The Canadian Securities Administrators (CSA) have recently published proposed amendments to National Instrument 24-101 Institutional Trade Matching and Settlement (NI 24-101) and its companion policy for a 90 day comment period. Principally, the proposed amendments would postpone, from July 1, 2010 to July 1, 2015, the requirement to match DAP/RAP trades by no later than midnight on the trade date. Further, the CSA are proposing to extend for two years the current deadline for matching DAP/RAP trades from noon on the business day following the trade to 2:00 p.m. on the business day following the trade. Documentation and exception reporting requirements, meanwhile, would also be amended under the proposals. Comments are being accepted on the proposals until January 28, 2010.
It's been a busy week for the U.S. House Financial Services Committee. Following its approval of a private adviser registration bill and the introduction of draft legislation to address systemic financial risk, the Committee has also approved a bill respecting credit rating agencies. The proposed legislation is intended to "take strong steps to reduce conflicts of interest, stem market reliance on credit rating agencies, and impose a liability standard on the agencies." According to the Committee's press release, the proposed legislation expands on the Treasury proposal of July 2009. Specifically, the proposed legislation clarifies the ability of individuals to sue rating agencies, adds a duty to supervise an agency's employees, requires that agencies have a board with at least one-third independent directors, provides for greater public disclosure and includes provisions regarding former employees of rating agencies that go to work for an issuer.
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Secretary of the Treasury Timothy Geithner, meanwhile, testified yesterday before the House Committee on Financial Services regarding the draft legislation. Secretary Geithner cited the five key elements necessary for reform, being: (i) the orderly resolution of failing financial institutions; (ii) no open-bank assistance to failing financial institutions; (iii) protecting taxpayers from losses; (iv) limiting the Federal Reserve's and the FDIC's emergency authorities; and (v) stronger constraints on size and leverage. According to Secretary Geithner, "the test for any effective set of reforms" is whether the above elements are included. According to the Secretary, the draft legislation "meets that test."
The U.S. House Committee on Financial Services announced yesterday that it had passed draft legislation (available here in its initial form as introduced in the House of Representatives) that would require the registration of advisers to private pools of capital. The draft legislation would also introduce new recordkeeping and disclosure requirements for private advisers and increase the regulation of advisers to hedge funds, private equity firms and other private pools of capital.
In response to numerous inquiries, the Ontario Securities Commission (OSC) issued a notice today outlining the OSC Staff's view on the applicability of securities laws to offerings of Contracts for Difference (CFDs), foreign exchange contracts (FX contracts) and similar OTC derivative products. While the notice focuses on CFDs, the guidance is intended to apply generally to FX contracts and OTC derivatives as well.
Specifically, OSC Staff consider CFDs to be securities and, as such, CFD providers offering such products to Ontario investors must comply with registration and prospectus requirements of Ontario securities law absent statutory exemptions or exemptive relief. The notice states, however, that as the prospectus requirement may not be well-suited for certain types of OTC derivative products, OSC staff "may be prepared to recommend relief" from the prospectus requirement under certain situations. The circumstances under which an exemption may be provided are discussed in the notice and an example of such an exemption was provided last week.
The notice is intended to provide interim guidance until such time that a harmonized approach to the regulation of OTC derivatives is developed by the Canadian Securities Administrators and/or Ontario introduces derivatives legislation.
RiskMetrics Group announced yesterday that it has released for comment until November 11, 2009 its 2010 draft proxy voting policies. The comment period is part of RiskMetrics' annual policy development process and "offers institutional investors, corporate issuers, and industry constituents the opportunity to provide feedback on RiskMetrics' draft policies." Topics covered include director independence and elections, pay for performance and takeover defences. Specific to Canada, RiskMetrics published a policy respecting slate ballots, a process for elections that RiskMetrics described as "depriving shareholders of the opportunity to express approval or disapproval for individual directors." As described in our post of August 18, RiskMetrics criticized slate ballots in an open letter to TSX companies back in July.
