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Posted on February 2, 2012
Simon Romano -
On December 23, the Ontario Securities Commission released its reasons for imposing sanctions in its case against Coventree Inc. and two of Coventree's directors. As we discussed in an earlier post, the Commission recently ordered Coventree to pay an administrative penalty of $1 million and costs of $250,000, while the defendant directors were each ordered to pay a penalty of $500,000.
The sanctions decision raises a couple of points of particular interest. First, the decision considers the principle enunciated in Kienapple that an accused cannot be punished for more than one offence arising out of the same set of facts. While the principle has been applied in an administrative context in the past, the Commission in the immediate case raised doubt as to whether the principle would apply to an OSC proceeding. Regardless, the Commission found that the failure to issue and file a news release in respect of a material change in this case was a distinct offence from the failure to file a material change report in respect of the same material change. As such, the Commission's opinion on the applicability of Kienapple was not determinative.
Further, the decision discusses Staff's request that the Commission issue an order preventing the director defendants from seeking or accepting indemnification from Coventree for any penalty imposed. The Commission ultimately found that it lacked the authority to make such an order. In the Commission's view, however, there would be nothing preventing Staff from negotiating a provision in a settlement agreement limiting a director or officer from seeking such indemnification.
Posted on February 2, 2012
On January 30, the international Financial Stability Board released its Peer Review of Canada report. The peer review, undertaken in 2011, was intended to assess Canada's progress in addressing issues identified during this country's Financial Sector Assessment Program (FSAP) review in 2007-2008. FSAP assessments of member countries occur every five years, with peer reviews typically following two or three years later.
Ultimately, the report concluded that Canadian authorities have made good progress in addressing FSAP recommendations on banking supervision, stress testing and the early intervention regime. According to the report, authorities have also taken steps to address issues with respect to ABCP and structured finance markets and have also made progress on recommendations in the securities sector.
The report's conclusions on the last point may be of particular interest. Specifically, the FSB notes the improvements made on such issues as coordination among provincial regulators, registration reform and enforcement actions. According to the report, however, additional steps are still needed.
Notably, the report cites the fact that the passport system does not address policy development or enforcement matters. Further, while the passport system is intended to sustain coordination, the report notes that the CSA is not a legal entity and relies on the goodwill and consensus of its members. According to the report, a single national securities regulator is preferable. The FSB also highlights issues with respect to, among other things, the oversight reviews of SROs, the effectiveness of enforcement actions, the oversight of derivative products and the differences in regulation of market intermediaries.
Posted on January 31, 2012
On January 25, NYSE Euronext announced that it would no longer permit broker voting of uninstructed shares in the case of certain corporate governance proposals previously categorized as "Broker May Vote". The change in policy follows the elimination of discretionary voting by brokers in director elections in 2010 and the prohibition introduced by the Dodd-Frank Act respecting discretionary voting by brokers on executive compensation.
Posted on January 30, 2012
On January 27, the Investment Industry Regulatory Organization of Canada (IIROC) issued guidance with respect to the process to be followed by dealers, users and subscribers seeking to obtain an interpretation of, or exemption from, a provision of UMIR. The notice states that interpretation and exemption requests may be sought by phone or email. In the case of the latter, IIROC staff will generally require certain contextual information, including the name of the security, the facts giving rise to the request and an explanation as to why the exemption is necessary or desirable. In cases where an exemption request has been allowed or denied, staff will follow up with a written ruling.
The notice also provides guidance with respect to requests that a dealer be able to act as principal or agent in respect of a trade to be completed "off-marketplace". According to IIROC, it will grant such exemptions if the execution of the trade on a marketplace would be disruptive of a fair and orderly market or impractical in order for the seller, purchaser or their agents to comply with applicable securities legislation. The notice also sets out the most common exemptions granted to dealers to permit involvement in such trades.
For more information, see IIROC Notice 12-0029.
Posted on January 27, 2012
Earlier today, the Canadian Securities Administrators announced the adoption of a new national instrument, related policies and consequential amendments to impose regulatory oversight for designated credit rating agencies and organizations. The new NI 25-101, first proposed in draft form in July 2010 and amended in March 2011 requires designated rating organizations to establish, maintain and comply with a code of conduct substantially based on the IOSCO Code of Conduct Fundamentals for Credit Rating Agencies unless exemptive relief is obtained. The instrument also sets out requirements with respect to compliance, filing, and the maintenance of books and records.
Meanwhile, all jurisdictions except Ontario are adopting amendments to Multilateral Instrument 11-102 Passport System to permit the passport system to be used for applications for designations by credit rating organizations and exemptive relief applications by designated rating organizations. NP 11-205, which was also published and to which Ontario is a party, is the equivalent policy that sets out how the process would work for filing and the review of an application to become a designated rating organization in Ontario and the passport jurisdictions.
While the draft instrument was amended in response to comments received during the consultation process, the changes are not considered material. As such, assuming Ministerial approvals are received, the new instrument and related policies and consequential amendments will come into force on April 20, 2012.
Posted on January 20, 2012
Last week, the Alberta Securities Commission released a staff notice providing a summary of staff's initial compliance reviews of firms registered as exempt market dealers (EMDs). The notice highlights issues identified in staff's review and provides guidance with respect to suggested practices. Common issues identified include: (i) policies and procedures not reflecting EMDs' actual business practices; (ii) inconsistencies between clients' tolerance for risk and the types of securities that EMDs sell; (iii) an inability by some EMDs to demonstrate having conducted an appropriate level of due diligence to satisfy the suitability requirement; and (iv) EMDs not always adequately disclosing relationships to clients with respect to issuers, ownership of securities, outside business activities, and risks related to borrowing money for the purposes of making financial investments.
The notice also provides information regarding the compliance activities to be performed by ASC staff in the future. For more information, see ASC Staff Notice 33-704 Review of Exempt Market Dealers.
Posted on December 23, 2011
The Ontario Securities Commission announced today that Ontario's Minister of Finance has approved its Memorandum of Understanding with the U.S. Financial Industry Regulatory Authority. The MOU, which we discussed in our post of November 18 and became effective as of December 13, is intended to facilitate the exchange of information between the two regulators.
Posted on December 22, 2011
On December 22, the Supreme Court of Canada released its much-anticipated opinion, rejecting the federal government’s proposal to implement a national securities regulatory scheme under the oversight of a national securities regulator. The express question posed to the Court was whether the proposed Securities Act (the “proposed Act”) fell within Parliament’s general authority to regulate trade and commerce under section 91(2) of the Constitution Act, 1867. The Supreme Court answered in the negative, concluding that taken as a whole, the proposed Act was chiefly directed at regulating matters falling within provincial authority over property and civil rights.
In considering the division of powers between Parliament and the provinces, the Supreme Court noted the emergence of a flexible view of federalism "that accommodates overlapping jurisdiction and encourages intergovernmental cooperation," highlighting that while important, cooperation and flexibility cannot override or modify the separation of powers. The Supreme Court then applied a “pith and substance” analysis against this backdrop of “cooperative federalism,” looking at the purpose and effects of the proposed law to determine whether its “main thrust” was within Parliament’s jurisdiction over trade and commerce.
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Posted on December 22, 2011
In a news release published last week, the Autorité des marchés financiers (the AMF) stated that it anticipates that the Money-Services Businesses Act (the Act) will come into force on April 1, 2012, as will the Policy Statement to the Money-Services Businesses Act, the Regulation under the Money-Services Businesses Act and the related Regulation respecting Fees and Tariffs. The AMF also anticipates that all statutory and regulatory provisions dealing with the operation of automated teller machines will come into force on January 1, 2013.
The Act and regulations will require any person or entity who operates a money-services business for remuneration to hold a licence issued by the AMF and to disclose information about its directors, officers, partners, shareholders, branch managers, employees working in Quebec and certain types of lenders. The Act and regulations also set out the nature, form and content of the books, registers and records that a money-services business must maintain and preserve, as well as the requirements governing the identification of customers and co-contracting parties.
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Posted on December 22, 2011
The Supreme Court of Canada ruled today that the proposed Canadian Securities Act is outside the jurisdiction of the federal Parliament.
Siding in certain respects with the lower court decisions from Alberta and Quebec, the Court held that the Act viewed in its entirety cannot be classified as falling with the general trade and commerce power of the national government.
Check back here for more details on the decision.
Posted on December 20, 2011
The Ontario Securities Commission announced yesterday that it is extending the public consultation period in respect of its proposed new enforcement initiatives. As we discussed in an October post, the OSC is currently considering, among other things, allowing cooperative respondents to resolve enforcement matters without admitting facts or to non-compliance with securities law (commonly known as a "no-contest" settlement).
Citing high levels of public interest in the proposals, the OSC has now extended the deadline for comments until January 16, 2012. Further, a policy hearing will be held to seek additional input. For more information, see OSC Staff Notice 15-705.
Posted on December 20, 2011
On December 16, the Autorité des marchés financiers announced adjustments to certain costs and fees for the upcoming year. Specifically, fees payable under laws administered by the AMF, including the Securities Act and Derivatives Act, will increase by 2.66% as of January 1, 2012. For the AMF's complete list of adjusted fees, see section 1.1 of AMF Bulletin vol. 8, no. 50.
Posted on December 19, 2011
Canadian financial regulators are hampered by the gridlock that comes with fragmentation. Independent oversight could promote new ways of thinking
Ian Russell and Edward Waitzer -
As Canadian securities regulators become more fragmented, the tendency to "lock-in" to policy choices based on previous decisions has increased.
This tendency is natural where individuals working in teams are often less equipped to act on key information than when there is more accountability. The gridlock is exacerbated by a complex and rapidly evolving market environment, contributing to oversimplification and "tunnel vision." Many of us tend to see the world in a particular way when it serves our self-interest to do so. It's easy to ignore "inconvenient" facts or analysis to promote a desired outcome. And yet in today's world, "normal" paradigms rarely hold up.
Likewise, there is a proclivity for "conservatism bias," where information is interpreted to confirm prior expectations. There is also perceived safety in the status quo, even when available evidence suggests a different course of action. This is particularly so when consensus is difficult to achieve or there is much uncertainty over the consequences of a particular action.
Each of these biases are a disincentive to engage in independent, analytical thought. Efforts are made to avoid such conduct through accountability mechanisms (e.g., review by third parties, independent auditing). But these mechanisms no longer work as effectively as they should with Canadian securities regulators.
The challenge is particularly acute with respect to the reform of existing rules, where inertia becomes an obstacle to the adjustments required to ensure competitive and well-functioning markets and to address the inevitable, unintended consequences of regulation.
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Posted on December 19, 2011
Posted on December 9, 2011
Quebec's Autorité des marchés financiers today launched a public consultation to consider a potential compensation system for consumers of financial products and services that have been victims of fraud. Specifically, the AMF is seeking submissions on issues such as:
- the role of compensation among measures intended to protect consumers of financial products and services;
- accountability of consumers and representatives;
- fundamental objective of a compensation system;
- approach with respect to consumer compensation;
- responsibility for managing mechanisms intended to compensate victims of financial crime;
- products, representatives and conduct covered by the compensation fund; and
- funding the compensation fund and cost containment measures.
The AMF is accepting submissions from interested parties until February 7, 2012.
Posted on November 18, 2011
The Canadian Securities Administrators today announced the adoption of changes to National Policy 11-201 Delivery of Documents by Electronic Means. The revised policy clarifies that, subject to electronic commerce and other legislation, delivery requirements of securities legislation can generally be satisfied through electronic delivery if:
- the receipt of the document has notice of electronic delivery and easy access to the document being delivered;
- the document received is the same as the document delivered; and
- the deliverer has evidence of delivery.
The Policy provides further guidance on how each of these elements can be satisfied. While express consent is not required for effective delivery under the Policy, CSA staff clarify that express consent may assist in achieving the key components identified above and note that it may still be required under electronic commerce legislation.
The Policy has been amended to reflect various developments that have taken place since it was first implemented in 2000. These include changes to e-commerce and corporate legislation, the introduction of legislation governing electronic transactions and protection of personal information and the general proliferation of electronic communications. The amendments, published in draft form in April, are intended to simplify guidance on the form and substance of securityholder consents, reduce technology-related references that may become obsolete and alert stakeholders to other legislation addressing the electronic delivery of documents. As the CSA does not consider its revisions to the proposed amendments to be material, no comment period will be provided and the amendments come into effect today.
