The CRA complied with the September 30 FATCA deadline after the IRS advised that Notice 2015-66 did not apply to Canada

Roanne C. Bratz -

In an affidavit that was filed with the Federal Court of Appeal on September 25, 2015 in support of the government’s response to block a motion for injunctive relief that had been brought by the plaintiffs, Sue Murray, Director of the Canada Revenue Agency’s Competent Authority Services Division,  International and Large Business Directorate, Compliance Programs Branch (the CPB), swore that the U.S. Internal Revenue Service (IRS) indicated to Canadian officials that Canada was not eligible, under IRS Notice 2015-66, for an extension of the September 30th deadline to comply with its intergovernmental agreement on the Foreign Account Tax Compliance Act.

The affidavit stated that in a conference call that took place on September 24, 2015, Douglas O'Donnell,  IRS Large Business and International Division Commissioner, told her and some of her colleagues, that the extension offered by the IRS to countries with Model 1 IGAs did not apply to Canada, and the IRS expected Canada to comply with the September 30th  deadline.

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CSA publishes results of staff review of women on boards disclosure

On September 28, 2015, the Canadian Securities Administrators (CSA) published CSA Multilateral Staff Notice 58-307 Staff Review of Women on Boards and in Executive Officer Positions – Compliance with NI 58-101 Disclosure of Corporate Governance Practices (Staff Notice 58-307).  Staff Notice 58-307 summarizes the results of CSA staff’s review of disclosure related to the “women on boards” initiative.

The staff review focused on 722 TSX-listed issuers and yielded helpful guidance for improving disclosure.  CSA staff provide guidance on improving disclosure with respect to mechanisms of board renewal that the  issuer has adopted; describing gender diversity policies and ensuring compliance of such policies with Form 58-101F1 Corporate Governance Disclosure; and improving disclosure of the representation of women in the director and executive officer identification and selection process among other areas.  Staff Notice 58-307 also provides insightful statistics on the representation of women on boards and should be reviewed in detail by interested stakeholders.

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Various developments result in changes to rules governing marketplace operations and trading

As we noted in an earlier post, amendments to National Instrument 21-101 Marketplace Operation (NI 21-101) and National Instrument 23-101 Trading Rules (NI 23-101) came into force on October 1, 2015.  The amendments relate to a variety of matters relating to marketplace operation and trading, including business continuity planning and the information technology systems of marketplaces.

On a related note, the Ontario Securities Commission recently approved changes to the protocols for the review and approval of exchange rules.  Changes are also made to the protocols for the review of the information contained in Form 21-101F1 Information Statement Exchange or Quotation and Trade Reporting System and Form 21-101F2 Information Statement Alternative Trading System and the exhibits thereto.  The changes set out certain requirements for the launch of new marketplaces and the implementation of changes to the systems of existing marketplaces.  Changes were also made to ensure consistency with the amendments to NI 21-101 and NI 23-101.  For further information on the protocols and the changes made thereto, please consult Processes for the Review and Approval of Exchange Rules and of the Information Contained in Forms 21-101F1 and 21-101F2

Finally, OSC Staff Notice 21-706 Marketplaces’ Initial Operations and Material System Changes was updated to reflect the developments noted above.

Comment deadline approaches on proposal to expand post-trade reporting for private placements

Our readers will recall that the Canadian Securities Administrators (CSA) have proposed to significantly expand the type of information required to be provided in private placement reports of trade.

As we discussed when this proposal was first published in August 2015, new or amended disclosure requirements would include detailed information on directors, executive officers, control persons and promoters (for certain types of issuers) as well as the identities of persons being compensated as a result of the distribution, and other significant changes for investment funds.

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Ontario activity fee amendment for the revocation of certain cease trade orders to come into force in December 2015

The Ontario Securities Commission (OSC) approved amendments to OSC Rule 13-502 Fees to provide that no activity fee is payable in respect of certain applications to have a cease trade order revoked.  Specifically, no activity fees are payable with respect to a revocation of a failure to file cease trade order under section 127(4.1) of the Securities Act (Ontario).  That provision was added to the Securities Act on June 4, 2015.  The amendment to OSC Rule 13-502 is expected to come into force on December 15, 2015.  For further information, please consult the Notice of Amendment.