The proposed policy would recommend a withhold vote for slate directors where RiskMetrics has identified: "(i) additional corporate governance practices that fall short of best practice for the Canadian market; or (ii) concerns about compensation practices and the alignment of pay with performance." According to RiskMetrics, the proposed policy "is expected to promote best practice in director elections in the Canadian market which alights with best practice in other markets."
The Canadian Coalition for Good Governance (CCGG) has recently released a model "say on pay" policy intended to provide guidance to boards of directors on the issue of executive compensation. While the CCGG acknowledges that companies will customize the model policy, it "urges companies to use the recommended form of resolution as closely as possible so that there is consistency among issuers." Specifically, the policy considers: (i) how to engage shareholders on the issue; (ii) the nature of compensation disclosure to shareholders; (iii) the purpose of an advisory vote on executive compensation; (iv) the form of the resolution to be contained in the management information circular; (v) how to respond to the results of the advisory vote; and (vi) the regular review of the policy. The CCGG is inviting comments on the model policy until November 25, 2009.
Canada's largest financial services companies, meanwhile, appear to be moving forward voluntarily on the issue. The Globe and Mail is reporting today that nine banks and insurers have agreed to allow shareholders to vote on the same "say on pay" resolution across all participating firms "in an effort to simplify the voting process for shareholders."
In light of concerns regarding the H1N1 Flu, the Investment Industry Regulatory Organization of Canada (IIROC) is reminding its members of their obligations under IIROC Rule 17.16 to have adequate business continuity plans in effect. Specifically, IIROC is recommending that members ensure that such plans are "up-to-date and cover business disruptive scenarios, including potential pandemic scenarios."
The Investment Industry Regulatory Organization of Canada (IIROC) has published a market regulation policy update for October 2009. The policy update briefly reviews the status of new rules yet to be implemented (reporting of extended failed trades and trade variations and cancellations), those currently under development (trade-through protection and market stabilization) and considers recent issues such as dark pools and short sales. The update also states that IIROC is currently analyzing the use of circuit breakers by stock exchanges around the world and that a proposal for further study has been prepared. According to IIROC, the research thus far "is inconclusive as to the effectiveness of circuit breakers on a global scale."
The Canadian Securities Administrators (CSA) published a notice today regarding proposed amendments to National Instrument 31-103 Registration Requirements and Exemptions, its companion policy and National Instrument 33-109 Registration Information. The proposed changes relate to the impending transition to IFRS and follow proposals respecting IFRS-related changes to investment fund disclosure and prospectus and registration exemptions published last week. Specifically, the immediate amendments include replacing existing Canadian GAAP terms and phrases with IFRS terms, providing registered dealers and investment fund managers a 15-day extension for delivery of their first IFRS interim financial information for an interim period beginning on or after January 1, 2011 and providing registrants with an exemption from the requirement to provide comparative information for financial years beginning in 2011. The CSA are accepting comments on the proposals until January 21, 2010.
The U.K. Financial Services Authority (FSA) released a discussion paper today titled "A regulatory response to the global banking crisis: systemically important banks and assessing the cumulative impact". The paper focuses on two major issues: (i) the "dangers" posed by systemically important banks that are considered too big or interconnected to fail, or too big to rescue; and (ii) how the cumulative impact of various capital and liquidity regime changes should be assessed. U.K. and international policy developments are considered and of particular note, the migration of OTC derivatives to central counterparty clearing is cited as a risk-reducing policy initiative.
Responses to the discussion paper are being accepted until February 1, 2010.
The Government of Canada has now introduced Bill C-52 An Act to amend the Criminal Code (sentencing for fraud), first discussed in our post of October 20. The proposed legislation, expected to receive second reading today, establishes a minimum sentence of two years for convictions under section 380 (fraud) of the Criminal Code. The bill would also add aggravating circumstances to those listed under section 380.1(1) that a court may consider in sentencing an individual convicted under the relevant section. Specifically, aggravating circumstances would include whether the magnitude or duration of the fraud was significant, whether the offender failed to comply with a licensing or professional standard and whether the offender concealed or destroyed records related to the fraud. The bill does not, however, provide further particulars regarding the specific licensing or professional standards that may be considered. Further, the practical consequences of the proposed legislation are unclear at this point, as the bill focuses on sentencing rather than enforcement.
