MFDA submits application to amend recognition orders

On August 29, the CSA published a Joint Notice and Request for Comment regarding an application by the MFDA to extend the suspension of MFDA Rule 2.4.1 to December 31, 2010.

MFDA  Rule 2.4.1 requires MFDA Members to pay any remuneration for business conducted by MFDA Approved Persons on the Members' behalf directly to and in the name of the Approved Persons. 

The MFDA is requesting that the securities regulatory authority in each of British Columbia, Ontario, Saskatchewan, and Nova Scotia extend the suspension of Rule 2.4.1 to December 31, 2010 to give it time to develop proposed amendments that would allow Approved Persons to direct remuneration in respect of business they conduct on behalf of MFDA Members to non-registered corporations, subject to certain conditions.

Suspension of MFDA Rule 2.4.1 currently expires on December 31, 2008.

CSA adopt NP 12-203 Cease Trade Orders for Continuous Disclosure Defaults

The CSA have adopted National Policy 12-203 Cease Trade Orders for Continuous Disclosure Defaults (“NP 12-203”).

NP 12-203 provides guidance as to how the CSA will respond to certain types of continuous disclosure defaults and:

  • modernizes, harmonizes and streamlines existing practices relating to cease trade orders (CTOs) including general CTOs and management cease trade orders (MCTOs);
  • provides guidance for issuers as to the circumstances in which the CSA regulators will issue a general CTO or an MCTO;
  • explains factors the CSA regulators will consider when evaluating an application for an MCTO; and
  • describes what other actions issuers need to undertake if the CSA regulators issue an MCTO.

CSA publish Notice 46-305 - Second Update on PPNs

On Friday, the CSA published CSA Notice 46-305 Second Update on Principal Protected Notes. The purpose of this notice is to provide an update on the CSA’s review of PPNs and the recent coming into force of federal regulation applicable to PPNs (the “Federal PPN Regulations”).

The CSA are of the view that the Federal PPN Regulations, together with the CSA’s continuing regulatory initiatives and discussions with IIROC and the MFDA, will substantially address the CSA’s key concerns with PPNs, which were identified in CSA Notice 46-303

SEC proposes IFRS roadmap

On Wednesday, the SEC also voted to publish a proposed roadmap that could lead to the adoption of International Financial Reporting Standards (IFRS) beginning in 2014.  The roadmap provides several milestones that lead to a 2011 decision on whether adoption of IFRS occurs.

SEC to modernize foreign company disclosure requirements

On Wednesday, the U.S. SEC voted to modernize and update disclosure requirements for foreign companies offering securities in U.S. markets. The amendments seek to improve access to such information by providing American investors with instant electronic access to foreign company disclosure on the internet and in English. The full text of the rules will be published by the SEC shortly.

Quebec government adopts securities transfer legislation

Sterling H. Dietze

An Act respecting the transfer of securities and the establishment of security entitlements (the Quebec STA) received Royal Assent on June 20, 2008 and will come into force on January 1, 2009. The adopted legislation differs from Bill 47 as initially introduced in the National Assembly and upon which we commented in December 2007.

The Quebec STA seeks to implement the principles of the Uniform Securities Transfer Act, while harmonizing Quebec's rules with the securities transfer legislation of other provinces. The concepts found in the Quebec STA follow the model of the USTA and Article 8 of the U.S. Uniform Commercial Code (including the companion provisions of UCC Article 9). The Quebec STA introduces or formalizes into Quebec law concepts such as adverse claims, securities intermediaries, security entitlements, entitlement holders, securities accounts, financial assets, control and protected purchasers.

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Mutual Recognition Agreement signed between SEC and Australian Securities and Investments Commission

On Monday, the SEC announced that it had entered into a mutual recognition arrangement with the Australian Securities and Investments Commission (ASIC), together with the Australian Minister for Superannuation and Corporate Law. The agreement provides a framework for the parties to consider exemptions to regulations that would allow American and Australian exchanges and broker-dealers to operate in both jurisdictions without being subject to double regulation.  A Memorandum of Understanding Concerning Consultation, Cooperation and the Exchange of Information Related to the Enforcement of Securities Laws and a Memorandum of Understanding Concerning Consultation, Cooperation and the Exchange of Information Related to Market Oversight and the Supervision of Financial Services Firms were also agreed to, and are intended to apply broadly to all U.S. and Australian market activity.

SEC announces successor to EDGAR database

The SEC announced a successor to its EDGAR database today, which it states will provide faster and easier access to financial information. The new Interactive Data Electronic Applications (IDEA) will first supplement, but eventually replace EDGAR. IDEA will collate information from individual forms and allow investors to create reports and analysis, as opposed to the current system, which only allows investors to review one form at a time.

SEC approves amendments to NASDAQ definition of "independent director"

The US SEC recently approved a rule change to amend NASDAQ's definition of "independent director". Previous to the change, NASDAQ Rule 4200(a)(15)(B) generally provided that a director who accepted or had a family member who accepted any compensation from the company in excess of $100,000 during a period of 12 months within the previous three years may not have been deemed an independent director. The approved change to the Rule raises this threshold to $120,000.

