CSA adopts recovery guidance for recognized clearing agencies

The CSA has adopted amendments to the Companion Policy (CP 24-102) to National Instrument 24-102 Clearing Agency Requirements (NI 24-102) effective June 3, 2016.  The amendments are intended to help clearing agencies develop recovery plans before the end of 2016.

On December 3, 2015, the CSA published for comment proposed amendments to CP 24-102.  The amendments to CP 24-102 provide supplementary guidance on the recovery and orderly winding-down planning of domestic recognized clearing agencies which are also subject to oversight by the Bank of Canada.  These Canadian authorities expect those clearing agencies to meet the standards related to recovery and orderly wind-down set out in a report published by the Bank of International Settlements Committee on Payments and Market Infrastructure entitled Principles for Financial Market Infrastructures.  The supplementary guidance can be found in Annex 1 to CP 24-102.

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Here's to simpler disclosure: TSX proposes new disclosure requirements for compensation arrangements

Katy Pitch and Laura Levine

With the goal of reflecting current compensation arrangements and simpler public disclosure, the Toronto Stock Exchange (TSX) has proposed amendments to its Company Manual related to the disclosure requirements for security based compensation arrangements, such as stock option plans or similar plans that would result in the issuance of securities from treasury (Compensation Arrangements).   Through a new disclosure form, Form 15, the TSX proposes to streamline the disclosure into tabular format.   

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TSX proposes issuer website disclosure

The TSX has proposed amendments to its Company Manual that would introduce a requirement that listed issuers maintain a publicly accessible website posting current copies of the following documents:

  • Constating documents 
  • Corporate policies that impact meetings of security holders and voting
  • Security holder rights plans
  • Security compensation arrangements (such as stock option plans
  • Certain corporate governance documents, including charters of board committees, code of ethical business conduct, position descriptions, board mandate, anti-corruption policies and other environmental and social policies, and whistleblower policies
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IIROC Publishes Three-Year Plan and Details Immediate Priorities for 2016-17

Andrew Cunningham - 

On May 26, 2016, the Investment Industry Regulatory Organization of Canada (IIROC) published IIROC Notice 16-0109 IIROC’s Three-Year Strategic Plan and IIROC Notice 16-0110 IIROC 2017 Priorities, which respectively set out the organization’s 3-year strategic plan and its immediate priorities for 2016-17.

Over the longer term, the 3-year strategic plan responds to the expectations of key IIROC stakeholders – including its members, other regulators, investors and employees. At the same time, the plan addresses a number of key trends, including (among others) the aging investor population, a shift among retail investors away from ownership of individual securities (and toward ETFs and other pooled products) as well as technological change that is affecting both the business models of IIROC members and the types of expertise that IIROC requires to be an effective regulator. Also emphasized in the plan is a trend toward improved co-ordination among IIROC and other regulators.

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IIROC proposes amendments regarding transparency in debt securities trades

The Investment Industry Regulatory Organization of Canada (IIROC) is proposing amendments to the Dealer Member Rules dealing with market transparency in trades of domestic debt securities.

Section 2100.1 and 2100.4(d) of the Dealer Member Rules are proposed to be amended to make them consistent with the requirements of National Instrument 21-101 Marketplace Operation (NI 21-101), including by eliminating the requirement that the IIROC Board of Directors recognize an organization that provides market transparency and by amending the definition of “information processor”.    

In addition, the proposed amendments are intended to ensure that these provisions remain current when CanPX Inc. ceases operations as an information processor on June 30, 2016.  According to IIROC, the current drafting of the provisions do not support any other party acting as an information processor.  Parts of the Dealer Member Rules specifically name CanPX Inc. as an information processor – the proposed amendments would remove such direct references in order to allow any party to act as an information processor pursuant to NI 21-101.

For further information, please consult IIROC Notice 16-0117 Proposed Amendments Respecting Market Transparency in Trading of Domestic Debt Securities.

CSA reminding market participants of upcoming T+2 implementation

The Canadian Securities Administrators (CSA) recently issued reminders to market participants of the shortening of the standard settlement cycle from three days after the date of a trade (T+3) to two days after the date of a trade (T+2) on September 5, 2017. 