Order protection rule amendments adopted by IIROC

Amendments to the Investment Industry Regulatory Organization of Canadas (IIROC) Universal Market Integrity Rules have been approved by the applicable securities regulatory authorities.  The amendments, which relate to unprotected transparent marketplaces and the order protection rule, were originally published for comment on June 12, 2015.

For further information, please see IIROC Notice 15-0211.

Follow-Up: automatic disclosure of financial records from Canadian financial institutions

Roanne C. Bratz -

On September 30, 2015, Justice Donald J. Rennie, on behalf of a three member panel  of the Federal Court of Appeal, denied the appellants’ motion for an interlocutory injunction prohibiting the disclosure of their financial records by the Minister of National Revenue to the U.S. Department of the Treasury pursuant to the IGA.

This would appear to give the Canada Revenue Agency a “green light” to turn over bank account information of U.S. persons residing in Canada to the Internal Revenue Service. For further background on related developments, please see our previous posts.

More disappointing news for U.S. citizens residing in Canada

Roanne C. Bratz -

In addition to Justice Martineau’s  denial of injunctive relief and dismissal of the request for summary judgment in Hillis and Deegan v. The Attorney General of Canada,  as discussed in our previous post, U.S. citizens residing in Canada received more disappointing news on September 29, 2015, when Judge Thomas M. Rose of the U.S. District Court for the Southern District of Ohio denied a motion for a preliminary injunction, which in part, looked  to enjoin the U.S. Department of the Treasury and  the Internal Revenue Service from enforcement of various provisions contained under the FATCA legislation.

Senator Rand Paul  had joined six other plaintiffs in filing this lawsuit on July 14, 2015 , which, in part, challenged the validity of the FATCA related IGAs that the U.S. has signed with Canada, the Czech Republic, Israel and Switzerland.

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Tailored listing regime for TSX non-corporate issuers comes into force

Darin Renton -

Amendments to the TSX Company Manual were made effective September 17, 2015 to add various requirements for non-corporate issuers such as exchange traded funds and non-redeemable investment funds, as noted in a previous post.  The amendments are intended to provide guidance to the increasing numbers of non-corporate issuers listed on the TSX with respect to original listing requirements and requirements relating to changes in capital structure.

Our readers will recall that the amendments were first published for comment on January 15, 2015.  The final amendments, approved on September 17, 2015, incorporate comments received on the proposed amendments relating to the definition of “Closed-end Fund”, the market capitalization requirement for Closed-end Funds, amendments to constating documents, pre-clearance of security holder documents and NAV calculations

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IIROC Dealer Member Rules amended to reduce quiet periods following prospectus offerings

The Ontario Securities Commission approved amendments to Requirement 14 of Dealer Member Rule 3400 of the Investment Industry Regulatory Organization of Canada (IIROC).  The amendments have the effect of reducing quiet periods following prospectus offerings.  The quiet period for an initial public offering is reduced from 40 days to 10 days and the quiet period for secondary offerings is reduced from 10 days to 3 days following the date of the offering to be consistent with similar changes to the FINRA Rules in the U.S.  The Dealer Member Rule amendments came into force on September 25, 2015. 

While under IIROC Notice 15-0216, the amendments to Dealer Member Rule 3400 are effective immediately, IIROC also published Notice 15-0217 which requests comments on these amendments, and potentially broader amendments, to Requirement 14 of Dealer Member Rule 3400.

For further information, please consult IIROC Notice 15-0216 – Amendments to Research Report Quiet Periods and IIROC Notice 15-0217 – Request for Comments – Research Report Quiet Periods.

CSA publishes guidance for online portfolio advisers

On September 24, 2015, the Canadian Securities Administrators (CSA) published guidance for portfolio managers on providing advice using online platforms.  The CSA’s overarching message is that portfolio managers that provide advice using online platforms are subject to the same obligations as any other portfolio manager. 

