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

First Policy Statements Published

Alix d'Anglejan-Chatillon |  PDF Version | Version française

As a follow-up to the recent announcement by the Quebec Government on the coming into force of the new Derivatives Act (the “QDA” or “Act”) on February 1, 2009, the Autorité des marchés financiers (the “AMF”, Quebec’s financial services regulator) issued a press release on January 26, 2009 to announce a series of important transitional measures. The coming-into-force documents published by the AMF also include three policy statements relating to the definition of “accredited counterparties”, the characterization of “hybrid instruments” and self-certification of rules made by “recognized regulated entities”.

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On January 29, the Canadian Securities Administrators (CSA) released their 2008 report on enforcement activities. CSA members commenced 215 proceedings in 2008 involving 279 individuals and 137 companies. Meanwhile, the CSA concluded 123 cases, involving 193 individuals and 129 companies. These cases resulted in fines, administrative penalties and cost awards of about $14 million.

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As discussed in a previous post, the Expert Panel on Securities Regulation released its Final Report and Recommendations entitled “Creating an Advantage in Global Capital Markets” on January 12, 2009. The Expert Panel was established by the federal Minister of Finance to provide advice and recommendations on various areas of securities regulation. Its key recommendations include establishment of a single securities regulator to administer a national securities act, establishment of an independent adjudicative tribunal, advancing a more principles-based approach to securities regulation and modernizing Canada’s approach to the regulation of derivatives. Along with its Final Report the Expert Panel also published a draft national Securities Act to serve as a starting point for the development of national legislation to govern Canadian capital markets.

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According to Stikeman Elliott's recently published M&A outlook for 2009, the Canadian M&A market will continue to be affected by tight credit, lower valuations based on lower multiples (driven in part by lower earnings and difficulties in leveraging acquisitions) and a Canadian dollar that is likely to remain significantly below par (in the 75-85¢ U.S. range). Also affecting the Canadian market will be political and regulatory developments – not only domestically but in the U.S., Europe and Asia. While blockbuster deals are likely to be few and far between, opportunities will inevitably present themselves, especially to cash-rich acquirors. When all is said and done, the theme heading into 2009 is: "Cash is king – it’s a buyer’s market once again."

"Uncovering Opportunities - Canadian M&A in 2009" is available here.

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No transitional relief issued to date

Alix d'Anglejan-Chatillon |  PDF Version | Version française

The Quebec Government has proclaimed the Derivatives Act (QDA) in force as of February 1, 2009. The Act had received royal assent on June 20 2008.

The QDA is the first comprehensive standalone derivatives legislation to be adopted in Canada. The Act regulates both over-the-counter (OTC) and exchange-traded derivatives, subject to certain carve outs for OTC derivatives activities involving “accredited counterparties” and in other cases to be specified by regulation. An earlier post regarding the adoption of the QDA can be found here.

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Canadian Securities Administrators propose overhaul of corporate governance “best practices” and disclosure requirements and revisit how Canadian public companies assess director independence

Adam J. Kline and Ramandeep Grewal |  PDF Version | Version française

On December 19, 2008 the Canadian Securities Administrators (the CSA) published a notice (the Notice) of the proposed repeal and replacement of National Policy 58-201 Corporate Governance Guidelines (the Governance Policy), National Instrument 58-101 Disclosure of Corporate Governance Practices (the Governance Rule) and National Instrument 52-110 Audit Committees (the Audit Committee Rule).

Under the proposed repeal and replacement, the governance “best practices” currently set out in the Governance Policy are to be replaced with nine principles of governance. Consequently, the disclosure to be provided under the Governance Rule would be replaced with more general and broad-based disclosure relating to these nine governance principles.   The CSA also propose amending the Audit Committee Rule by replacing the bright-line tests for determining independence with a new principles-based definition of independence, arguably providing more discretion to the board of directors in determining independence. 

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Jeffrey Elliott |  PDF Version | Version française

In the last few years, climate change considerations have begun to figure more prominently in the investment decisions of Canadians. This, along with the complexities of complying with the existing regulations (with the prospect of more to come) designed to reduce greenhouse gas (GHG) emissions, has led the Ontario Securities Commission (OSC) and the accounting profession to focus on the disclosure of climate change issues by Canadian reporting issuers to ensure that investors are fully informed. Two recent initiatives highlight this trend.

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Following almost a year of study and consultation, the Expert Panel on Securities Regulation released its Final Report and Recommendations, entitled “Creating an Advantage in Global Capital Markets” on January 12, 2009. The Expert Panel, created to provide advice and recommendations to the federal Minister of Finance with respect to securities regulation, cited as its central recommendation the establishment of a single securities regulator. This new Canadian Securities Commission (CSC) would be responsible for policymaking and rulemaking, as well as the investigation and prosecution of regulatory offences.

The Expert Panel also recommended the creation of an independent adjudicative tribunal. Recommendations also included providing the CSC with the power to order investor compensation in cases of legal violations by registrants and the establishment of special independent panels to allow for input by investors and small reporting issuers in the development of policy.

A draft national Securities Act, which could serve as a starting point for securities legislation to govern Canadian capital markets should the Expert Panel's recommendations be adopted, was also published. The Expert Panel has recommended a voluntary structure that would give provinces and territories the option to participate in the national regime. The Expert Panel also recommended consideration of a second level of opt-in that would permit registrants and others resident in provinces and territories that do not participate to opt-in individually and be governed exclusively by the national regime. 

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On January 9, 2009, the CSA, Bourse de Montréal and IIROC announced that they have decided not to proceed with the TREATS project. The project had been initiated to "investigate, design and implement a solution to facilitate compliance with Canadian securities electronic audit trail requirements introduced in National Instrument 23-101 Trading Rules." In light of the size and complexity of the project, the Regulators decided against continuing due to the uncertainty over whether enhanced market integrity would result.

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Citing the challenges facing issuers in preparing financial statements in light of current economic conditions, the CSA have published Staff Notice 51-328 Continuous Disclosure Considerations Related to Current Economic Conditions. The Staff Notice notes the importance to investors of continuous disclosure and addresses the topics the CSA are focusing on in their review of continous disclosure filings.

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