Posted on November 18, 2011
The Ontario Securities Commission announced today that it has entered into a Memorandum of Understanding with the U.S. Financial Industry Regulatory Authority intended to establish a formal basis for cooperation between the regulators and to facilitate the exchange of information . According to the OSC Chair Howard Wetston, "[c]ross-jurisdictional regulatory coordination is essential for protecting investors in today's global marketplace. This framework acknowledges the interconnectedness of our markets and represents our commitment to working collaboratively with our international regulatory partners to address threats to investors and markets." The MOU is subject to approval by Ontario's Minister of Finance.
Posted on November 10, 2011
Alix d'Anglejan-Chatillon and Alex Colangelo
On September 23, the Ontario Securities Commission released OSC Notice 33-736 – 2011 Annual Summary Report for Dealers, Advisers and Investment Fund Managers. While the report was prepared by the OSC’s Compliance and Registrant Regulation Branch (the Branch) to assist dealers, advisers and investment fund managers in complying with Ontario securities laws, it provides useful guidance for registrants and applicants for registration in all Canadian jurisdictions. The report primarily covers the OSC’s 2011 fiscal year and (i) reviews recent developments in light of the new registration regime; (ii) considers Canada’s response to global financial developments, including with respect to OTC derivatives regulation and the potential systemic risks posed by hedge funds; (iii) discusses the OSC’s recent focus on registrant misconduct; (iv) provides information for firms and individuals applying for registration by, among other things, identifying common deficiencies in registration applications and providing corresponding guidance; and (v) identifies trends in deficiencies and suggested practices for registrants, advisers, investment fund managers and dealers based on ongoing compliance reviews.
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Posted on November 4, 2011
On November 1, the Ontario Securities Commission hosted OSC Dialogue 2011, a conference featuring sessions with securities regulators and industry participants.
In his opening remarks, Ontario Securities Commission Chair Howard Wetston discussed the OSC's strategic direction and its role in policy development. Specifically, Mr. Wetston considered the changes in Canadian equity markets, including the move to multiple marketplaces, the recent proposals to strengthen enforcement and the need for investor protection.
Meanwhile, other sessions of interest to market participants included discussions of M&A trends, investor issues and regulatory developments. The OSC has now posted audio files of the various sessions on the conference webpage.
Posted on November 4, 2011
The OSC released a report today providing an overview of initiatives impacting investment fund issuers. Specifically, the report reviews the status of the OSC's key policy initiatives, including the CSA's project to modernize investment fund product regulation, the Point of Sale disclosure project, and proposed amendments to prospectus requirements.
The report also discusses observations and findings emanating from OSC Staff's prospectus reviews of non-redeemable investment funds and ETFs, prospectus reviews of hypothetical pro-forma performance data, continuous disclosure reviews of money market funds, ETFs and investment portfolio holdings, and disclosure reviews of Independent Review Committees.
The OSC's outreach and consultation practices are also discussed, including its publication of the Investment Funds Practitioner and the creation of the new Investment Funds Product Advisory Committee. For more information, see OSC Notice 81-716.
Posted on November 3, 2011
The Investment Industry Regulatory Organization of Canada (IIROC) yesterday released its Annual Consolidated Compliance Report for 2011. The report outlines matters that require firm attention, identifies deficiencies identified by IIROC's compliance examination teams over the last year and sets out IIROC's focus for the 2011-2012 examination cycle.
The report begins by identifying a number of matters requiring firm attention, including with respect to notification to IIROC of material changes. Specifically, the report notes that in some instances dealers having made significant changes to business models without informing IIROC prior to implementation.
Meanwhile, common examination deficiencies respecting financial and operations compliance include missing written services agreements in related party transactions and cases in which inaccurate or inappropriate margin rates have been applied. In the case of business conduct compliance, the report identifies a number of deficiencies, including: (i) situations where members with order-execution only services provide clients with "planning tools" that result in recommendations; (ii) policies and procedures that have not been appropriately customized to a firm's business and risks; (iii) inadequate identification of conflicts of interest; (iv) inadequate controls respecting the sale of private placements to accredited investors; and (v) inadequate controls respecting employee accounts.
The report also discusses the focus for the 2011-2012 examination cycle, including client complaints handling, the use of titles and designations, and trading conduct compliance. With respect to the latter, IIROC states, among other things, that it will be conducting reviews of compliance with best execution obligations and dealers' OTC supervision procedures.
For more information, see IIROC Notice 11-0306.
Posted on October 21, 2011
In a bid to resolve enforcement matters more quickly and effectively, the Ontario Securities Commission today announced a series of proposed enforcement initiatives that would include permitting market participants to enter into no-contest settlements.
According to the notice, the timeliness and effectiveness of OSC investigations are currently being affected by the concerns of those being investigated that actions taken in response to an investigation may prejudice concurrent or potential civil litigation. As such, the OSC has proposed the following measures:
- No-enforcement action agreements - Such agreements would be explicit in circumstances where market participants self-report and immediately remediate, and would be available in a number of situations. OSC Staff could also consider an agreement where a self-reporting party also reports in respect of the conduct of other parties where the conduct in question was jointly carried out. While Staff have simply advised participants that no action will be taken under the current processes, the proposals would make their decisions explicit with the result of greater certainty for market participants.
- No-contest settlement program - Although recent amendments to the OSC's Rules of Procedure (Rule 12) have eliminated the explicit requirement for admissions in settlement agreements to be presented to a Commission panel for approval, settlement agreements generally include an admission of facts and of non-compliance with Ontario securities law or conduct contrary to the public interest. The program will therefore allow cooperative respondents to resolve enforcement matters without admitting facts or to non-compliance with securities law. Such settlements would have to meet the public interest requirements set out in the Securities Act and would be limited to respondents not previously subject to enforcement or regulatory activity by the OSC or another agency.
- Clarified process for self-reporting - This proposal would introduce a proffer process to provide greater transparency and certainty for self-reporters.
- Enhanced public disclosure for credit granted for cooperation - The proposal would enhance disclosure regarding the credit granted for cooperation in respect of proceedings before hearing panels, settlements and matters relating to the proposed no-enforcement action agreement.
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Posted on October 19, 2011
Jonathan Willson
On August 19th, 2011, the Department of Finance released for public consultation a package of amendments to the foreign affiliate rules in the Income Tax Act (Canada) (the ITA) and related regulations. Included among these proposals are a series of new provisions (the "upstream loan rules") designed to restrict the use of loans as a mechanism to distribute funds from certain types of foreign affiliates to their Canadian shareholders to avoid the tax that would otherwise be paid on dividend distributions by such affiliates. Under the current rules, such loans can be used to distribute profits to a Canadian taxpayer, thereby enabling the taxpayer to avoid receiving a dividend from a foreign affiliate that would be, at least partially, subject to Canadian income tax.
Conceptually, these proposed amendments will operate in a manner similar to the existing rules in subsection 15(2) that apply to shareholder loans, in that they will require, subject to certain exceptions, all or a portion of an upstream loan that is received by a Canadian taxpayer (or certain other persons) to be included in the taxpayer's income.
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Posted on October 12, 2011
John G. Lorito and Jill Winton -
A flow-through share is a share which allows the issuing corporation to renounce resource deductions to shareholders who can use such deductions to offset their income. Under the Income Tax Act (Canada) (the Tax Act), the cost of a flow-through share to the shareholder is deemed to be nil. When the shareholder disposes of a flow-through share, the portion of any capital gain that is attributable to the proceeds of disposition up to the shareholder’s original cost amount represents a partial recovery by the government of the tax benefit realized by the taxpayer in connection with the renunciation and deduction of the resource expenses.
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Posted on October 7, 2011
The Ontario Securities Commission today issued a notice and request for comment related to the proposed acquisition by the Maple Group Inc. of TMX Group, Alpha Trading Systems Limited Partnership and Alpha Trading Systems Inc., the Canadian Depository for Securities Limited and, indirectly, CDS Clearing and Depository Services Inc. The OSC's notice summarizes the Maple Group's proposal, considers the potential issues raised and requests responses on specific questions. Comments are being accepted until November 7. The OSC also plans to hold policy hearings to consider the proposal in December 2011.
Posted on September 23, 2011
The OSC today released a report prepared by its Compliance and Registrant Regulation Branch that summarized the new and proposed rules impacting registrants, provided information intended to assist firms and individuals applying for registration, and identified deficiencies found in compliance reviews of registrants. The report primarily covered the OSC's 2011 fiscal year.
Of particular interest, the deficiencies highlighted by the report include: (i) inaccurate calculations by firms of excess working capital on Form 31-103F1; (ii) inadequate insurance coverage by registered portfolio managers and investment fund managers; (iii) a lack of disclosure by portfolio managers regarding the use of client brokerage commissions; (iv) a delegation of "know your client" and suitability obligations by portfolio managers; (v) EMDs selling exempt securities in reliance on the accredited investor exemption to investors who do not meet the definition; (vi) individuals trading on behalf of EMDs without being registered as a dealing representative with the EMD; and (vii) EMDs inappropriately using investor funds.
The report also provides a number of suggested practices to assist registrants in addressing the various identified deficiencies. Guidance was also included concerning such issues as the use of social media, marketing practices and the provision of online advisory services. For more information, see OSC Staff Notice 33-736.
Posted on September 14, 2011
Staff of the Canadian Securities Administrators in Alberta, Ontario, Quebec, Nova Scotia, New Brunswick and the Northwest Territories published a notice yesterday setting out their concerns regarding the use of advertising that may attempt to promote an issuer's securities. While the notice applies to all types of media, CSA staff's concerns focus on the television ads used primarily by junior issuers that focus on the positive aspects of an issuer's business or its prospects. In the case of listed issuers, the stock symbol is prominently featured in the ads, whereas contact information is typically provided for investor inquiries for unlisted issuers.
According to CSA staff, such ads may fail to comply with disclosure requirements under securities legislation or may be misleading to investors. According to staff, such ads do not appear to be aimed at selling products or services or raising public awareness of the issuer but, rather, appear to try to promote interest in an issuer's securities. The notice, therefore, reminds issuers of the restrictions on advertising and marketing activities during a distribution or in furtherance of a distribution, as well as the additional disclosure restrictions and requirements applicable to mining and oil and gas projects.
Staff will continue to monitor advertisements by issuers going forward, and suggest that regulatory action could be taken should it appear that an advertisement is misleading to investors or contrary to the public interest.
For more information, see CSA Staff Notice 51-336 Issuers using Mass Advertising.
Posted on August 12, 2011
On August 12, the Canadian Securities Administrators (CSA) published for comment amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure (NI 81-101), Form 81-101F3 Contents of Fund Facts Document and Companion Policy 81-101CP Mutual Fund Prospectus Disclosure (the Proposed Amendments). The Proposed Amendments, together with consequential amendments, set out Stage 2 of the CSA’s implementation of the point of sale disclosure framework published in 2008.
The Proposed Amendments will, among other things, require the delivery of the Fund Facts to investors within two days of their purchase of the fund, permit the delivery of the Fund Facts to satisfy the current prospectus delivery requirements under securities legislation and eliminate the current requirement to deliver the simplified prospectus (which will be required to be provided to investors upon request).
The Proposed Amendments are Stage 2 of a three-stage process. Stage 1 (completed on January 1, 2011 and discussed in our post October 28, 2010) required mutual funds subject to NI 81-101 to produce and file the Fund Facts and make it available on the mutual fund’s or mutual fund manager’s website. Stage 3 will consider point of sale delivery for other types of publicly offered investment funds. The comment period expires on November 10, 2011.
Posted on August 10, 2011
Susan Hutton and Paul Beaudry -
On June 24, 2011, Niko Resources Ltd., a Calgary-based oil and gas exploration and production company, entered a guilty plea under Canada’s Corruption of Foreign Public Officials Act (CFPOA) with respect to charges of bribing a public official in Bangladesh. Niko, which operates in a number of countries around the world, had been notified by Canadian authorities in January 2009 that it was being investigated over allegations that it had provided the Energy Minister of Bangladesh with a $190,000 vehicle for personal use as well as with trips to Calgary and New York. These gifts had been made at the time when the Minister was assessing how much compensation was owed to Bangladeshi villagers for water contamination and other environmental concerns caused by explosions at a Niko operation.
