The draft Regulation under the Cities and Towns Act introduces a framework enabling Ville de Montréal and Ville de Québec to diversify their municipal investment activities beyond the limits currently set out in section 99 of the Act. The intention is to allow these major municipalities to invest portions of their available funds while imposing strict governance, risk management, and reporting requirements to protect public assets.

It specifies that eligible investments include shares in investment funds composed of publicly traded common or preferred shares as well as debt securities issued by legal persons whose minimum credit rating is A- or equivalent according to recognized rating agencies. The regulation prohibits cities from borrowing funds or using sinking fund monies to finance these investments, ensuring fiscal discipline and separation of debt repayment resources from investment activities.

It also requires investment fund managers to hedge foreign currency exposure through derivatives when underlying securities are denominated in foreign currencies, thereby reducing exchange rate risk for municipal portfolios. A key limitation is that investment amounts cannot exceed twenty five percent of the total investable municipal funds minus amounts already invested at the time of the transaction, ensuring diversification and preventing over concentration in market assets.

The Regulation further restricts management of these investments to authorized entities including the Caisse de dépôt et placement du Québec, regulated financial institutions, and registered securities dealers. It also imposes a minimum aggregate threshold of one hundred million dollars for managed investments under external oversight, ensuring scale efficiency and professional management.

Municipalities must adopt a formal investment policy through city council resolution specifying asset classes, risk tolerance, benchmarks, liquidity needs, and portfolio composition requirements including proportions of equity and debt instruments. The policy must be reviewed annually and submitted to the Minister of Finance, ensuring continuous oversight and alignment with public financial objectives.

A dedicated monitoring committee must be established consisting of the city treasurer as chair and at least two additional members appointed by council. This committee must review performance quarterly, produce compliance reports, and submit findings to both the city council and the provincial finance ministry, ensuring transparency and accountability.

Annual external audits are mandated to verify compliance with the investment policy, conducted either by the city auditor or independent auditors appointed by council. Finally the Regulation will come into force fifteen days after publication in the official gazette, concluding the regulatory framework establishing a controlled yet flexible investment regime for major Quebec municipalities.

Quebec (Draft) April 22, 2026
Disclaimer: Insights are for informational purposes only and does not reflect RRI’s official position or constitute legal opinion.