CSA Staff Notice 24-314 Preparing for the Implementation of T+2 Settlement: Letter to Registered Firms (CSA Staff Notice 24-314), which was published on May 26, 2016, follows an earlier notice along the same lines published on April 2, 2015: CSA Staff Notice 24-312 Preparing for the Implementation of T+2 Settlement.  CSA Staff Notice 24-314 advised market participants that Ultimate Designated Persons (UDPs) and Chief Compliance Officers (CCOs) of registered firms received a letter from the CSA advising of this upcoming development.  The letter encourages registrants to prepare for the transition and provides some background information on the adoption of T+2 in other jurisdictions.  For example, the change in Canada is being made to coincide with a similar change in U.S. securities markets and follows similar changes in most European markets (which transitioned in 2014) and in Australia and New Zealand (which transitioned earlier this year).

For further information, please consult CSA Staff Notice 24-314.

CSA requires certain exempt market filings to be made on SEDAR

Certain exempt market filings are now required to be made on the System for Electronic Document Analysis and Retrieval (SEDAR) rather than in paper format in all Canadian jurisdictions other than Ontario and British Columbia. Issuers making exempt market filings in British Columbia and Ontario must do so through either the British Columbia Securities Commission’s (BCSC) eServices or the Ontario Securities Commission’s (OSC) Electronic Filing Portal. The new filing requirement came into force on May 24, 2016.

On April 21, 2016, the Canadian Securities Administrators (CSA) released Multilateral CSA Staff Notice 13-323 Frequently Asked Questions About Making Exempt Market Offering and Disclosure Filings on SEDAR (the Staff Notice) aimed at assisting issuers in making certain exempt market filings on SEDAR. Exempt market filings required to be made on SEDAR include Form 45-106F1 Report of Exempt Distribution (Form 45-106F1) and the related schedules, materials required to be filed or delivered in connection with the offering memorandum prospectus exemption, the start-up crowdfunding prospectus exemption, the crowdfunding prospectus exemption, disclosure documents delivered to subscribers under section 37.2 of the Securities Regulation (Quebec) and financial statements of “mutual funds in the jurisdiction” as defined in National Instrument 81-106 Investment Funds Continuous Disclosure. Documents used in connection with prospectus exemptions not enumerated in the Staff Notice are not required to be filed on SEDAR.

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Ontario, Manitoba and Quebec Adopt Useful Amendments to the Trade Reporting Rules

Margaret Grottenthaler and Alison Beer - 

The anticipated amendments to the rules on reporting derivatives data in Ontario, Quebec and Manitoba are expected to come into force on July 29, 2016.  Highlights of the final amendments to OSC Rule 91-507 Trade Repositories and Derivatives Data Reporting; MSC Rule 91-507 Trade Repositories and Derivatives Data Reporting include:

  • Exempting inter-affiliate trades from reporting (and not just those between “local” counterparties)
  • Pushing back the effective date for requiring trade repositories to publicly report derivatives data to January 16, 2017
  • Simplifying the timing convention used for releasing derivatives data publicly: it’s now 48 hours after execution of the trade
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Changes to private placement reports of trade soon in force

A new harmonized Form 45-106F1 Report of Exempt Distribution (the New Report) will come into effect on June 30, 2016 in all Canadian provinces and territories. Announced by the Canadian Securities Administrators (the CSA) on April 7, 2016 in CSA Notice of Amendments to National Instrument 45-106 Prospectus Exemptions relating to Reports of Exempt Distribution, the New Report is intended to reduce the compliance burden for issuers and underwriters, and to provide securities regulators with information necessary to facilitate more effective regulatory oversight of the exempt market.