Yesterday (October 21), the Investment Industry Regulatory Organization of Canada released a notice responding to "recurring questions" received by its staff regarding the new approval categories for "Executives" and "Supervisors" under the new registration regime. Specifically, the notice describes those individuals that must be approved under one of the above noted categories, as well as considering the proficiency requirements for Supervisors.
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The SEC is inviting public comments on the proposals, which have yet to be published on the SEC website, for 90 days after their publication in the Federal Register. For more information, see the text of Ms. Schapiro's speech before the SEC's open meeting as well as the SEC fact sheet on the subject.
The Financial Post recently published an article that considered the upcoming transition to IFRS and the decision for small businesses on whether to adopt the new standard. Simon Romano, a partner in Stikeman Elliott's Toronto office, was quoted in describing the potential benefits to small businesses electing to make the transition.
The Senior Supervisors Group, consisting of financial supervisors from nine different countries, including the U.S. Securities and Exchange Commission and the Office of the Superintendent of Financial Institutions (Canada), issued a report today (October 21) titled "Risk Management Lessons from the Global Banking Crisis of 2008". The report identifies deficiencies in the "governance, firm management, risk management, and internal control programs that contributed to, or were revealed by, the financial and banking crisis of 2008." The weaknesses identified in the report include the failure of some boards and managers to establish and adhere to acceptable levels of risk, as well as compensation programs that "conflicted with the control objectives of the firm". Despite recent progress in improving risk management practices at financial firms, the report concludes that weaknesses remain that still need to be addressed.
The federal Department of Justice announced this morning that it will be introducing legislation tomorrow to combat white collar crime by providing "tougher sentences" for fraud. According to the press release, the legislation would add new aggravating factors to be considered in sentencing those guilty of fraud. Of particular note, one of the aggravating factors that could be considered is "if the offender failed to comply with applicable licensing rules or professional standards." As the legislation has yet to be released, further details are not available and it is unclear whether any specific licensing rules or professional standards will be cited.
Further information will be provided once the draft legislation has been released.
OSC grants relief allowing international dealer to distribute CFDs via an IIROC member affiliate without filing prospectus
On October 16th, the Ontario Securities Commission (OSC) granted relief on an application by CMC Markets U.K. and its Canadian affiliate allowing CMC Canada to distribute contracts for difference and foreign exchange contracts (collectively, CFDs) to Ontario investors without having to file a prospectus. CFDs are derivative products that "allow clients to obtain exposure to markets and instruments that may not be available directly, or may not be available in a cost-effective manner."
In granting the relief, the OSC stated that the requested relief would "substantially harmonize the Commission's position on the offering of CFDs to investors in Ontario with how those products are offered to investors in Quebec" under the Derivatives Act (Quebec). Under the QDA, such products may be offered through the distribution of a standardized risk disclosure document rather than a prospectus. The OSC noted that it had previously recognized that similar disclosure may be better suited for such products than a prospectus.Continue Reading...
On Friday, federal Justice Minister Rob Nicholson announced that the Government of Canada would be seeking the Supreme Court's opinion regarding Parliament's authority to implement a federal securities regulatory regime. While the Government believes that it enjoys authority to enact such a scheme, it is submitting the reference to gain greater certainty and will also submit draft legislation to the Supreme Court.
Mr. Nicholson's announcement follows Finance Minister Jim Flaherty's announcement the previous day regarding the appointment of members to an advisory committee to the Canadian Securities Transition Office. The provincial and territorial advisory committee, consisting of representatives of all jurisdictions except for Alberta, Quebec and Manitoba, is intended to "provide advice to the Transition Office on the transition to a Canadian securities regulator" and will "ensure that each of the participating governments' interests are represented in the work of establishing" a federal regulator.