Niko’s sentence included a $9.5 million fine and a three-year probation order that requires the company to implement a detailed compliance program subject to review by an independent auditor. Prior to Niko’s conviction, only one Canadian company had been convicted of foreign bribery under the CFPOA in the past decade. The $25,000 fine issued by the court in that case, known as R. v. Hydro Kleen Services Inc., was less than the bribe involved.
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Posted on August 2, 2011
On July 29, the Investment Industry Regulatory Organization of Canada published proposed amendments to the Universal Market Integrity Rules that address the regulation of dark liquidity on Canadian markets.
The release of IIROC's proposals represents the next step in the effort by the Canadian Securities Administrators and IIROC to adopt regulations to address issues surrounding dark pools and dark orders. The proposed amendments released last week follow various previous steps taken by regulators to consider the issues, including a joint CSA/IIROC consultation paper released in 2009, a consultation forum held in March 2010 and a CSA/IIROC position paper published in November 2010.
Among other things, the proposed amendments would (i) introduce or amend, as the case may be, definitions of "better price", "dark order" and "last sale price"; (ii) allow IIROC to designate a minimum size for orders that are not displayed in a consolidated market display; (iii) allow IIROC to designate a minimum size of an "iceberg" order that must be displayed in a consolidated market display; (iv) provide that orders entered on a marketplace must trade with visible orders on that marketplace at the same price before trading with dark orders at the same price on that marketplace; and (v) require, subject to certain exceptions, an order entered on a marketplace that trades with an order that has not been displayed in a consolidated market display to either receive a better price or be for more than 50 standard trading units, or have a value of more than $100,000.
Comments on the proposals are being accepted until October 27, 2011. For more information, see IIROC Notice 11-0225.
For a discussion of the regulatory framework for dark liquidity, see IIROC Notice 11-0226 / Staff Notice 23-311, which was also published last week and contains a summary of public comments in response to the CSA/IIROC position paper of November 2010. Also see our post on the proposed amendments to NI 21-101 Marketplace Operations, which were published in March.
Posted on July 19, 2011
The Alberta Securities Commission recently released its 2011 Annual Report. The report reviews the ASC's activities over the past year, including with respect to regulatory initiatives and enforcement activity. On the latter point, the report discusses the establishment of ASC's Market Surveillance & Investigation department, which is intended to uncover cases of market abuse.
Posted on July 8, 2011
Earlier this week, the Ontario Securities Commission announced that it is undertaking a targeted review of Ontario reporting issuers listed on Canadian exchanges that have "significant business operations" in emerging markets. According to the OSC, the review is intended to examine the disclosure of certain issuers, as well as the role of auditors and underwriters in assisting such issuers access to the Ontario market. The OSC's announcement follows the recent disclosure-related allegations made against Sino-Forest, which acquired a Canadian listing through a reverse takeover in the 1990s.
Posted on July 6, 2011
Earlier this week, the Investment Industry Regulatory Organization of Canada (IIROC) published Notice 11-0203 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 for the third quarter of 2011 are 1,200 points, 2,400 points and 3,650 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 Index. The TSX trigger levels are: Level 1 (10%) - 1,300 points; Level 2 (20%) - 2,650 points and Level 3 (30%) - 3,950 points, and result in trading halts ranging from 30 minutes to the balance of the trading session, depending on the time of day and magnitude of the market decline. Triggering the Level 1 threshold between 2:00 and 2:30 p.m., for example, would result 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 threshold levels for the third quarter are slightly lower than those for the second quarter of 2011.
Posted on July 5, 2011
William J. Braithwaite
Fairness opinions are largely accepted as forming an essential component of the board’s review of a major business transaction. They are typically obtained from a financial adviser for the purpose of analysing the consideration that is being received or paid, in order to determine whether the transaction meets the requisite standards of fairness. In this respect, the fairness opinion can assist in demonstrating that the board has fulfilled its duties in considering a transaction, and provide objective evidence of its fairness. A fairness opinion often supports a board’s recommendation to the shareholders when a transaction requires the affirmative vote of the shareholders in order to proceed. Issues relating to fairness opinions and the proper board process surrounding such opinions have surfaced recently on a few occasions in Canada, the most recent being the high-profile dual class share declassification of Magna International Inc, a transaction where, ironically, no fairness opinion was given. What follows from the Magna transaction is a clear affirmation that the facts will be paramount in determining whether a fairness opinion fulfils its objectives. These facts include not only the nature of the transaction and consideration involved, but also the process followed by the board in retaining and working with its financial advisers.
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Posted on June 17, 2011
The Autorité des marchés financiers last week published for comment draft regulations and a policy statement related to the Money-Services Businesses Act. Specifically, the AMF released draft versions of (i) Regulation under the Money-Services Businesses Act, which sets out general obligations and licensing requirements under the Act; (ii) Regulation respecting Fees and Tariffs, which stipulates the fees applicable to money-services businesses; and (iii) Policy Statement to the Money-Services Businesses Act, which sets out how the AMF interprets and intends to apply the provisions of the Act.
The Act, scheduled to come into force in 2012, will require that persons operating a "money-services business" for compensation obtain a license from the AMF and disclose information about their directors, officers, partners, shareholders, branch managers, employees working in Quebec and certain types of lenders with whom they deal. For further background on the definition of "money services business" and scope of application of the Act, see our posts of November 12 and December 17, 2010.
Posted on June 17, 2011
The OSC today published a revised Statement of Priorities for the financial year to end March 31, 2012, thereby updating the version released earlier this year. The revisions to the Statement of Priorities include a number of initiatives to address points raised in public comments received by the OSC. The initiatives include:
- working with the Ontario Government to explore a mechanism by which the OSC could award compensation to Ontario investors suffering losses due to Securities Act violations;
- researching the pros and cons of imposing a fiduciary duty on financial advisors;
- working the with CSA, IIROC and MFDA to harmonize standards for cost disclosure and performance reporting to investors;
- continuing the implementation of the mutual fund point of sale initiative and expanding it to other types of investment fund products; and
- demonstrating the importance to the regulatory process of obtaining verifiable data.
Posted on June 13, 2011
The Canadian Securities Transition Office today released an update to its activities since December 2010. According to the release, the CSTO's work includes: preparing regulations for the draft Canadian Securities Act, designing the processes and details related to the Canadian Securities Tribunal and developing an organizational design for the Canadian Securities Regulatory Authority.
Posted on June 9, 2011
The U.S. SEC has now adopted a revised final rule designed to award whistleblowers who voluntarily provide original information to the SEC regarding violations of securities laws where the enforcement action leads to monetary sanctions totalling more than $1 million. The rules also seek to support internal compliance programs by making a whistleblower eligible for an award if the information is reported internally but results in the company informing the SEC about the violations. As we discussed in November 2010, the SEC released a draft proposal last year, and the final rule reflects changes made in response to public comments on the draft.
The provisions may be of particular interest to Canadian companies since, while foreign officials and employees of state-owned enterprises are excluded from the whistle-blower program, employees of foreign companies could be eligible for rewards.
Posted on June 3, 2011
As we recently discussed, the OSC provided guidance earlier this week for issuers in case of a postal strike, a situation that has now been realized. Other Canadian securities regulators have also provided similar guidance.
For example, the Alberta Securities Commission has advised those required to file material with the ASC to make the filings by delivery or fax unless the filing is required to be made through SEDAR, SEDI or NRD. With respect to the requirement to send financial statements and related disclosure to securityholders, the ASC has issued a Blanket Order providing an exemption under certain circumstances. Among other things, reporting issuers and investment funds are required to issue a news release stating that electronic versions of the financial statements have been filed on SEDAR and that copies of the statements will be sent to those requesting them. The New Brunswick Securities Commission has also issued an order (Blanket Order 51-501) as has the British Columbia Securities Commission (BC Instrument 51-510, applying to reporting issuers other than investment funds), while the Autorité des marchés financiers and Nova Scotia Securities Commission have issued similar guidance.
Posted on June 1, 2011
As has been reported in the media, a Canadian postal strike could occur as early as tomorrow evening. As an interruption of mail service would impact the ability of issuers and registrants to deliver required documents under securities laws, the Ontario Securities Commission today released guidance for issuers in the event that a postal strike occurs.
Specifically, the OSC stated that, while it will not take action against reporting issuers solely for failing to deliver financial reports to securityholders, issuers must make reasonable efforst to make such reports available to securityholders on request. Further, on the resumption of normal mail service, such reports will have to be mailed. With respect to offering documents, proxy solicitation materials and bid circulars, issuers and affected persons and companies are advised to consult with their service providers as to alternate delivery options, and their legal advisers in order to determine how to best comply with obligations.
Registrants, meanwhile, are advised to make "reasonable efforts" to meet client obligations with respect to trade confirmations and the delivery of other documentation. Applications for registration, financial information and other required information should be delivered or faxed to the OSC.
The OSC guidance also states that applications for exemptive relief from requirements to deliver documents to securityholders and other parties may be necessary and, where relief is urgently needed, the OSC will try to deal with applications as quickly as possible. The OSC also refers market participants to National Policy 11-201 Delivery of Documents by Electronic Means.
Posted on May 27, 2011
The Canadian Securities Administrators published a notice yesterday providing an update on the project to modernize investment fund product regulation. As we discussed in June 2010, the first phase of the project involves amending NI 81-102 Mutual Funds and NI 81-106 Investment Fund Continuous Disclosure to codify exemptive relief that is frequently granted to mutual funds and other investment funds and replace the patchwork orders with uniform requirements. Amendments to that end were proposed last year and, according to yesterday's notice, the CSA intend to publish the amendments in final form by the end of the summer.
Meanwhile, Phase 2 of the modernization project involves identifying and addressing issues concerning market efficiency, investor protection and fairness that arise out of the differing regulatory regimes that apply to different types of publicly offered investment funds. A stated aim of this phase, which is to be implemented in two stages, is reducing the potential for regulatory arbitrage. The first stage would include adopting proposals for restrictions and operational requirements for non-redeemable investment funds analogous to those in NI 81-102 in order to address investor protection and fairness concerns. The CSA plan to publish such proposals for comment in early 2012. During the second stage of this phase of the project, the CSA intend to consider whether certain investment restrictions in NI 81-102 should be loosened in recognition of product and market developments.
Public comments on the proposals are being accepted until July 25, 2011.
Posted on May 19, 2011
Later this afternoon, the Investment Industry Regulatory Organization of Canada (IIROC) will be posting on its website a recorded webcast considering the Canadian and U.S. perspectives on fiduciary standards and the differences between such a standard and the suitability standard. The webcast will be available for viewing as of 4:00 p.m. today.
As we wrote in March, SEC staff have recently recommended a uniform fiduciary standard for investment advisers and broker-dealers in the U.S. Our colleague Ed Waitzer also considered the standards to which financial advisers in the U.S. and Canada are subject in his post of February 17, 2011.
Posted on May 3, 2011
Last month, the Ontario Securities Commission announced that it had secured the first finding of guilt for fraud in quasi-criminal proceedings it has brought before the Ontario Court of Justice. The accused pled guilty to fraud contrary to section 126.1 of the Securities Act (Ontario) in relation to his role with a company operating an unregistered securities sales office that offered trading units of limited partnerships fraudulently represented to constitute ownership interests in oil and gas leases. Sentencing is scheduled for November 24, 2011.
Posted on April 29, 2011
The Canadian Securities Administrators (CSA) today published for comment proposed amendments to National Policy 11-201 Delivery of Documents by Electronic Means. The proposals are intended to, among other things, simplify guidance on the form and substance of securityholder consents with respect to electronic delivery of documents and reduce technology-related language in the policy to avoid obsolescence. The CSA is accepting comments until June 29 and has formulated specific questions for the consideration of industry participants and investors.
Posted on April 15, 2011
IIROC has republished its market regulation fee model, which it first published for comment in November 2010. In response to comments received by IIROC to its original proposals, the republished fee model maintains the discount for market makers. IIROC is accepting comments on its most recent proposal until May 13. For more information, see IIROC Notice 11-0125.