CSA Staff Notice 31-342 Guidance for Portfolio Managers Regarding Online Advice provides insight in a number of areas that may be of interest to advisers offering services online or contemplating a move to an online platform.  These areas include: know-your-client obligations as they relate to online advisers; composition of investment portfolios; due diligence reviews and compliance reviews by CSA staff of a portfolio manager’s plans for providing online advice; and terms and conditions that may be imposed on registration.

OSC releases annual compliance and registrant regulation report

Jeff Elliott and Andrew Cunningham

On September 21, 2015, the Ontario Securities Commission’s (OSC) Compliance and Registrant Regulation Branch (CRR) released its Annual Summary Report for Dealers, Advisers and Investment Fund Managers, also known as OSC Staff Notice 33-746 (the Report). The CRR oversees over 1,000 firms and nearly 67,000 individuals in the industry. The Report is divided into five main sections, dealing respectively with (i) new policy initiatives, (ii) registrant outreach, (iii) registration initiatives, (iv) key findings from ongoing compliance reviews and (v) enforcement responses with respect to registrant misconduct.

The 96-page Report is a valuable resource and worth reading in its entirety. This post summarizes a number of the key issues that the Report identifies.

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Amendments on trading on unprotected lit marketplaces made to TSX Rule Book and Alpha Trading Policy Manual amendments

Effective September 21, 2015, housekeeping amendments were made to make the TSX Rule Book and the Alpha Trading Policy Manual consistent with amendments to the Universal Market Integrity Rules by (UMIR) by the Investment Industry Regulatory Organization of Canada (IIROC).

The amendments to the TSX Rule Book and the Alpha Trading Policy Manual follow related amendments to the order protection rule by the CSA and IIROC on June 12, 2015 which seek to accommodate trading on unprotected lit marketplaces.

As a result of the OSC's approval of amendments to the Alpha Trading Policy Manual pertaining to the speed bump, the Alpha Exchange will be the first exchange that displays orders that will not be considered to be protected from a trade-through under the Order Protection Rule according to the OSC.

For further information, please consult both of the Ontario Securities Commission's Notices of Housekeeping Rule Amendments.

New prospectus exempt rights offering regime to come into force on December 8, 2015

Simon Romano and Junaid Subhan - 

The prospectus exempt rights offering regime will be significantly revised to address concerns that it is too expensive and time consuming.  The Canadian Securities Administrators (CSA) states that the amendments are intended to make prospectus exempt rights offerings more palatable for issuers while maintaining investor protections.  The amendments will repeal National Instrument 45-101 Rights Offerings (NI 45-101) – the revised rights offering prospectus exemption will be provided in an amended section 2.1 of National Instrument 45-106 Prospectus Exemptions (NI 45-106).

Principal Conditions of the Exemption

The new rights offering prospectus exemption is only available to non-investment fund reporting issuers that meet certain conditions.  The issuer must be a reporting issuer in Canada and it must be current in its continuous disclosure obligations.  In addition, the exercise period for the rights must be no less than 21 days and no more than 90 days and must commence the day after the rights offering notice is sent to security holders.  

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CSA members permit speed bumps on Alpha Exchange Inc.

On September 17, 2015, nearly all members of the Canadian Securities Administrators (CSA) approved an exemption to allow Alpha Exchange Inc. to implement “speed bumps” in its trading policies.  For example, BC Instrument 23-502 Exemption from Certain Requirements in Part 6 of National Instrument 23-101 – Trading Rules was approved by the British Columbia Securities Commission and ASC Blanket Order 23-502 Order-Protection Rules and Alpha Exchange Inc. was adopted by the Alberta Securities Commission on September 17, 2015.  The only CSA member that did not adopt a similar exemption is the Ontario Securities Commission (OSC) as a similar exemption is not required in Ontario.

The blanket orders are in effect from September 21, 2015 until National Instrument 23-101 Trading Rules and/or Companion Policy 23-101 are amended to account for speed bumps by marketplaces.  These amendments were proposed by the CSA on June 12, 2015.