CSA publish proposed amendments to prospectus and registration exemption instrument arising from upcoming changeover to IFRS
The Canadian Securities Administrators today also published a notice regarding proposed amendments to National Instrument 45-106 Prospectus and Registration Exemptions, its companion policy and forms. The proposed amendments are intended to replace Canadian GAAP terms with IFRS terms, change disclosure requirements where IFRS contemplates different financial statements than existing Canadian GAAP, provide a 30-day extension for reporting issuers to include in an offering memorandum the first interim financial report in the year of adopting IFRS in respect of an interim period beginning on or after January 1, 2011 and clarify, amend or delete provisions that are no longer appropriate.
The Autorité des marchés financiers and the New Brunswick Securities Commission in Quebec and New Brunswick, respectively, are publishing staff notices for comment that set out the substantive proposed changes reflected in the proposals published by the other CSA jurisdictions. However, due to the requirement to publish proposed amending instruments in French and English, and because French IFRS terminology has not been settled, these regulators are not yet able to publish the proposed amendments for comment. Further amending instruments dealing with French IFRS terminology are expected to be published in early 2010.
Comments on the proposals are being accepted by the CSA until January 18, 2010.
CSA publish proposed changes to investment fund continuous disclosure instrument arising from upcoming changeover to IFRS
The Canadian Securities Administrators published a notice today regarding proposed amendments to National Instrument 81-106 Investment Fund Continuous Disclosure, its companion policy and certain other rules and forms that address the upcoming changeover from Canadian GAAP to International Financial Reporting Standards (IFRS). This notice forms part of a series of notices that address various changes required to be made to securities rules to accommodate the transition to IFRS. The proposals are intended to accommodate the transition to IFRS by requiring that investment funds prepare financial statements in accordance with Canadian GAAP for publicly accountable enterprises and report compliance with IFRS for financial years beginning on or after January 1, 2011 (for financial years beginning on or after January 1, 2011, Canadian GAAP for publicly accountable enterprises will be IFRS incorporated into the CICA Handbook). Terminology found within NI 81-106 will also be updated to accommodate the transition. The proposed amendments are not intended to substantively alter securities law requirements but are required in order to cover terminology differences between Canadian GAAP and IFRS and to reflect changes to financial statement presentation that will result. Two of the changes highlighted in the notice in this respect are the classification of securities issued by investment funds and consolidation.Continue Reading...
The U.S. House Committee on Financial Services yesterday approved draft legislation to regulate over-the-counter derivatives. Among other things, the legislation requires that: (i) standardized swap transactions be executed on a national securities exchange, board of trade or swap execution facility; (ii) swap dealers and major participants register with the appropriate commission; and (iii) reporting and recordkeeping obligations are met. The U.S. Treasury Department first proposed such legislation in mid August.
Earlier today, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) issued a joint report on the issue of regulatory harmonization. The report follows joint meetings held in early September and makes a series of recommendations on such issues as oversight and enforcement, investor and customer protection, compliance and the improvement of coordination and cooperation between the agencies.
Of particular note, the report recommends that the SEC "review its approach to cross-border access to determine whether greater efficiencies could be achieved with respect to cross-border transactions in securities..." Specifically, the report states that the SEC may consider amendments to Rule 15a-6 of the Securities Exchange Act of 1934 regarding the interaction of U.S. investors with foreign broker-dealers.
On October 1, the U.S. House Committee on Financial Services released, among other bills, a discussion draft of the Investor Protection Act. The IPA is intended to strengthen the powers of the Securities and Exchange Commission, while enhancing the SEC's enforcement powers and funding. Further, under the draft bill, all financial intermediaries that provide advice would have a fiduciary duty toward their customers and the SEC would also be granted the authority to prohibit or impose limitations on arbitration clauses respecting customer contracts.
On October 2, meanwhile, the Committee circulated a discussion draft of legislation intended to regulate over-the-counter derivatives. According to a committee member, the OTC bill "moves us in the right direction by reducing risk to the economy with robust and dynamic oversight of major market participants, while preserving appropriate risk-management tools for end users." The Committee is began meeting yesterday to discuss the OTC bill.