Posted on April 14, 2011
The Supreme Court continued its hearings today on the reference case considering the constitutionality of the proposed federal Securities Act. While a number of interveners, including the Attorney General of Ontario, FAIR Canada and the Canadian Coalition for Good Governance made submissions in favour of the federal scheme, a number of provinces lined up to oppose the initiative. Specifically, New Brunswick, Manitoba, British Columbia and Saskatchewan argued that the proposed legislation is outside the jurisdiction of the Parliament of Canada. Not surprisingly, the Supreme Court reserved its decision.
Posted on April 13, 2011
The Supreme Court of Canada today began hearing the reference case submitted by the federal government regarding the constitutionality of the proposed federal Securities Act. As we've discussed in previous blog posts, the Courts of Appeal of both Alberta and Quebec have ruled that the proposed Act is outside the jurisdiction of the federal government.
The hearing began this morning with submissions by counsel for the Attorney General of Canada, who argued that the proposed Act met the General Motors test (as expanded in Kirkbi) for determining whether there is a valid exercise of Parliament's general trade and commerce power under the Constitution Act, 1867. Essentially, the federal government argued that rather than focusing on a particular industry, this case impacts the economy as a whole. The Justices, however, were determined in their questioning, challenging federal counsel to explain how their arguments could withstand the fact that the provinces already work (relatively harmoniously) to regulate the space.
The afternoon saw submissions by counsel for Quebec and Alberta, who argued that the proposed Act is, in pith and substance, directed at the regulation of securities, which falls within the scope of property and civil rights under the Constitution Act, 1867. Quebec and Alberta also argued that the double-aspect doctrine did not apply in this case as the proposed Act has virtually identical subject matters, purposes and aspects as existing provincial and territorial securities regulatory legislation.
The hearing, which is being live-streamed on the Supreme Court website, will pick up tomorrow with submissions of interveners at 9:00 a.m. For live updates during the hearing, see our Twitter feed @Cdn_Securities.
Posted on April 4, 2011
On April 1, the Investment Industry Regulatory Organization of Canada (IIROC) published Notice 11-0016 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 for the second quarter of 2011 are 1,200 points, 2,400 points and 3,600 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 Index. The TSX trigger levels are: Level 1 (10%) - 1,400 points; Level 2 (20%) - 2,800 points and Level 3 (30%) - 4,200 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., for example, would result 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.
Posted on April 4, 2011
Earlier this month, the Canadian Securities Administrators released an oversight review of the Investment Industry Regulatory Organization of Canada. The review was intended to: (i) asses whether IIROC is in compliance with the terms and conditions of its recognition order; (ii) assess whether IIROC's regulatory processes are adequate, consistent and fair; and (iii) evaluate the progress of the integration of IIROC's predecessor, the IDA and RS.
While the review found IIROC to be in substantial compliance with the terms and conditions of its recognition order, it identified a number of areas for improvement and provided CSA's recommendations. IIROC's responses were also included.
Posted on April 1, 2011
In a decision released yesterday, the Quebec Court of Appeal found plans for a national securities regulator to be outside the jurisdiction of the federal government. As we recently discussed, an Alberta ruling of last month came to the same conclusion. The issue is set to be considered by the Supreme Court of Canada at hearings scheduled for April 13 and 14, 2011.
Posted on March 30, 2011
Yesterday, the Canadian Securities Administrators (CSA), Investment Industry Regulatory Organization of Canada (IIROC) and Mutual Fund Dealers Association (MFDA) announced the launch of an expanded Canadian Disciplined Persons List. The expanded list will now include the names of persons disciplined by IIROC and the MFDA, dating back to 2004, in addition to records of disciplinary actions by provincial securities regulators.
Noting that sanctions imposed by securities regulators are a matter of public record, the announcement states that the combined list will now allow the public to search for those disciplined by securities regulators or the SROs in one place, regardless of how serious the matter.
Posted on March 29, 2011
On March 23, Bill C-61, the Freezing Assets of Corrupt Foreign Officials Act, was given Royal Assent and came into effect. The Act allows the federal government to freeze the assets of "politically exposed foreign persons" in cases where the person has allegedly misappropriated the property of a foreign state or inappropriately acquired property by virtue of office or personal or business relationships. Orders and regulations may also be made to prohibit Canadians from dealing with any property of a politically exposed foreign person, facilitating financial transactions related to such property or providing financial or other related services in respect of such property.
Further, certain domestic entities are now under a duty to determine, on a continuing basis, whether they are "in possession or control of property that they have reason to believe is the property of a politically exposed foreign person" who is the subject of an order or regulation made under the Act.
Notably, this duty to determine is imposed on, among others,
- entities that engage in any activity described in paragraph 5(h) of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (which includes those engaged in the business of foreign exchange dealing) if the activity involves the opening of an account for a client; and
- entities authorized under provincial legislation to engage in the business of dealing in securities or to provide portfolio management or investment counseling services.
Meanwhile, all Canadians have a duty to report to the RCMP the existence of property in their possession or control that they have reason to believe is the property of a politically exposed foreign person subject to a government order described above.
Wasting no time in making use of the new legislation, the government adopted the corresponding Freezing Assets of Corrupt Foreign Officials (Tunisia and Egypt) Regulations on March 23 in order to respond to requests by Tunisia and Egypt to freeze the property of certain of their nationals accused of misappropriating property.
Posted on March 18, 2011
The Canadian Securities Administrators (CSA) today released revised proposals to impose regulatory oversight for designated credit rating agencies and organizations. As we discussed in our post of July 16, 2010, the CSA released its original proposals last July.
The revised proposals include a number of key changes to the CSA's July proposals, namely: (i) designated rating organizations would no longer be permitted to deviate from the included code of conduct based substantially on the IOSCO Code of Conduct Fundamentals for Credit Rating Agencies unless exemptive relief was obtained; (ii) additional provisions beyond those mandated in the IOSCO Code, regarding such issues as governance and ratings reports, would be required of credit rating organizations; (iii) compliance officers would now be prohibited from participating in the development of credit ratings, methodologies and models and the establishment of compensation for most employees of designated rating organizations; and (iv) the requirement that directors and officers of a designated rating organization or a credit rating organization applying to be designated submit personal information forms has been eliminated.
Further, all jurisdictions except Ontario published for comment proposed amendments to Multilateral Instrument 11-102 Passport System to permit the passport system to be used for applications for designations by credit rating organizations and exemptive relief applications by designated rating organizations. Proposed NP 11-205, to which Ontario is a party, would be the equivalent policy that sets out how the process would work for filing and the review of an application to become a designated rating organization in Ontario and the passport jurisdictions. The revised proposals also note the trend in other jurisdictions towards the imposition of civil liability on credit rating organizations and state that, while the CSA has not included similar proposals at this time, the CSA will continue to monitor such developments.
Various Canadian jurisdictions have also proposed or implemented amendments in their securities legislation to give effect to recognition of credit rating organizations. In Ontario, a new Part IX was added to the Securities Act under Bill 135. The applicable provisions came into force on December 8, 2010.
The CSA will be accepting comments on the revised proposals until May 17, 2011. For more information, see proposed National Instrument 25-101 Designated Rating Organizations.
Posted on March 14, 2011
In late January, the U.S. SEC submitted a staff study to Congress that recommended a uniform fiduciary standard for investment advisers and broker-dealers that provide securities investment advice to retail customers. The study, which noted that broker-dealers are generally not currently subject to a fiduciary standard under federal securities laws, recommended a fiduciary standard no less stringent than currently applied to investment advisers be extended to broker-dealers. The SEC was required to undertake the study to comply with Dodd-Frank, and the study also provided suggestions for further harmonization of the broker-dealer and investment adviser regulatory regimes. Whether the study's recommendations are followed through with, however, remains to be seen. According to the SEC, the views expressed in the study are those of SEC staff and "do not necessarily reflect the views" of the SEC or individual commissioners.
In Canada, standards applicable to registrants such as dealers and advisers were somewhat harmonized in conjunction with the coming into force of the new registration regime for dealers, advisers and investment fund managers. Work also continues on IIROC's Client Relationship Model project, which attempts to address issues relating to such things as conflicts of interest management and suitability assessment. For a further discussion, see Ed Waitzer's post of February 17, entitled "Make advisors work for investors".
Posted on March 11, 2011
According to the Ontario Securities Commission's website, the OSC intends to publish a rule for comment next month to address electronic trading and direct electronic access to marketplaces. While the OSC's website doesn't provide specifics on the proposed rule, the OSC Market Regulation Branch provided some information in its Annual Report of October 2010. Specifically, the Annual Report stated that the CSA and IIROC were examining issues relating to direct market access (DMA) and developing a proposal to address risks associated with electronic trading (such as market risk, and credit risk), DMA and other issues associated with technology. Other issues cited in the report include high frequency trading, co-location and outsourcing.
Meanwhile, IIROC's Market Regulation Policy Quarterly Update of October 2010 also noted the work of the CSA and IIROC and added that the regulators were taking into account emerging issues relating to high frequency trading, co-location and outsourcing as well as regulatory initiatives in the US and elsewhere, including, modified NASDAQ Rule 4611 and the SEC’s Proposed Rule 15c3-5. According to the update, the principles contained in the Consultation Report on Direct Electronic Access, published by the Technical Committee of IOSCO in February 2009 and those contained in Principles for Direct Electronic Access to Markets, the Final Report of the Technical Committee of IOSCO, issued in August 2010 will also inform the policy development process.
Posted on March 11, 2011
The Canadian Securities Administrators recently released their 2010 Enforcement Report, which summarizes the steps taken by regulators over the past year "to detect and disrupt misconduct in Canada's capital markets." The report notes that 178 proceedings were commenced in 2010 against 301 individuals and 183 companies, while 174 cases were concluded. Notably, of the cases concluded, 64 were concluded by court proceeding, representing a marked increase from the 35 in 2009. Illegal distributions were the most frequent type of securities law violation, and represented two-thirds of concluded cases. The report also provides a number of case summaries to illustrate the type of activity that constitutes the various categories of violations.
Posted on March 8, 2011
The Alberta Court of Appeal has just released its decision on the reference made by the Alberta government regarding the federal government's plan to implement the proposed federal Canadian Securities Act. According to the Alberta Court of Appeal, the proposed Act exceeds the constitutional authority of the Parliament of Canada as it encroaches on provincial jurisidiction.
The Alberta Court of Appeal's decision in one of among three references currently pending on the issue. The Department of Finance released the proposed Canadian Securities Act in May 2010 and the Canadian Securities Transition Office has since been working on a plan for transitioning securities regulation to a federal regulator. The Quebec Court of Appeal held hearings on the constitutionality of the federal Act in January, while the Supreme Court of Canada is scheduled to hold hearings on the issue on April 13 and 14, 2011.
Posted on March 4, 2011
On February 25, the OSC released for comment a draft of its 2011-2012 Statement of Priorities. According to the OSC, its planning for the year was influenced by developments in the overall investment marketplace, the regulatory arena domestically and internationally and stakeholder perceptions of regulatory effectiveness. Ultimately, the OSC identified five broad priorities, namely to:
- better demonstrate its commitment to investor protection by undertaking policy and rule development as well as compliance and enforcement programs;
- intensify operational, compliance and enforcement efforts;
- modernize its regulatory systems and approaches, including by focusing on risk oriented regulatory responses and implementing a robust framework for OTC derivatives;
- pursue a coordinated approach to securities regulation by supporting the development of a federal securities regulator and working to harmonize and modernize regulation through the CSA; and
- demonstrate accountability for its performance as a leading securities regulator in Canada.
Comments on the are being accepted by the OSC until April 27, 2011. For more information, see OSC Notice 11-765.
Posted on March 4, 2011
A memorandum of understanding between the OSC, certain other provincial securities regulators and Investment Industry Regulatory Organization of Canada (IIROC) entered into with the Mutual Fund Dealers Association of Canada (MFDA) is set to come into effect on March 23, 2011.
The MOU is intended to facilitate the sharing of information regarding compliance and enforcement matters by establishing a framework for the MFDA's use, under certain circumstances, of the National Registry Database system.
Posted on February 25, 2011
Last week, FAIR Canada released a report entitled A Decade of Financial Scandals, which reviews various cases of financial fraud and presents a number of recommendations for the consideration of governments and regulators. Specifically, the report's recommendations deal with fraud prevention, the early detection of financial fraud, enforcement and better compensation for victims.
