assets into diversified market investments.

Municipalities may delegate investment management responsibilities to qualified institutions, including the Caisse de dépôt et placement du Québec, authorized financial institutions operating under Québec or Canadian law, or registered securities dealers. The regulation requires a significant scale of investment management, establishing that initial investments entrusted to one or more managers must total at least $25 million.

Quebec (1136/2026) July 29, 2026
Disclaimer: Insights are for informational purposes only and does not reflect RRI’s official position or constitute legal opinion.