On September 25, 2009, the Ontario Securities Commission issued its passport decision In the Matter of National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103 or the Instrument), Miller Tabak Roberts Securities, LLC (the Filer) and certain other international dealers (the Decision). The Decision provides certain transitional relief for certain persons or companies that were registered in Ontario or Newfoundland and Labrador as international dealers immediately before the effective date of NI 31-103 (collectively, International Dealers). As noted in previous posts, the effective date of NI 31-103 was September 28, 2009 (the Effective Date). As of the Effective Date, the dealer registration of International Dealers was revoked. Under NI 31-103 an International Dealer can continue to transact business in the jurisdiction in which it was so registered by relying on the international dealer exemption, which, provided certain conditions are met, generally permits trading with "permitted clients" when trading in foreign securities and certain debt securities. Reliance on the international dealer exemption would, in certain respects, restrict the activity that could previously be conducted by the International Dealer under its dealer registration, including the trading of Canadian debt securities outside of a distribution of the securities with local "designated institutions".
Provided certain conditions are met, International Dealers can elect to rely on the transitional relief provided under the Decision to continue to trade in the local jurisdiction in which they were so registered in debt securities with local "designated institutions", other than during the security's distribution, for a period of one year from the Effective Date. Electing to rely on the transitional relief would also also extend the requirement to provide the prescribed notice to clients to six months from the Effective Date. To rely on the transitional relief, the International Dealer will have to satisfy certain conditions, which are generally those applicable to a firm wishing to rely on the international dealer exemption under NI 31-103 . Further, the International Dealer would, within one month of the Effective Date, have to provide notice to the applicable regulator of their intention to rely on the Decision along with the Form 31-103F2 – Submission to Jurisdiction and Appointment of Agent for Service.
On September 28, 2009, the Ontario Securities Commission issued its passport decision In the Matter of National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103 or the Instrument) and Crosbie & Company Inc. and Certain Other Limited Market Dealers that have become Exempt Marker Dealers under Subsection 16.3(2) of NI 31-103 (the Decision). The Decision provides additional transitional relief from particular requirements under NI 31-103 for certain limited market dealers (LMDs) that transitioned to exempt market dealers (EMDs) in Ontario and Newfoundland and Labrador as of the effective date of NI 31-103. As noted in previous posts, the effective date of NI 31-103 was September 28, 2009 (the Effective Date). An LMD that transitioned to an EMD as of the Effective Date and that is not registered in any other category of registration in Ontario or Newfoundland and Labrador, now has one year from the Effective Date to comply with the financial reporting requirements under section 12.12 of NI 31-103. Further, an LMD that transitioned to an EMD as of the Effective Date and that is not registered in any other category of registration in Ontario or Newfoundland and Labrador except as a registered mutual fund dealer as of the Effective Date or as an investment fund manager, has two years from the Effective Date to comply with the requirement to deliver client statements under s. 14.14 of NI 31-103.
The Ontario Securities Commission (OSC) released a notice today respecting the review by OSC staff of the regulatory requirements for stock exchanges and alternative trading systems and their practices. The OSC identified the first phase of the review as focusing on initiatives "that can be taken in the short-term on the transparency of filings" by exchanges and ATSs where their operations are similar. The next phase of the review will consider the requirements set out in National Instrument 21-101 Marketplace Operations to ensure that marketplace rules "are able to provide for flexibility in a competitive environment while providing regulators with the information they need to meet their mandate." The notice released today also sets out the process for reviewing changes to exchange and ATS operations.
As described in an earlier post, the CSA recently published the final version of National Instrument 23-102 Use of Client Brokerage Commissions (NI 23-102) and the accompanying companion policy, which relate to soft dollar arrangements. The CSA has now also released proposed amendments to Form 81-101F2 Contents of Annual Information Form and Form 41-101F2 Information Required in an Investment Fund Prospectus. The amendments to the forms are intended to ensure consistency with the disclosure requirements in NI 23-102. Comments are being accepted by the CSA until January 6, 2010.