Posted on February 22, 2011
According to an article in today's Globe and Mail, the OSC has been "widening the net" as it investigates potential cases of insider trading in advance of major corporate deals and announcements. OSC enforcement director Tom Atkinson is cited as stating that the sources of insider trading are rarely executives of a company but, rather, employees of the law, accounting, consulting and investment firms involved in deals.
The article also discusses the OSC's new Trade Nexus software, which "allows the OSC to search trading data and look for patterns using numerous variables. It can also be used to identify webs of connections as investigators check to see whether more than one person is involved in a case."
Posted on February 17, 2011
As published in Tuesday's Financial Post
Edward Waitzer -
In January 2004, the Ontario Securities Commission released a concept paper advocating a "fair dealing model." The paper acknowledged that the regulatory regime -- regulating dealers and their representatives through the products they sell -- was based on the outdated assumption that transaction execution is the primary reason people seek financial services. Recognizing that most customers are seeking advice, the concept paper proposed changing the regulatory framework to focus on the advisory relationship.
Financial professionals and salespersons in Canada are allowed to call themselves advisors, irrespective of their professional designation. Few, however, are compensated directly for their advice. Instead, they are paid commissions to sell specific products. Addressing the conflicts of interest that result from commission-based compensation, the paper proposed that retail clients should be entitled to rely on objective advice that is in their best interest and, when there are conflicts of interest, they should be clearly disclosed so that the client can understand the conflicts and how they may affect the advice given.
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Posted on February 4, 2011
The Toronto Stock Exchange today released proposed changes to its Company Manual for public comment that would, among other things, create a new subcategory for oil and gas issuers in the development stage. Listing requirements under this subcategory would include contingent resources of $500 million and a minimum market value of the issued securities to be listed of $200 million.
The proposed changes to the Manual also include : (i) amendments intended to pre-empt avoidance of security holder approval requirements in the case of insider transactions regarding private placements; (ii) an exemption from security holder approval for employment inducements where the aggregate number of securities issued to officers under the exemption in the preceding year is no more than 2% of the outstanding securities; and (iii) removing the requirement that rights offerings must be unconditional.
Comments on the proposals are being accepted until March 7, 2011.
Posted on February 1, 2011
NERA Economic Consulting yesterday released an update on the number and value of securities class action claims in Canada. Specifically, Trends in Canadian Securities Class Actions: 2010 Update notes that there are now a record 28 active Canadian securities class actions representing almost $16 billion in outstanding claims. The study considers trends in filings and resolutions and notes that the most common claims continue to relate to allegations of operational misrepresentations and accounting misrepresentations for cases filed in 2010. Readers may also be interested in the publication's consideration of US securities class actions against Canadian companies.
Posted on January 12, 2011
In a speech yesterday at the National Centre for Business Law, Bryan Davies, Vice-Chair of the Canadian Securities Transition Office provided an update on the progress made towards the implementation of a federal securities regulator. Notably, Mr. Davies stated that the Transition Office is moving forward with the view that the implementation of a federal Securities Act would occur in July 2012. As we've discussed in the past, the federal government has referred the proposed Act to the Supreme Court of Canada in order to ascertain whether the Act falls within federal authority.
Posted on January 4, 2011
The Investment Industry Regulatory Organization of Canada (IIROC) today published Notice 11-0001 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 for the first quarter of 2011 are 1,150 points, 2,300 points and 3,450 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 Index. The TSX trigger levels are: Level 1 (10%) - 1,350 points; Level 2 (20%) - 2,700 points and Level 3 (30%) - 4,000 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. would result 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.
Posted on December 15, 2010
Sylvie Hébert
The new Quebec Business Corporations Act (QBCA), which was introduced following three years of extensive consultations, will come into force on February 14, 2011.
Major reform of Quebec corporate law
As discussed in our December 2009 bulletin, the QBCA makes major changes to the regime applicable to companies currently governed by the Quebec Companies Act (QCA). These changes will take effect as soon as the QBCA comes into force on February 14, 2011 as the Act will automatically apply to companies constituted, continued or resulting from an amalgamation under Part IA of the QCA without any action required on their part. They will become “business corporations” governed by the new statute, as will insurance companies within the meaning of the Act respecting insurance, to which Part IA of the QCA applies. Companies constituted, continued or resulting from an amalgamation under Part I of the QCA will, for their part, have five years to send articles of continuance to the enterprise registrar in accordance with the new statute, failing which they will be dissolved. The same transition period will apply to companies incorporated under the Mining Companies Act.1
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Posted on December 15, 2010
Yesterday, the Canadian Securities Transition Office released an update on its activities for the last few months. Notably, the CSTO stated that it has now begun to develop regulations to accompany the proposed federal Securities Act released by the Department of Finance earlier this year. The CSTO intends to seek comments on proposed regulations as work progresses.
Posted on December 10, 2010
The CSA announced today that a new version of the SEDAR Filer Manual (version 8.15) is now available, which provides updated and new guidance on such things as privacy, passport processes and filing processes. For more information, see CSA Staff Notice 13-317.
Posted on December 10, 2010
On December 8, Ontario's Bill 135, the Helping Ontario Families and Managing Responsibility Act 2010, received Royal Asset. The Act amends the Ontario Securities Act and, among other things, (i) establishes a regulatory framework for trading in derivatives in Ontario; (ii) allows the Ontario Securities Commission to regulate credit rating organizations; (iii) provides the OSC authority to recognize and make decisions related to alternative trading systems and (iv) extends current prohibitions on insider trading and tipping to issuers that have a "real and substantial connection" to Ontario and whose securities are listed and posted on the TSX-V. Most of the amendments came into force on the day of Royal Assent, while certain provisions principally relating to the regulation of derivatives will not come into force until a date still to be proclaimed.
Posted on November 30, 2010
On November 26, the Investment Industry Regulatory Organization of Canada proposed amendments to its Dealer Member Rules that would provide a uniform six-year limitation period to all IIROC enforcement proceedings. While current rules allow IIROC to initiate proceedings against a former member or former approved person for five years after the cessation of IIROC membership, there is no limitation period on proceedings relating to current dealer members or approved persons. Specifically, the new rule, which would apply to current and former members and approved persons, would require IIROC to commence proceedings within six years of "the date of the occurrence of the last event on which the proceeding is based."
IIROC is accepting comments on the proposed amendments until January 25, 2011, and specifically requested comment on the concept of allowing for the extension of the limitation period where both IIROC and the Dealer Member or Approved Person agree to the extension.
For more information, see IIROC Notice 10-0310, the language of the proposed amendments and the blackline of the rules proposed to be amended.
Posted on November 24, 2010
On November 3, the U.S. Securities and Exchange Commission released a proposal to reward individuals that provide information that leads to successful SEC enforcement action in which monetary sanctions total more than $1 million. The proposal, emanating from Dodd-Frank, also includes provisions to discourage whistleblowers from bypassing a company's compliance program. For more information on the implementation of Dodd-Frank, see the SEC's intended schedule for planned rule proposals.
Posted on November 23, 2010
Andrea Boctor and Ramandeep Grewal
Beginning January 1, 2011, virtually every stock option exercise by an employee or director will trigger employer tax withholding and remittance requirements. Stemming from the March 2010 Federal Budget, new rules were introduced into the Canadian Income Tax Act earlier this fall which "clarify" that, effective as of the new year, source deduction requirements apply to stock option benefits. These and other proposed amendments relating to taxation of stock options are summarized in detail in our related Tax Update. The change in policy in respect of withholding and remittance for stock options brings the Canadian tax regime essentially in line with the regimes of other countries, including the U.S. and U.K.
These developments impact both employers and those receiving stock options or similar compensation. Every corporation and every mutual fund trust that sponsors stock option plans to which these rules apply should review the existing terms of its plans, and related administrative procedures, to determine whether tax withholding and remittance can be accommodated in accordance with Canada Revenue Agency (CRA) rules. For public companies, existing stock option plans and agreements should also be carefully reviewed to determine whether shareholder approval is required for any necessary amendments.
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Posted on November 19, 2010
The Canadian Securities Administrators (CSA) and Investment Industry Regulatory Organization of Canada (IIROC) published a joint position paper today that considers, and provides the regulators' views on, the issues associated with dark pools and dark orders. According to IIROC and the CSA, their views are intended to provide "more clarity" around how dark orders should be treated and facilitate "investor understanding and choice" regarding the execution of orders.
The paper follows a year of consultations on the subject and sets out the position of the position of the regulators on a number of issues, namely:
- that only orders meeting a minimum size threshold be exempt from pre-trade transparency requirements;
- that, while, two dark orders meeting the minimum size exemption should be able to execute at the national best bid or best offer, meaningful price improvements should be required in all other circumstances;
- that visible (lit) orders should execute before dark orders at the same price on the same marketplace, except where two dark orders meeting the minimum size exemption can be executed at that price; and
- that meaningful price improvement should be considered as one trading increment as defined under UMIR. For securities with a difference between the best bid price and the best ask price of one trading increment, one-half increment will be considered to be meaningful price improvement.
Comments are being accepted on the position paper until January 10, 2011. Once comments have been considered, the CSA and IIROC intend to propose rule changes as required.
Posted on November 18, 2010
The Canadian Securities Administrators announced last week that eight of its members (the provincial regulators but for Newfoundland and PEI) signed a regulatory cooperation agreement with the China Insurance Regulatory Commission. According to the CSA release, the agreement "paves the way for Chinese insurers to invest in financial products on Canadian markets regulated by CSA participating jurisdictions." The agreement is currently in effect in seven jurisdictions and, pending ministerial approval, will take effect in Ontario on January 12, 2011.
Posted on November 12, 2010
Alix d’Anglejan-Chatillon and Jason Streicher
Omnibus financial legislation introduced by the Quebec government on November 10, 2010 includes technical amendments to Quebec's derivatives legislation, as well as provisions intended to improve the oversight of persons authorized to market a derivative and to strengthen the process of authorization of the marketing of the product.
The technical amendments would include expanding the list of instruments included in the definition of "derivative" under the Derivatives Act (Quebec) (the QDA) to cover contracts for differences (CFDs) specifically.
Bill 128 would also incorporate more detailed requirements to provisions under the QDA that are not yet in force governing persons qualified under the QDA to create or market a derivative. These new provisions include requirements that a qualified person maintain a corporate and organizational structure and adequate human, financial and technological resources to enable it to operate effectively and ensure the security and reliability of its transactions and activities. A qualified person would also be required to have adequate business policies and procedures and appropriate governance practices, including, in particular, with respect to the independence of its directors and the auditing of its financial statements. The amendments also clarify that a qualified person would be required to register as a dealer or offer derivatives to the public through a dealer.
Posted on November 12, 2010
Currency exchange and funds transfer businesses not otherwise regulated would be covered.
Alix d’Anglejan-Chatillon and Jason Streicher
On November 10, 2010, there was a first reading by Quebec's National Assembly of Bill 128, An Act to enact the Money-Services Businesses Act and to amend various legislative provisions mainly concerning special funds and the financial sector (Bill 128).
If adopted, Bill 128 would result in the enactment of the Money-Services Businesses Act (the MSB Act). The Québec government has stated that the oversight of money-services businesses is part of a broad offensive against tax evasion and money laundering. The MSB Act would require that persons operating a "money-services business" for compensation obtain a license from Quebec’s financial markets authority, the Autorité des marchés financiers (the AMF), and disclose information about their directors, officers, partners, shareholders, branch managers, employees working in Quebec and certain types of lenders they deal with. The term "money-services business" is not defined but the MSB Act would define "money services" to include currency exchange, funds transfer, the issue or redemption of travelers’ cheques, money orders or bank drafts, cheque cashing, or operating automated teller machines. If the lessor of a commercial space is responsible for keeping an automated teller machine supplied with cash, the lessor would also be subject to the licensing provisions of the MSB Act.
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Posted on November 11, 2010
The federal government has just published legislative proposals that would relax one of the conditions for tax-exempt pension fund investment corporation status under the Income Tax Act. That is, under the proposals, there would no longer be a prohibition against such a corporation issuing "debt obligations" and the prohibition would be narrowed to cover issuing "bonds, notes, debentures or similar obligations". The change would be retroactive to 1994.
