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

On June 30, the Obama Administration delivered to Congress a bill that would create the Consumer Financial Protection Agency. The agency's mission would be to regulate the provision of consumer financial products and services by promoting "transparency, simplicity, fairness, accountability, and access in the market". More specifically, the agency would ensure that: 

1. consumers have, understand, and can use the information they need to make responsible decisions about consumer financial products or services;
2. consumers are protected from abuse, unfairness, deception, and discrimination;
3. markets for consumer financial products or services operate fairly and efficiently with ample room for sustainable growth and innovation; and
4. traditionally underserved consumers and communities have access to financial services.

The agency would also be provided with the power to investigate practices, issue cease and desist orders and commence civil actions against those that violate provisions of the statute. According to the Treasury Department's press release, "[f]or the first time, a single agency will have authority to examine and enforce compliance against any institution, bank or non-bank, that provides consumer financial products or services." 

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On Thursday, the Canadian Securities Administrators unveiled a new web-based tool to assist in determining SEDAR regulatory filing fees for market participants across Canada. Based on the filing information entered by the user, the tool indentifies the relevant regulatory filing fees in all Canadian jurisdictions and provides legislative references. According to the CSA press release, the new tool "gives SEDAR users a faster, simpler and easier way to calculate the filing fees of various securities commissions."

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On July 1, the U.S. Securities and Exchange Commission (SEC) proposed rule revisions "intended to improve the disclosure provided to shareholders of public companies" with respect to executive compensation and corporate governance matters in proxy and information statements. The proposals would require information regarding: the relationship of a company's overall compensation policies to risk; the qualifications of executive officers, directors and nominees; company leadership structure; and potential conflicts of interest of compensation consultants. Amendments to proxy rules intended to clarify how they operate were also proposed. The proposals follow a speech by SEC Chairman Mary Schapiro on the subject on June 10. Comments on the amendments, yet to be published on the SEC website, are being accepted until 60 days after their publication in the Federal Register.

The SEC also approved a proposal of the New York Stock Exchange (NYSE) to eliminate discretionary voting by brokers in the election of directors. Currently, NYSE Rule 452 permits voting by brokers without instructions in certain situations. The changes will apply to shareholder meetings held on or after January 1, 2010.

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On June 26, the Mutual Fund Dealers Association of Canada (MFDA) published MFDA Bulletin #0385-P, proposing amendments to section 35 (No Actions Against the Corporation) of its By-law No. 1. According to the MFDA, the proposed amendments are intended to (i) extend the existing protection found in section 35 of By-law No. 1 to the MFDA Investor Protection Corporation (MFDA IPC); and (ii) provide for, within MFDA By-laws, the "terms of the relationship between the MFDA and MFDA IPC and existing MFDA and Member obligations to the MFDA IPC."

The MFDA is accepting comments on the proposal until September 24, 2009.

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The Canadian Coalition for Good Governance (CCGG) today released Building High Performance Boards, a draft set of twelve guidelines for public boards to follow. The guidelines are categorized under four general qualities of "high performance boards", being that they: represent their shareholders; have experienced, knowledgeable and effective directors and committees; have clear roles and responsibilities and engage their shareholders. The CCGG is accepting comments on the draft guidelines until July 31, 2009.

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The Investment Industry Regulatory Organization of Canada (IIROC) today released a notice setting out IIROC Registration Staff's "approach when conducting suitability reviews for individuals seeking IIROC approval and/or registration". The notice describes the three fundamental criteria IIROC Registration Staff use to evaluate whether an individual is "fit and proper" for approval, being integrity, financial solvency and competence. The notice also discusses the additional filings for disclosures that may affect an individual's suitability as well as a number of best hiring practices for sponsoring firms.

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The Investment Industry Regulatory Organization of Canada (IIROC) today released a guidance note setting out how it would transition current Approved Persons from existing categories to the proposed new categories under the upcoming registration regime to be implemented under proposed National Instrument 31-103 Registration Requirements, expected to come into force on September 28, 2009. The notice supplements the information published in CSA Staff Notice 31-311 on June 12.

The current category structure, consisting of 46 categories will be replaced with a regime containing 11 categories that will focus solely on the function of the Approved Person. The type of customer, product and whether the individual engages in portfolio management will be tracked separately.

Continue Reading...

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Chairman Schapiro Photo Courtesy of www.sec.gov

Securities and Exchange Commission (SEC) Chairman Mary Schapiro appeared before the U.S. Senate's Subcommittee on Securities, Insurance, and Investment yesterday to testify regarding the regulation of over-the-counter (OTC) derivatives. Her testimony provided an overview of OTC derivatives markets and made the case for bringing securities-related OTC derivatives under the purview of the SEC.

Chairman Schapiro noted that while transactions involving OTC derivatives can replicate the economics of securities transactions without involving the purchase or sale of actual securities, such transactions currently fall outside the umbrella of federal securities laws. As such, Chairman Schapiro discussed a "functional and sensible approach to regulation", in which the SEC would have primary responsibility for securities-related OTC derivatives, while the responsibility for all other derivatives, including those related to such things as commodities, energy and foreign exchange would rest with the Commodity Futures Trading Commission. Citing the close relationship between the securities markets and securities-related OTC derivatives, Chairman Schapiro emphasized the importance of ensuring that such OTC derivatives be "subject to the federal securities laws so that the risk of arbitrage and manipulation of interconnected markets is minimized." Subjecting securities-related OTC derivatives to federal securities laws would also provide a unified and consistent framework for securities regulation.

For the testimony of the other witnesses that appeared before the Subcommittee, click here.

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The International Organization of Securities Commissions today released a report, entitled Hedge Funds Oversight: Final Report, containing "high level principles that will enable securities regulators to address, in a collective and effective way, the regulatory and systemic risks posed by hedge funds in their own jurisdictions while supporting a globally consistent approach."

The six principles outlined are:

1. Hedge funds and/or hedge fund managers/advisers should be subject to mandatory registration;
    
2. Hedge fund managers/advisers that are required to register should also be subject to appropriate ongoing regulatory requirements relating to organizational and operational standards, conflicts of interest and other business conduct rules, investor disclosure and prudential regulation;
    
3. Prime brokers and banks that provide funding to hedge funds should be subject to mandatory registration, regulation and supervision and should have risk management systems and controls in place to monitor their counterparty credit risk exposures;
    
4. Hedge fund managers/advisers and prime brokers should provide information for systemic risk purposes to the relevant regulator;
    
5. Regulators should encourage and take account of the development, implementation and convergence of industry good practices, where appropriate; and
    
6. Regulators should have the authority to cooperate and share information with each other where appropriate so as to facilitate efficient and effective oversight of globally active managers/advisers and/or funds.

The report, which was prepared by the IOSCO Task Force on Unregulated Entities established in November 2008 to support the G-20 in restoring global growth and reforming the world’s financial systems, recommends that all securities regulators apply these principles in their regulatory approaches.

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