The U.S. Securities and Exchange Commission (SEC) yesterday released for public comment a draft Strategic Plan outlining its mission, values and strategic goals for fiscal years 2010 to 2015. The identified goals include fostering and enforcing compliance with federal securities laws, establishing an effective regulatory environment, facilitating access to information that investors need to make informed investment decisions and enhancing the SEC's performance. Desired outcomes are discussed and the SEC also identified performance metrics by which to measure its progress.
Yesterday, the Canadian Securities Administrations (CSA) published the final version of National Instrument 23-102 Use of Client Brokerage Commissions and the accompanying companion policy. The instrument and policy seek to regulate soft dollar arrangements across Canada, stipulating the types of goods and services that may be acquired with client brokerage commissions and prescribing related disclosure requirements. The instrument and policy apply to registered advisers, who obtain the goods and services and to registered dealers, who accept the brokerage commissions.
NI 23-102 and its companion policy were initially published in July 2006. The 2006 proposals applied to all types of transactions where brokerage commissions or similar transaction-based fees were charged, and imposed duties on advisers to ensure that soft dollars were used to benefit the client and were reasonable in relation to the value of goods and services received. The proposals further specified that the goods and services acquired using client brokerage commissions were restricted to "order execution services" and "research", and prescribed detailed disclosure requirements for advisers. In response to comments submitted, the CSA republished the proposals in January 2008. Substantive changes were made to the 2006 proposals regarding: (i) the breadth of the application of the instrument and policy; (ii) definitions of order execution services and research services; (iii) the framework for client brokerage commission practices; (iv) disclosure of client brokerage commission practices; and (v) the addition of a transition period.Continue Reading...
On October 2, the U.S. Securities and Exchange Commission (SEC) announced the upcoming expiration of the exemption from section 404 of the Sarbanes-Oxley Act currently enjoyed by public companies with a public float below $75 million. Section 404 of SOX requires public companies and their independent auditors to report on the effectiveness of internal controls. The extension for small public companies is scheduled to expire beginning with the annual reports of companies with fiscal years ending on or after June 15, 2010. The exemption had been set to expire for fiscal years ending on or after December 15, 2009, but was extended due to the recent publication of a study by the SEC's Office of Economic Analysis regarding whether post-2007 reforms were having the intended effect of "facilitating more cost-effective internal controls evaluations and audits." The study found a "significant reduction" in compliance costs following the 2007 reforms.
Certification of effectiveness of internal control over financial reporting is also required in Canada under NI 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings. In contrast to the U.S., however, NI 52-109 does not require auditor attestation and permits "venture issuers" to omit certain certifications relating to internal controls over financial reporting and disclosure controls and procedures.
The Securities and Exchange Commission (SEC) today announced its approval of new exchange rules (see, for example, filings respecting NYSE Arca, NASDAQ and the Chicago Board Options Exchange) for "breaking stock trades that deviate so substantially from current market prices that they are considered 'clearly erroneous.'" Specifically, the rules seek to provide consistent standards across equity markets.
Generally, the rules provide that a trade may be found to be clearly erroneous only if the price of a transaction occurring during regular trading hours exceeds the consolidated last sale price by more than 10% for stocks priced under $25, 5% for stocks priced between $25 and $50 and 3% for stocks priced over $50. The thresholds are set at 20%, 10% and 6%, respectively, for transactions occurring outside of regular trading hours. A filing involving five or more securities will be aggregated into a single filing, to which a 10% threshold will apply. Further, the erroneous trade review process must generally begin within 30 minutes of the trade.
Compare these quite specific rules to the more general discretion that applies on Canadian marketplaces by virtue of UMIR Rule 10.9, which has resulted in cancellations being quite rare events in Canada.
On October 2, the Investment Industry Regulatory Organization of Canada (IIROC) published draft guidance respecting its members' know-your-client and suitability obligations. The draft guidance does not seek to amend relevant requirements, but rather "sets out IIROC's interpretation, expectations and suggested best practices" respecting meeting current obligations. The note discusses issues such as new account application requirements, know-your-client information and product suitability.