We believe that these amendments, if adopted, should eliminate concerns that, for example, the assignment to a third party of a right to receive an investor's capital contribution to a limited partnership would be treated as an impermissible debt obligation, where that investor was a pension fund investment corporation.
Interested parties are invited by the Department of Finance to provide comments on the proposals by December 5.
Posted on October 29, 2010
As discussed last week, the OSC recently released the annual reports of its Compliance and Registrant Regulation Branch and Investment Funds Branch. OSC-watchers can now feast on two more annuals, the fiscal 2010 versions of the Corporate Finance Branch Report and Market Regulation Branch Annual Report. Specifically, the Corporate Finance Branch Report provides issuers with details on its disclosure review programs while the Market Regulation Branch Annual Report provides a summary of key policy activities and initiatives relating to market structure and clearing and settlement.
For more information, see OSC Staff Notice 51-706 and Staff Notice 21-704.
Posted on October 28, 2010
Earlier this month, the Investment Industry Regulatory Organization of Canada (IIROC) published Notice 10-00259 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 2010 as 1,050 points, 2,100 points and 3,150 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 Index. The TSX trigger levels are: Level 1 (10%) - 1,200 points; Level 2 (20%) - 2,450 points and Level 3 (30%) - 3,650 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.
Posted on October 28, 2010
The Ministry of Finance recently announced proposed changes to Regulation 90 under the Commodity Futures Act to ensure consistency with IFRS terminology. Comments on the proposed amendments are due on November 19.
Posted on October 19, 2010
The Investment Industry Regulatory Organization of Canada (IIROC) yesterday released a new Anti-Money Laundering Compliance Guide to replace the IDA's 2002 "Deterring Money Laundering Activity". The new document is intended to provide dealers with guidance on complying with anti-money laundering and anti-terrorist financing requirements in light of the legislative and regulatory changes of recent years.
According to IIROC, since no standard program will be appropriate for all firms, the guidance has been prepared to assist dealers in adapting their compliance program "specifically to their firm's business, ensuring that it covers the scope of their customer base, the types of accounts, the types of transactions, the extent of the firm's international activities and all the risks and other relevant factors within the firm."
See IIROC Notice 10-0273
Posted on October 13, 2010
The Canadian Securities Transition Office released an update last week outlining the activities it has undertaken since the delivery of its Transition Plan this past summer. According to the CSTO, it has "begun to identify the specific skills required to carry out the activities and tasks required to execute the Transition Plan" and has received regulatory staff seconded by participating jurisdictions. Discussions continue regarding the allocation of further staff.
The CSTO's annual report for 2009-2010 was also recently tabled in Parliament. The report describes the transition office's activities for the past fiscal year, including its consultations with stakeholders and the development of national securities legislation and the Transition Plan.
Posted on September 30, 2010
On September 28, the U.S. Financial Industry Regulatory Authority (FINRA) announced that it will file a rule proposal with the Securities and Exchange Commission next month that will allow investors to opt for all-public panels in arbitration claims. According to FINRA, "[g]iving each individual investor the option of an all-public panel will enhance confidence in and increase the perception of fairness in the FINRA arbitration process".
In recent months, the Investment Industry Regulatory Organization of Canada (IIROC) has also been considering changes to its arbitration program. A review of the program was initiated in December 2009, while a request for comments on specific changes was released in August 2010.
Posted on September 30, 2010
The Investment Industry Regulatory Organization of Canada (IIROC) announced the launch of a surveillance system yesterday that will allow it to conduct surveillance across all Canadian equity markets. According to IIROC, the Surveillance Technology Enhancement Platform (STEP) will allow it to "keep pace with the dramatic increase in the speed and volume of trading activity" in Canadian equity markets. Among other things, STEP provides IIROC with an increased monitoring capacity and the ability to more easily identify potential violations, such as with respect to best execution and trade-throughs.
Posted on September 22, 2010
The Securities and Exchange Commission has published a timetable on its website outlining its schedule for implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The timetable, which extends to July 2011, suggests a busy year of rule-making at the SEC and would see, among other things, new rules regarding shareholder votes on executive compensation proposed by the end of the year.
Posted on September 21, 2010
Citing the need to increase transparency and reduce counterparty and operational risk, the European Commission recently released new proposals to regulate the OTC derivatives market. Among other things, the proposals would require trades in OTC derivatives in the EU to be reported to central data centres (trade repositories) accessible to regulators. A new European Securities and Markets Authority would be responsible for registering and monitoring trade repositories, while standard OTC derivatives would have to be cleared through central counterparties. The EC expects the proposals to be promulgated by the end of 2011.
For more information, see the EC Press Release and the accompanying Impact Assessment.
Posted on September 7, 2010
The Ontario Securities Commission (OSC) put out a call last week for new applications for membership on its Continuous Disclosure Advisory Committee (CDAC). The CDAC, which was established in 2002 and meets four to six times per year, advises OSC staff on such things as the planning, implementation and communication of its review program, as well as policy and rule-making initiatives. The OSC invites representatives of reporting issuers, industry associations, advisors, investing organizations and "any other interested persons" to apply by September 30, 2010.
Posted on August 23, 2010
On August 19, the Canadian Radio-television and Telecommunications Commission (CRTC) issued a decision amending its interpretation of the Unsolicited Telecommunications Rules with respect to the financial industry. This decision amends the CRTC's previous interpretation and finds that unsolicited calls made by financial advisers to existing clients for the purpose of solicitation constitute telemarketing under the rules. While the "existing business relationship" or "business-to-business" exemptions may still apply to such calls, financial advisers are no longer exempt from the rules.
See: Telecom Regulatory Policy CRTC 2010-599 and Telecom Information Bulletin CRTC 2010-600
Posted on August 20, 2010
As we discussed in our post of June 16, the Ontario Securities Commission, Quebec's Autorité des marchés financiers and the U.S. Securities and Exchange Commission (SEC) recently signed a Memorandum of Understanding to facilitate the supervision of regulated entities that operate on a cross-border basis. The Minister of Finance has now approved the MOU.
Posted on August 20, 2010
Earlier this week, the Ontario Securities Commission released its 2010 Annual Report, which provides a review of the OSC's activities over the past year. Of particular interest, the report discusses various compliance issues associated with the implementation of registration reform, IFRS and corporate sustainability reporting. The report also reviews the results of compliance reviews of registrants, public companies and investment fund issuers.
Posted on August 13, 2010
Comments are being accepted on the proposed amendments to Rule 3.1.1 and Form 1 until October 12, 2010.
Posted on August 12, 2010
Revised CSA staff notice and SEMA Iran regulations released
CSA release revised staff notice regarding terrorist financing reporting obligations
As reported in our post of July 30, 2010, the Canadian Securities Administrators (CSA) published CSA Staff Notice 31-317 (Revised) – Reporting Obligations Related to Terrorist Financing on July 30, 2010 (the Revised Notice), updating their initial release of April 16, 2010. The Revised Notice does not refer to the new Special Economic Measures (Iran) Regulation (described below) but these new rules should be considered in conjunction with the Revised Notice.
The purpose of the Revised Notice is to clarify the CSA’s view that firms relying on any exemption from the dealer or adviser registration requirements for the purposes of engaging in the business of “dealing in securities” or “providing portfolio management or investment counseling services” in any Canadian jurisdiction must comply with the Canadian federal monthly reporting and other requirements relating to terrorist financing and United Nations sanctions, described in the Revised Notice (Canadian Terrorist Financing and UN Sanctions Regulations).
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Posted on August 6, 2010
On July 29, the Committee of European Securities Regulators published a set of recommendations, pursuant to a review of the Markets in Financial Instruments Directive, intended to improve the functioning and transparency of securities markets. The recommendations include advice on equity markets, non-equity markets transparency, transaction reporting and investor protection and intermediaries.
Posted on August 6, 2010
Alix d'Anglejan-Chatillon and Jason Streicher
Under Quebec’s derivatives legislation, the Chief Compliance Officer (CCO) of a derivatives portfolio manager is required to have at least three years of relevant derivatives experience and to have passed all required IIROC exams with respect to derivatives for an officer of a derivatives dealer (the Derivatives Proficiency Requirements) in addition to satisfying the proficiency requirements of National Instrument 31-103 Registration Requirements and Exemptions.
On July 27, 2010, the Autorité des marchés financiers, Quebec's financial services regulator, issued a blanket decision which exempts the CCO of a derivatives portfolio manager from the Derivatives Proficiency Requirements provided the firm has designated an Officer Responsible for Derivatives Operations who meets prescribed proficiency requirements that are detailed in the blanket decision with respect to options, futures and swap-related products.
The decision is in effect as of July 30, 2010.
Posted on August 5, 2010
With the recent approval of financial regulatory reform legislation in the United States, SEC Chairman Mary Schapiro provided an outline of next steps in a speech last week to the Center for Capital Markets Competitiveness in Washington D.C. Specifically, Ms. Schapiro discussed five topics that new rules will need to address, namely, (i) oversight of OTC derivatives and the need for joint rulemaking between the CFTC and SEC; (ii) fiduciary duty in respect of existing standards of care applicable to broker-dealers and investment advisors; (iii) registration requirements for hedge funds, (iv) expanded corporate disclosure, including upcoming rules that will set new standards of independence for compensation committees; and (v) credit rating agencies. According to Ms. Schapiro, the next year will a busy one for the SEC and CFTC as a number of new proposals are introduced.
Posted on July 30, 2010
The Canadian Securities Administrators today released CSA Staff Notice 31-317 (Revised) – Reporting Obligations Related to Terrorist Financing. The revised Notice is intended to make clear CSA staff's views that all dealers and advisers relying on exemptions from the registration requirements are subject to federal monthly reporting requirements, including newly exempted international dealers and international advisers. The Notice also sets out the view of CSA staff regarding the mechanics of complying with federal reporting requirements and includes a new consolidated CSA reporting form.
For more information on the initial publication of the Notice, see our post of April 29. For a brief description of the implementation of anti-terrorist financing legislation in Canada, see our update of March 19, 2008. Our insurance colleagues have also prepared a helpful overview of Canada's listings and sanctions laws that, while focused on insurers, also applies to entities engaged in the business of dealing in securities or providing portfolio management or investment counselling services.
Posted on July 30, 2010
On Monday, Her Majesty's Treasury launched a consultation to gather views on the British Government's proposals to reform the UK's financial regulatory framework. As discussed in our post of June 17, the proposals would: (i) give the Bank of England the authority over macro-prudential regulation; (ii) establish a new prudential regulator, operating as a subsidiary of the Bank of England, that would regulate financial firms; and (iii) establish a new Consumer Protection and Markets Authority to regulate the conduct of financial firms providing services to consumers. The just-released consultation document provides further details regarding the proposals and asks specific questions for public comment.
Posted on July 29, 2010
Last month, the House of Commons' Standing Committee on Industry, Science and Technology released a report based on its statutory review of the Canada Business Corporations Act. The report considered a number of issues and ultimately recommended that a broad public consultation be conducted by the government within two years regarding issues such as: (i) executive compensation, including whether shareholders should have an advisory vote on compensation packages; (ii) shareholder rights and governance, including the election of directors and shareholder approval for significantly dilutive acquisitions; and (iii) securities regulation.
Posted on July 22, 2010
On July 20, the Ontario Securities Commission (OSC) announced that it had approved the adoption of a new rule Rule 12 to its Rules of Procedure in order to enhance the approval process with respect to settlement agreements. Specifically, the new rule would provide for a settlement conference to be held in camera, before a public settlement hearing, for the purpose of providing the parties the opportunity "to make confidential submissions on a proposed settlement to a Panel in order to obtain guidance on whether the terms of the proposed settlement would, in the view of the Panel, be in the public interest."
Posted on July 20, 2010
The U.S. Securities and Exchange Commission (SEC) announced last week that Goldman, Sachs & Co. had agreed to pay $550 million to settle charges that the company had misled investors respecting a subprime mortgage product. The settlement also requires remedial action by Goldman Sachs with respect to the company's review and approval of certain mortgage securities offerings and additional education and training of employees in this area of the company's business. For more on the case and settlement, see this article from the New York Times.