Request for Comment for Public Interest Amendments to the TSX Company Manual

The purpose of this notice is to publish for comment a proposed new Part X to the Toronto Stock Exchange Manual (the Manual), which would result in the introduction of Part X -- Special Purpose Acquisition Corporations (referred to as "SPACs”) to the Manual.

The TSX has decided to propose rules for the listing of SPACs, having observed the popularity of the use of SPACs in the United States, with a growing number of issuers going public with the intention to later complete a qualifying acquisition by merging with or acquiring an operating company with the proceeds of such offering. While similar to reverse takeovers, the TSX notice observes that unlike reverse takeovers, SPACs generally offer: i) a clean public company shell; ii) more experienced management teams; iii) greater certainty of financing; and iv) a readily available retail and institutional securityholder base.

The TSX notice also observes that while SPACs bear some similarity to capital pool companies (CPCs) in that both involve the creation of publicly-traded shell companies that later acquire an operating business using the initial proceeds raised, the proposed SPAC rules differ from the CPC rules, particularly because SPACs are much larger than CPCs and, therefore, involve more stringent investor protections. The proposed SPAC rules take into account SPAC rules recently adopted by the New York Stock Exchange and currently proposed by NASDAQ, while also attempting to incorporate best commercial practices observed in the SPAC market in the United States.

As a result of the growing market acceptance of SPACs in the United States, and building on the CPC concept, the TSX is proposing Part X to provide a framework for the listing of SPACs on TSX. The proposed Part X of the TSX Manual sets out: i) the original listing requirements that must be met by the SPAC; ii) the continued listing requirements that a SPAC must meet prior to the completion of a qualifying acquisition; and iii) the process relating to the completion of a qualifying acquisition, or failing that, liquidation distribution of the SPAC.

Part X will be effective upon approval by the Ontario Securities Commission following public notice and comment and is open for comments until Monday, September 15, 2008.

CSA publish notice of revised NI 52-109 regarding certifications

The CSA today published notice of National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109). The purpose of this notice is to confirm the repeal and replacement of MI 52-109 (the Certification Rules) and all related forms, as well as consequential amendments to Form 51-102 F1 Management’s Discussion & Analysis (the MD&A Form). NI 52-109 seeks to improve the quality and reliability of disclosure by requiring a CEO, CFO, or someone performing similar functions to personally certify certain prescribed representations.

Pursuant to these proposed amendments to the Certification Rules, in addition to the certifications that an issuer’s CEO and CFO are required to make today, they will also have to certify that they have evaluated the effectiveness of the issuer's internal control over financial reporting and have caused the issuer to disclose their conclusions about such effectiveness in the issuer's MD&A. (Today, the certificates include representations about the design of disclosure controls and procedures and internal control over financial reporting, and only as to the effectiveness of disclosure controls and procedures).

Under the amended Certification Rules, venture issuers will not be required to include any representations in their certificates regarding disclosure controls and procedures or internal control over financial reporting (currently, venture issuer’s have been given an exemption from including these representations by way of a blanket order or equivalent issued by securities regulators).

These amendments are scheduled to come into effect on December 15, 2008.

SEC announces agreement on insider trading surveillance

In a press release dated August 13, 2008, the U.S. SEC announced that it was publishing for comment an agreement among self-regulatory organizations intended to improve the surveillance and detection of insider trading. The agreement seeks to better protect investors and improve market integrity by reallocating regulatory responsibility in order to eliminate duplication and gaps in surveillance among equity markets.

CSA release notice on Continuous Disclosure Review Program Activities for 2008

The CSA have released CSA Staff Notice 51-326 Continuous Disclosure Review Program Activities for Fiscal 2008, which summarizes the results of its continuous disclosure review program of reporting issuers, excluding investment funds, for the fiscal year ending March 31, 2008. The review identifies common deficiencies in disclosure documentation and provides a statistical summary of outcomes.

IIROC proposes new financial planning rule

The Investment Industry Regulatory Organization of Canada (IIROC) is proposing a new rule to create a basic regulatory framework for the provision of financial planning services. The proposed rule would define "financial planning" and establish minimum industry standards by setting out proficiency and supervision requirements. Public comments on the proposal will be accepted for 30 days from the publication of the notice on August 8, 2008.

SEC announces new AML compliance initiatives

On August 7, 2008, the U.S. SEC announced two new anti-money laundering compliance initiatives. The first, an online reference site, was originally developed for the benefit of SEC examiners and provides links to relevant laws, rules and guidance to assist mutual funds in AML compliance efforts. The second initiative, a centralized SEC SAR Alert Message Line, will allow the reporting of Suspicious Activity Reports that may require immediate attention by the SEC.

Notice of Amendment to OSC Rule 31-502

The OSC has made an amendment to Rule 31-502 Proficiency Requirements for Registrants, which is expected to come into force on October 24, 2008. The amended rule revises post-registration proficiency requirements for salespersons of brokers, securities dealers and investment dealers and is intended to harmonize the rule with Rule 2900 of IIROC's Dealer Member Rules.

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