Considering the "significance of the subject matter", IIROC is accepting comments on the draft guidance until December 16, 2009.
The Ontario Securities Commission has published proposed amendments to OSC Rule 13-502 Fees and OSC Rule 13-503 (Commodity Futures Act) Fees for comment. According to the OSC, the amendments are reflective of the OSC's costs of regulating Ontario's capital markets and those activities governed by the Commodity Futures Act. Under proposed changes to Rule 13-502, participation fees for reporting issuers will increase by 17% annually over three years at each tier of capitalization, while capital markets participation fees will be increased by 9% annually over the same amount of time. New activity fees and changes to existing activity fees are also proposed. Under the proposed changes to Rule 13-503, capital markets participation fees would increase by 9% annually over three years, while activity fees would also be amended.
Both sets of proposals are open to comment until December 31, 2009.
On October 1, the Investment Industry Regulatory Organization of Canada (IIROC) published a guidance note relating to securities trading halts in coordination with the application of 'circuit breakers' on U.S. markets. In the U.S., trading halts occur based on trigger levels of 10%, 20% and 30% drops of the Dow Jones Industrial Average, calculated at the beginning of each quarter using the previous month's average closing value. The NYSE thresholds have been announced for the fourth quarter of 2009 as 950 points, 1,950 points and 2,900 points respectively.
It is IIROC's policy that it will coordinate trading halts with U.S. markets, but for days when Canadian markets are open and American markets are closed, IIROC has published related triggers based on drops in the S&P/TSX Composite. The TSX trigger levels are: Level 1 (10%) - 1,150 points; Level 2 (20%) - 2,250 points and Level 3 (30%) - 3,400 points, with the effects of the triggers depending on the time of day the threshold drop occurs. Triggering the Level 1 threshold between 2:00 and 2:30 p.m. results in a 30 minute halt in trading, while trading would be shut down for the rest of the day should a Level 3 halt occur.
The U.K. Financial Services Authority (FSA) released a Feedback Statement yesterday summarizing and responding to comments it received in response to its proposals on regulating short selling as published in a discussion paper of February 2009. While the discussion paper concluded that direct constraints on short selling, such as a 'tick' rule, were not justified, it proposed enhancing the transparency of short selling. In considering the feedback received, the FSA reiterated its position that direct constraints on short selling are not justified at this point, while also stating that no major aspects of the proposals for a disclosure regime should change.
The International Organization of Securities Commissions (IOSCO) recently released a consultation report respecting the transparency of structured finance products. The report sets out the factors to be considered by market authorities when considering the enhancement of post-trade transparency of structured finance products. Meanwhile, the Joint Forum, established under the auspices of the Basel Committee on Banking Supervision, IOSCO and the International Association of Insurance Supervisors recently released a report considering the issues surrounding special purpose entities.
At the recent Pittsburgh summit, leaders of the G-20 met to, according to the leaders' statement, "turn the page on an era of irresponsibility and to adopt a set of policies, regulations and reforms to meet the needs of the 21st century global economy." The leaders' statement released on September 25 specifically discussed strengthening the international financial regulatory system by reforming compensation policies and practices and improving over-the-counter derivatives markets.
With respect to executive compensation, the G-20 endorsed the implementation standards of the newly-created Financial Stability Board respecting compensation, including: (i) avoiding multi-year guaranteed bonuses; (ii) requiring a significant portion of variable compensation be deferred, tied to performance and tied to appropriate clawbacks; (iii) ensuring that compensation for those having a material impact on the firm's risk exposure align with performance and risk; (iv) making compensation policies and structures transparent through disclosure requirements; (v) limiting variable compensation as a percentage of total net revenue when it is inconsistent with the maintenance of a sound capital base; and (vi) ensuring that compensation committees overseeing compensation policies are able to act independently. The Financial Stability Board is expected to complete a review of actions taken by national authorities to implement its compensation principles by March 2010. A progress report discussing actions taken and to be taken in the future was also released.