Posted on July 19, 2010
Earlier this month, the Canadian Securities Administrators released its Oversight Review Report of the Mutual Fund Dealers Association of Canada. The report followed an oversight review of the MFDA's regulatory functions by staff at various provincial securities regulators to (i) assess whether the MFDA is in compliance with the relevant terms and conditions of its recognition orders; (ii) determine whether the MFDA's regulatory processes are efficient, effective, consistent and fair; and (iii) evaluate whether the MFDA has adequate staffing, resources and training to perform its regulatory functions effectively and efficiently.
Ultimately, while the review found that the MFDA was generally compliant with the relevant terms and conditions of its recognition orders, it did include a number of recommendations, including with respect to the Financial Compliance group at head office. Recommendations concerned internal benchmarks used by the Financial Compliance group, the review of financial questionnaire and reports and the financial compliance examination process. The report includes the MFDA's responses to the report's concerns and the expected follow-up where appropriate.
Posted on July 16, 2010
On July 15, the U.S. Senate passed the Dodd-Frank Wall Street Reform and Consumer Protection Act by a vote of 60-39. The legislation is intended to overhaul the financial regulatory system in the U.S. by improving the supervision and regulation of federal depository institutions, providing transparency to derivatives markets and setting out obligations regarding corporate governance and executive compensation.
The legislation, which was passed by House of Representatives on June 30, is now awaiting the President's signature. A brief summary of the legislation is provided by the House Financial Services Committee, while Steven M. Davidoff provides some thoughts in the New York Times' DealBook.
Posted on July 16, 2010
The OSC has approved amendments to MFDA rules respecting client accounts, client communications and client reporting. The original proposals, which we noted in our post of May 2009 and will, among other things, require that investors are provided with certain information at the time of account opening, clarify the duty of MFDA Members and approved persons to assess the suitability of investments in client accounts when various triggering events occur and clarify Members' supervisory requirements regarding client communications that disclose a rate of return.
Posted on July 16, 2010
The Canadian Securities Administrators today published for comment a proposed rule, policies and related consequential amendments that would impose regulatory oversight for designated credit rating agencies and organizations. Under the proposals, credit rating organizations wishing to become designated for the purposes of having their credit ratings eligible for use where credit ratings are referred to in securities legislation would have to apply and, once designated, maintain and ensure compliance with a code of conduct that complies with the provisions of the IOSCO Code of Conduct Fundamentals for Credit Ratings Agencies of the International Organization of Securities Commissions. The IOSCO Code addresses such issues as: (i) the quality and integrity of the rating process; (ii) credit rating agency independence and the avoidance of conflicts of interest; (iii) credit rating agency responsibilities to the investing public and issuers; and (iv) disclosure of the code of conduct and communication with market participants. Deviations, however, from the provisions of the IOSCO Code would be permitted under certain circumstances.
Comments are being accepted by the CSA until October 25, 2010.
Notice and Request for Comment - Proposed National Instrument 25-101 Designated Rating Organizations, Related Policies and Consequential Amendments.
Posted on July 15, 2010
In a speech Tuesday to the British Bankers' Association, Lord Adair Turner, Chairman of the Financial Services Authority (FSA) discussed a new approach to regulation in the U.K. Specifically, Lord Turner discussed a "major shift in philosophy" towards a "more pre-emptive and instrusive approach to supervision". This would involve analyzing trends in the economic and market environment to identify potential risks to consumers, examining firms' business models to understand the drivers of profitability, reviewing whether firms have product development and approval processes that weed out innappropriately marketed or harmful products and taking action to ensure customers are protected where incentives, structures or products are found that would likely lead to poor customer outcomes.
Posted on July 9, 2010
Mihkel E. Voore and Ramandeep Grewal
As we discussed in our post of April 9, the Canadian Securities Administrators (CSA) have recently published much-anticipated proposals to amend National Instrument 54-101 Communication with Beneficial Owners of Securities of a Reporting Issuer (NI 54-101), which would give issuers the option to post proxy-related materials on a non-SEDAR website under a “notice-and-access” model. The proposed amendments aim not only to facilitate communication with shareholders, but also include amendments intended to increase the overall efficiency and equity among key players involved in the securityholder communication process.
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Posted on July 6, 2010
On July 2, the Investment Industry Regulatory Organization of Canada (IIROC) published Notice 10-0191 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 third quarter of 2010 as 1,000 points, 2,050 points and 3,050 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 Index. The TSX trigger levels are: Level 1 (10%) - 1,150 points; Level 2 (20%) - 2,350 points and Level 3 (30%) - 3,500 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.
Posted on June 17, 2010
In a June 16 speech at the Lord Mayor's Dinner for Bankers & Merchants of the City of London, the Chancellor of the Exchequer outlined a plan to reform financial regulation in Britain. Specifically, the Chancellor announced a plan to abolish the current tripartite system of regulation, which consists of the Financial Services Authority (FSA), the Bank of England and the Treasury, and wind down the FSA.
In place of the current system, an independent Financial Policy Committee at the Bank of England would be tasked with macro-prudential regulation. According to the Secretary to the Treasury, Mark Hoban, "[o]nly central banks have the broad macroeconomic and markets understanding, the authority and the knowledge required to make macro-prudential judgments." Meanwhile, a new prudential regulator, operating as a subsidiary of the Bank of England would regulate financial firms, including banks, investment banks and insurance companies. Finally, a new Consumer Protection and Markets Authority would be established to regulate the conduct of financial firms providing services to consumers.
According to the Chancellor, the transition to the new regulatory system is intended to be completed in 2012.
Posted on June 16, 2010
On Monday, the U.S. Securities and Exchange Commission (SEC), Quebec's Autorité des marchés financiers and the Ontario Securities Commission (OSC) announced the signing of a memorandum of understanding to facilitate the supervision of regulated entities that operate on a cross-border basis. The parties intend to consult, cooperate and exchange information related to the supervision and oversight of such regulated entities and the MOU is intended to support and facilitate such cooperation.
Posted on June 11, 2010
The International Organization of Securities Commissions (IOSCO) yesterday published a revised Objectives and Principles of Securities Regulation to incorporate principles based on "lessons learned from the recent financial crisis". Eight new principles were added to the document, including principles related to hedge funds, credit rating agencies and auditor independence. According to IOSCO the principles "outline the basis of an appropriate, effective and robust securities regulatory system".
Posted on June 10, 2010
On June 8, Quebec's Autorité des marchés financiers (AMF) announced that it had entered into a cooperation agreement with the United Arab Emirates' Emirates Securities and Commodities Authority (ESCA). The agreement is intended to "set up and implement a system for mutual assistance and exchange of information between the ESCA and the AMF in order to facilitate the performance of their respective securities-related functions".
Posted on June 10, 2010
The International Organization of Securities Commissions (IOSCO) announced today that securities regulatory authorities from South Korea, Uruguay, Iceland, the Maldives, Saudi Arabia and Syria have been invited (the latter four states pending membership approval) of the IOSCO Multilateral Memorandum of Understanding concerning Consultation, Cooperation and the Exchange of Information (MMoU). The MMoU provides a mechanism through which securities regulators may exchange information and assist one another in enforcing compliance with their respective securities laws and regulations.
Posted on June 8, 2010
The Investment Industry Regulatory Organization of Canada (IIROC) announced today that it is hosting a "Tips for Traders Toronto" education session on June 16 at the Design Exchange to consider recent market events and associated compliance issues. President and CEO of IIROC Susan Wolburgh Jenah will be making the opening remarks.
Posted on June 8, 2010
On May 26, 2010, the federal Department of Finance released its proposed Canadian Securities Act (the Act). The Act builds upon the Report released last year by the Expert Panel on Securities Regulation and represents the federal government’s proposal for a harmonized national regime to govern capital markets. Following decades of deliberation by various panels and committees, publication of the proposed Act by the Canadian Securities Transition Office evidences this government’s strong commitment to the establishment of a national securities regime and regulator.
The case for regulation of capital markets at a national level is set out in the preamble to the Act. Among other things, the preamble highlights the need to be competitive and consistent, enhance the integrity and stability of the Canadian financial system, have a comprehensive and coordinated enforcement regime and promote Canada’s interests at a national and international level. While the intent is to create a harmonized federal scheme for securities regulation, provincial participation is voluntary and the Act will only apply to those jurisdictions that choose to take part in the federal scheme. As we discussed previously, the draft Act is only a proposal at this stage, and has been referred to the Supreme Court of Canada for a ruling as to its constitutionality.
Continue Reading...
Posted on June 2, 2010
On May 31, the Canadian Securities Administrators (CSA) released Multilateral Consultation Paper 51-403 Tailoring Venture Issuer Regulation, a product of the securities regulatory authorities of Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia and Saskatchewan. While Ontario and Quebec are not fully participating in this consultation, they are encouraging their market participants to review and comment on the proposals.
The Consultation Paper is intended to "assess market interest in pursuing a more tailored approach to the regulation of the venture market" and seeks the views of stakeholders, exchanges, dealers and industry associations. Specifically, the Consultation Paper proposes consolidating and streamlining governance and continuous disclosure requirements in a new regulatory instrument that would apply only to venture issuers, replacing the relevant requirements currently found in various instruments.
The proposed new instrument would, among other things, replace the current requirement for separate annual financial statements and MD&A with an annual report, eliminate three and nine month interim financial statements and associated MD&A, introduce substantive corporate governance requirements, eliminate business acquisition reports and enhance material change reporting and permit prospectuses to contain only two years of historical financial statements.
The participating securities regulatory authorities are accepting written comments on the proposals until September 17, 2010. Additionally, consultation sessions will be held across Canada in order to gather further feedback.
Posted on May 31, 2010
Citing the lack of a central database containing comprehensive and readily accessible data regarding orders and executions, the U.S. Securities and Exchange Commission proposed a new rule on May 26 that would require SROs to establish a consolidated audit trail system. Under the new system, exchanges and FINRA, as well as their members, would be required to provide certain information to the central repository regarding each quote and order in a National Market System (NMS) security.
Such a consolidated system would be intended to: (i) provide regulators direct and timely access to uniform consolidated order and execution information for all orders in NMS securities from all participants across all markets; (ii) enable SROs to better fulfill their regulatory responsibilities to oversee their markets and members; and (iii) enable the SEC to better carry out its oversight of the NMS for securities.
The SEC is accepting public comments on the proposal for 60 days after its publication in the Federal Register.
Posted on May 28, 2010
The Investment Industry Regulatory Organization of Canada (IIROC) today proposed a new rule intended to "clearly articulate that any personal financial dealing with clients, subject to limited exemptions, is considered inappropriate conduct, a conflict of interest and a violation of the general business conduct standards." Prohibited conduct would include receiving direct or indirect benefits or other considerations from clients (other than through a Dealer Member), entering into private settlement agreements with clients, lending money or borrowing money from clients, and having any control or authority over the financial affairs of clients. Amendments to the current Rule 18.14 were also proposed in order to clarify that outside business activities require disclosure to, and approval by, Dealer Members.
Comments on the proposals are being accepted by IIROC for 90 days from today's publication.
Posted on May 27, 2010
The U.S. Financial Industry Regulatory Authority (FINRA) released a Regulatory Notice on May 26 requesting comments on proposed rule amendments intended to enhance the oversight of broker-dealers' back office operations. The proposed amendments would create a registration category for operations professionals engaged in, or supervising, activities relating to sales and trading support and the handling of customer assets. A new qualification exam for operations professionals would be established as well as continuing education requirements. Comments on FINRA's proposal are being accepted until July 12, 2010.
Posted on May 27, 2010
Margaret Grottenthaler
The proposed federal Securities Act tabled by the federal government on May 26 establishes a framework for the regulation of exchange-traded and over-the-counter derivatives markets and their participants. Don’t expect to see a new regime too soon though. This legislation has not yet been introduced as a Bill but only laid before Parliament on a Ways and Means motion. The draft legislation has been referred to the Supreme Court of Canada to obtain a ruling as to whether it is within the legislative competence of the federal Parliament and will not be introduced until that question is resolved. Provinces are given the choice to opt into the federal scheme as well. Many provinces (not including Quebec and Alberta) have taken part in the process and would be expected to opt into the national scheme.
Continue Reading...