Heightened disclosure requirements

The New Report will have heightened disclosure requirements. All issuers will be required to disclose, among other things:

  • the type of securities being distributed using a new 3-letter code; and
  • specific details about the prospectus exemption relied upon, including how each purchaser qualifies for certain exemptions, including the “accredited investor” exemption, for example. 
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Insider trading prohibition to be broadened

The Securities Act (Ontario) (OSA) is expected to be amended to include a prohibition on recommending the purchase or sale of securities of an issuer where the person or company making the recommendation is in a “special relationship” with the issuer and has knowledge of a material fact or material change with respect to such issuer that has not been generally disclosed. Currently, section 76 of the OSA provides that a person in a “special relationship” with the issuer includes:

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IIROC again extends deadline to comply with personal financial dealings rule

On May 10, 2016, the Investment Industry Regulatory Organization of Canada (IIROC) announced that it is extending the deadline for unwinding existing trustee, executorship and power of attorney arrangements prescribed by Dealer Member Rule 43.2(5)(i) to 180 days after the implementation of the final amendments to unwind existing arrangements, unless provided at the time the amendments are finalized.  IIROC previously required such amendments to be unwound by September 13, 2016.

For further information, please see IIROC Notice 16-0100 Personal Financial Dealings with Clients and our previous post on the subject.

Securities Act will soon include whistleblower protections

Employees in Ontario can soon expect to be protected from anti-retaliatory measures in connection with whistleblowing activities. As part of the Ontario Budget Measures Bill 173,which received royal assent on April 19, 2016, the Ontario government has approved amendments to the Securities Act (Ontario) (OSA) that are intended to implement protection for reprisals against employees who provide information about a possible contravention of Ontario securities law, or a by-law or other regulatory instrument of a recognized self-regulatory organization (SRO), or who are involved in an investigation or proceeding related to the information provided. 

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Consultation Draft #2 of the Capital Markets Stability Act Loses Weight

Margaret Grottenthaler -

The revised consultation draft of the federal Capital Markets Stability Act (CMSA) significantly scales back jurisdiction over market infrastructure and participants from the prior draft published in the fall of 2014 (see our previous post). The purposes of the CMSA continue – albeit in this newly slimmed-down form – to be to ensure the stability of Canada’s financial system through the management of certain types of systemic risk and to protect capital markets investors and others from “financial crimes”.

This post will review the main features of this new version of the CMSA as they relate to derivatives markets. Comments are due by July 6, 2016. 

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Take-over bid regime and early warning system amendments receive ministerial approval in Ontario

Amendments to the take-over bid and early warning reporting regimes announced earlier this year have received ministerial approval and come into force today, May 9, 2016, as discussed here and here. The amendments, which were approved by the Ontario Minister of Finance on March 31, 2016, include, among other things, the adoption in Ontario of National Instrument 62-104 Take-Over Bids and Issuer Bids, the repeal of OSC Rule 62-504 Take-Over Bids and Issuer Bids, amendments to National Instrument 62-103 Early Warning System and Related Take-Over Bids and Insider Reporting Issues and related amendments to the Securities Act (Ontario) (OSA).   The related amendments to the OSA, as included in Schedule 18 of the Budget Measures Act, 2015 (Ontario), also come into force today, as proclaimed by the Lieutenant Governor of Ontario.

For further information, please see Notice of Ministerial Approval of Amendments to Take-Over Bid Regime and Early Warning System.

TSX addresses dividend reinvestment plans in proposed amendments

The Toronto Stock Exchange (TSX) has proposed new standards and practices applicable to dividend reinvestment plans (DRIPs). The proposed Section 617.1 of the TSX Company Manual (the Manual), which is intended to provide greater transparency and a more efficient process for issuers adopting DRIPs, would require, among other things, that a DRIP, and any amendments to a DRIP, be pre-cleared with the TSX. Section 617.1 would also require that the price at which securities can be issued under a DRIP be no less than the market price of the security, less a 5% discount.

Currently, the Manual does not contain specific requirements relating to DRIPs. Instead, the TSX has relied on the additional listing requirements of the Manual where a DRIP provides for the issuance of securities from treasury. The proposed amendments to the Manual, including Section 617.1 and other related consequential amendments, are being published for a thirty-day comment period which expires May 28, 2016. For further information, please see Amendments to Toronto Stock Exchange Company Manual (April 28, 2016).