Canadian Securities Law : Canadian Securities Lawyer & Attorney : Stikeman Elliott Law Firm : Montreal, Ottawa, Calgary, Vancouver, Montreal, Toronto

The Canadian Securities Administrators today released CSA Staff Notice 31-317 (Revised) – Reporting Obligations Related to Terrorist Financing. The revised Notice is intended to make clear CSA staff's views that all dealers and advisers relying on exemptions from the registration requirements are subject to federal monthly reporting requirements, including newly exempted international dealers and international advisers. The Notice also sets out the view of CSA staff regarding the mechanics of complying with federal reporting requirements and includes a new consolidated CSA reporting form.

For more information on the initial publication of the Notice, see our post of April 29. For a brief description of the implementation of anti-terrorist financing legislation in Canada, see our update of March 19, 2008. Our insurance colleagues have also prepared a helpful overview of Canada's listings and sanctions laws that, while focused on insurers, also applies to entities engaged in the business of dealing in securities or providing portfolio management or investment counselling services.

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The Canadian Foundation for Advancement of Investor Rights (FAIR Canada) released a report earlier this week that reviews "the conflicts of interest that arise when exchanges that are commercial businesses also act as regulators and supervisors of issuers." Specifically, the report contends that the TSX is the only major exchange reviewed that has failed to implement specific measures to manage its conflicts of interest in regulating listed companies. According to FAIR Canada, other major exchanges have addressed such conflicts through changes in corporate governance, organizational structure, corporate policies and internal procedures.

Ultimately, the report provides three regulatory alternatives for the TSX to consider, being: (i) transferring most listings regulation responsibilities to another regulator; (ii) establishing a regulation subsidiary company with independent governance to perform listing regulation; and (iii) establishing a listings regulation department that is separate from the business operations of the exchange to perform listings regulation. While an Ontario legislative committee recently recommended that the OSC review the potential for conflicts of interest between the regulatory and commercial functions of the TSX, it is not yet clear whether any regulatory changes will be made.

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On Monday, Her Majesty's Treasury launched a consultation to gather views on the British Government's proposals to reform the UK's financial regulatory framework. As discussed in our post of June 17, the proposals would: (i) give the Bank of England the authority over macro-prudential regulation; (ii) establish a new prudential regulator, operating as a subsidiary of the Bank of England, that would regulate financial firms; and (iii) establish a new Consumer Protection and Markets Authority to regulate the conduct of financial firms providing services to consumers. The just-released consultation document provides further details regarding the proposals and asks specific questions for public comment.

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As we previously discussed, the New Brunswick Securities Commission recently proposed an amendment to its Local Rule 91-501 Derivatives to modify the language respecting the exemption for "qualified parties".  Specifically, the amendment states that the registration requirement does not apply "where each party to the trade is a qualified party acting as principal". The NBSC has now set the date of implementation of the amendment as September 1, 2010.

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Last month, the House of Commons' Standing Committee on Industry, Science and Technology released a report based on its statutory review of the Canada Business Corporations Act. The report considered a number of issues and ultimately recommended that a broad public consultation be conducted by the government within two years regarding issues such as: (i) executive compensation, including whether shareholders should have an advisory vote on compensation packages; (ii) shareholder rights and governance, including the election of directors and shareholder approval for significantly dilutive acquisitions; and (iii) securities regulation.

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The Ontario Securities Commission (OSC) today published a revised version of OSC Staff Notice 21-703 - Transparency of the Operations of Stock Exchanges and Alternative Trading Systems. Staff Notice 21-703 sets out the process of OSC Staff for reviewing changes to certain operations of exchanges and alternative trading systems. The Notice has been revised in order to apply to the notice and filing process relating to the initial operations of an ATS seeking to carry on business in Ontario.

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The Canadian Securities Administrators (CSA) today released CSA Staff Notice 52-326 IFRS Transition Disclosure Review, which provides an assessment of IFRS transition disclosure made by issuers in 2009 annual MD&A. The review, which was completed in consideration of disclosure guidance provided in May 2008, ultimately found an improvement in the amount and quality of transition disclosure. Specifically, findings included:

• 95% of issuers reviewed disclosed their IFRS transition plans;
• 60% of issuers described milestones and anticipated timelines associated with key elements of their transition plans;
  82% of issuers identified significant accounting policy differences between Canadian GAAP and IFRS; and
• 80% of issuers provided an update of transition information from 2008 disclosure.

The CSA did, however, identify various areas for improvement. For example, despite the fact that the vast majority of issuers disclosed their transition plans in their MD&A, many failed to discuss key elements of their plans. According to the CSA, "[f]or each key element of an IFRS changeover plan discussed in MD&A, issuers should have described the significant milestones and anticipated timelines." The CSA also stated that issuers should consider whether they can communicate quantified information in 2010 interim and annual MD&A prior to final approval of IFRS balances.

It is expected that the CSA will continue to review IFRS transition disclosure as part of their overall continuous disclosure review program and that issuers should expect requests to refile MD&A if disclosure obligations are not met. Thus, the movement towards the implementation of IFRS continues. As 2011 approaches, it is clear that, while issuers are making definite improvements in disclosing their IFRS transition plans, care must be taken to ensure that regulatory expectations are met.

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Daniella Laise

As we discussed in our post of June 25, the Canadian Securities Administrators (CSA) recently published for comment proposed amendments to National Instrument 31-103 Registration Requirements and Exemptions (31-103), National Instrument 33-109 Registration Information  (33-109), and Ontario Securities Commission Rule 33-506 (Commodity Futures Act) Registration Information and related policies and forms (the First Year Amendments). The First Year Amendments range from technical adjustments to more substantive matters and, according to the CSA, will serve to “enhance investor protection and improve the day-to-day operation” of the registration regime for both industry and regulators. Summarized below are some of the more substantive proposals under the First Year Amendments.

Continue Reading...

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On July 15, 2010, Quebec's financial services regulator, the Autorité des marchés financiers (the AMF), published two guidelines with respect to the investment management practices of financial institutions, including insurers, portfolio management companies controlled by an insurer, mutual insurance associations, financial services cooperatives and trust and savings companies governed by any of the following Quebec acts: An Act respecting insurance, An Act respecting financial services cooperatives and An Act respecting trust companies and savings companies.

Respectively, the "Investment Management Guideline" (at page 132) and the "Derivatives Risk Management Guideline" (at page 168) set out, in a principles-based approach, AMF guidelines with respect to the sound and prudent investment management practices that financial institutions are required to apply. A draft "Investment Management Guideline" (at page 137) had previously been circulated for public consultation by the AMF in November 2009, and the two recently circulated guidelines are a result of the consultation process. The AMF has stated that due to the complexity and risk-potential of derivatives, it has been decided to establish a separate guideline devoted specifically to derivatives risk management. The AMF has noted that its guidelines are based on core principles and guidance issued by international organizations, including the Basel Committee on Banking Supervision and the International Association of Insurance Supervisors.

The guidelines come into effect on August 1, 2010 and the AMF expects each financial institution to develop strategies, policies and procedures based on its nature, size, complexity and risk profile, to ensure the adoption of the principles underlying the guidelines by August 1, 2012. The AMF has also stated that where a financial institution has already implemented such a framework, the AMF may verify whether it enables the institution to satisfy the requirements of sound and prudent investment management practices prescribed by law.

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