Posted on May 26, 2010
As we mentioned a few weeks ago, federal Finance Minister Jim Flaherty recently stated that legislation to create a national securities regulator was imminent. Earlier today, Minister Flaherty unveiled a draft federal Securities Act, which would create such a regulator and allow provinces and territories to opt into the new regime voluntarily. According to the Minister, the proposed regime will provide: (i) better and more consistent protection for investors across Canada; (ii) improved regulatory and criminal enforcement to better fight securities-related crime; (iii) new tools to better support the stability of the Canadian financial system; (iv) faster policy responses to emerging market trends; (v) simpler processes for businesses, resulting in lower costs for investors; and (vi) more effective international representation and influence for Canada.
As there are impending legal challenges on the constitutionality of the plan, however, the proposed Act has been concurrently referred to the Supreme Court for its opinion on whether the proposed Act is within the federal government's legislative authority.
The Canadian Securities Transition Office has stated that it will release a technical commentary on the proposed legislation in the coming weeks and will also deliver a transition plan to the Minister and participating jurisdictions by July 12, 2010. Meanwhile, we expect to provide a more detailed review of the proposed legislation next week.
Posted on May 26, 2010
In light of concerns that national financial regulations may not sufficiently prevent future financial crises, the Technical Committee of the International Organization of Securities Commissions (IOSCO) yesterday published a report entitled "Principles Regarding Cross-Border Supervisory Cooperation". The report considers how regulators can enhance cross-border cooperation so as to "better supervise the entities that they regulate that have expanded their operations across borders." Specifically, the report provides a set of principles intended to guide cooperative supervisory arrangements among international regulators.
Posted on May 20, 2010
On May 18, Ontario's Bill 16, An Act to implement 2010 Budget measures and to enact or amend various Acts, received Royal Assent. Among other things, the Bill amends section 83 of the Securities Act to once again allow the Ontario Securities Commission (OSC) to publish a list of reporting issuers who are in default of any requirement of the Act or the regulations. Amendments to the Securities Act and the Commodity Futures Act also replace certain terms with comparable terms under International Financial Reporting Standards (IFRS).
Posted on May 19, 2010
The Globe and Mail, among other media outlets, is reporting today that Germany has banned naked short selling of euro-denominated government bonds, credit default swaps based on the bonds and shares of the country's ten most important financial institutions. The ban, which apparently took effect at midnight, will run until March 31, 2011. According to Reuters, the move caught Germany's European Union colleagues off guard and elicited a particularly strong response from the French Finance Minister, who stated that France would not introduce a similar ban. Whether other EU countries follow suit, however, remains to be seen.
Posted on May 19, 2010
Minister of Finance Jim Flaherty announced yesterday the widespread adoption by major credit and debit card issuers, as well as payment processors, of the Code of Conduct for the Credit and Debit Card Industry in Canada. The Code is intended to increase transparency and disclosure by payment card networks and acquirers to merchants, provide merchants with the flexibility to encourage consumers to choose the lowest-cost payment option and allow merchants to choose which payment options they will accept. Much of the Code comes into effect as of August 16, 2010.
Posted on May 11, 2010
As regulators continue to investigate last Thursday's extreme market volatility, the Investment Industry Regulatory Organization of Canada (IIROC) has announced that it has re-priced or cancelled various trades occurring during the market slide. Various U.S. markets have also announced that they would cancel trades (see for example announcements from NYSE Arca and NASDAQ). Meanwhile, the Securities and Exchange Commission (SEC) announced yesterday that it has met with the leaders of the Financial Industry Regulatory Authority, NASDAQ, BATS, Direct Edge, ISE and the CBOE, and that all parties have agreed on a structural framework for strengthening circuit breakers and handling erroneous trades.
Today, the SEC and Commodity Futures Trading Commission announced the formation of a joint committee to address "emerging regulatory issues", with the first item on the committee's agenda being a review of last Thursday's market events. Meanwhile, SEC Chairman Mary Schapiro testified before the Financial Services Committee's Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises this afternoon to summarize the events of May 6, provide an overview of the current market structure and discuss various regulatory tools to be considered "in determining how best to maintain fair and orderly financial markets and to prevent severe market disruptions in the future."
Posted on May 11, 2010
On May 7, the U.S. Commodity Futures Trading Commission (CFTC) issued an Advisory to alert market participants regarding their "ongoing legal obligations to comply with speculative position limits." Specifically, the CFTC reaffirmed that such limits apply on an intraday as well as an end-of-day basis and that traders whose positions exceed the applicable speculative position limit "at any time during the day" (emphasis in text) are in violation of the pertinent regulations even if their positions are reduced below the limit by the end of the day.
Posted on May 10, 2010
On May 3, TMX Group Inc., released a letter written to the Canadian Securities Administrators (CSA) outlining its position on the regulation of short sales in Canada in light of recent U.S. amendments on the subject.
Specifically, TMX recommended against adopting SEC-style amendments incorporating a price test trigger and stated that the "additional regulation of short sales in Canada is not warranted." In support of its views, TMX outlined findings from an analysis it performed on securities inter-listed on the TSX and a U.S. exchange. TMX found that on average, at least one inter-listed security would have triggered the SEC-style short sale circuit breaker every day. According to TMX, however, "it is highly unlikely that manipulative shorting occurs every day in one of the inter-listed securities." Thus, TMX urged the CSA "to take a decision on short sales that is contrary to the SEC's politically driven amendment to Reg SHO". Citing UMIR amendments to address failed trades and the strong real-time surveillance and enforcement capabilities of IIROC, TMX further outlined its support for "the removal of the short sale price test for all exchange-listed securities in order for Canadian participants to operate under one rule."
Posted on May 7, 2010
Finance Minister Jim Flaherty is reportedly days away from seeing the completion of draft legislation to create a national securities regulator. According to press reports, Ottawa is planning to send the draft bill to lawmakers and the Supreme Court for a reference on its constitutionality within a few weeks.
Posted on May 4, 2010
On April 30, the Canadian Securities Transition Office (CSTO) released a report summarizing the views of investor stakeholders on the topic of establishing an independent investor panel as part of a new national securities regulator. Issues for discussion as part of the roundtable included the potential mandate of the panel, the composition and appointment of panel members and how the panel should be funded.
While a "wide range of views" were shared during the discussions, the report identified a number of common themes that emerged. Such themes included an emphasis on clarity in defining the panel's mandate and the desire that there be transparency in the process of establishing an investor panel and its operation. The report did not, however, come to any conclusions and the CSTO stated that it will continue to consult on the issue with a view to ultimately providing recommendations to the Minister of Finance.
Posted on April 29, 2010
The Canadian Securities Administrators (CSA) issued a staff notice on April 16 relating to the reporting requirements of registrants, exempt international dealers and exempt international advisers with respect to terrorist financing. The notice is intended to provide information on the new consolidated reporting form and the submission of monthly reports.
It is important to note that while there is some legal uncertainty as to the applicability of such reporting requirements to exempt international dealers and exempt international advisers, by issuing the staff notice the CSA is clearly stating the CSA view that exempt international firms should be submitting the monthly reports.
For firms that are required to file, there is now one consolidated form, whereas previously reporting requirements of federal laws relating to terrorist financing and those relating to United Nations sanctions were in two separate reporting forms. The reporting process has changed to allow the consolidated form to be submitted by email to a firm's principal regulator. IIROC members, however, are requested to use the forms issued by, and file those forms with, IIROC.
Posted on April 28, 2010
On April 23, the Canadian Securities Administrators (CSA) announced the recent signing by eight members of the CSA of a Supervisory Cooperation Arrangement with the China Banking Regulatory Commission with respect to a program that allows Chinese institutional investors to invest pooled funds in approved overseas financial markets. According to Jean St-Gelais, Chair of the CSA, the arrangement "paves the way for Chinese commercial banks to conduct investments on behalf of their clients with Canadian-based financial institutions" in participating jurisdictions. The arrangement is currently in effect in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Quebec and Saskatchewan and, pending ministerial approval, is scheduled to take effect in Ontario on June 22, 2010.
Posted on April 23, 2010
It was reported yesterday that Canadian Finance Minister Jim Flaherty, speaking at a financial conference in Toronto on Wednesday, stated that a bill to create a national securities regulator will be ready in a month. According to the Minister, however, the bill will be referred to the Supreme Court of Canada for an opinion on its constitutionality before it is tabled in Parliament. As we discussed in March, the federal government's Budget 2010 set out a three-year target for the establishment of a federal securities regulator.
Posted on April 23, 2010
The Investment Industry Regulatory Organization of Canada (IIROC) recently released its Strategic Plan for 2010-2012. The plan describes IIROC's vision and values and sets out the challenges it faces in fulfilling its mandate. Specifically, the plan discusses the following goals:
- Promoting a culture of compliance and high standards among those subject to IIROC's jurisdiction. This will include a reorganization of IIROC's rules to enhance comprehension, providing compliance examination findings and recommendations to members and undertaking periodic industry-wide compliance audits.
- Delivering effective, efficient and expert regulation. Projects that IIROC will undertake in pursuit of this goal include the implementation of a risk-based methodology for registration and completing its framework approach to IFRS.
- Maintaining market integrity by actively monitoring market structure developments and market-related events. IIROC states that it will reduce timelines to complete enforcement investigations and bring proceedings, clarify roles and relationships in order to strengthen the client/adviser relationship and continue to develop its policies respecting OTC and debt markets.
- Ensuring that it discharges its responsibilities in a cost-effective manner, which will include the implementation of an equitable Dealer and Marketplace Member fee model.
- Maintaining a confident and well-trained staff.
Posted on April 13, 2010
On March 30, the Supreme Court of the United States released its decision in the case of Jones v. Harris. The case considered the fiduciary duty imposed on mutual fund advisers by section 36 of the Investment Company Act of 1940 (ICA) with respect to the receipt of compensation for services. This particular issue has been the topic of recent judicial attention.
Ultimately, the Supreme Court accepted the basic formulation of the Gartenberg test, stating that "to face liability under §36(b), an investment adviser must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm's length bargaining." While the basic formulation of the test appeared to be relatively uncontroversial in this case, the parties disagreed on a number of points concerning its application. Thus, the Supreme Court provided guidance on a number of issues. Specifically, the Supreme Court stated that:
- since the ICA requires consideration of all relevant factors concerning the fees charged, there is no categorical rule prohibiting comparisons between the fees charged by advisers to different types of clients. The weight to be allocated to such comparisons, however, depends on the circumstances and the ICA does not ensure fee parity between mutual funds and institutional clients;
- Courts should not rely too heavily on the fees charged by other advisers; and
- A court's evaluation of an investment adviser's fiduciary duty must take into account both procedure and substance. "Where a board's process for negotiating and reviewing investment-adviser compensation is robust, a reviewing court should afford commensurate deference to the outcome of the bargaining process." Where the board's process was deficient or the adviser withheld important information, however, a court may take a more rigorous look at the outcome.
Finding that the Seventh Circuit panel focused almost entirely on disclosure, the Supreme Court vacated the Circuit Court's decision and remanded the case.
The immediate decision's effect on mutual fund fees remains to be seen, and will ultimately depend on the interpretation given to the Supreme Court's findings by lower courts. Thus, the mutual fund industry will undoubtedly watch with interest as this case, and those like it, proceed through the lower courts.
Posted on April 13, 2010
As discussed in our post of April 7, the B.C. government recently introduced amendments to various acts for the purpose of, among other things, regulating credit rating agencies. The amendments have now received Royal Assent. While the implementation date of changes to the B.C. Securities Act is subject to regulation, various amendments to the Financial Institutions Act take effect at the end of 2010.
Posted on April 9, 2010
On April 7, the U.S. Securities and Exchange Commission (SEC) announced proposals to revise the rules respecting asset-backed securities in order to "better protect investors in the securitization market." Specifically, the proposals would make changes to the offering process, disclosure and reporting for asset-backed securities (ABS). The changes are described by the SEC as being comprehensive and imposing new burdens in order to "provide investors with timely and sufficient information...reduce the likelihood of undue reliance on credit ratings, and help restore investor confidence in the representations and warranties regarding the assets." Comments on the proposals are being accepted by the SEC for 90 days after publication of the proposals in the Federal Register.
Meanwhile, the International Organization of Securities Commissions (IOSCO) released a report yesterday entitled "Disclosure Principles for Public Offerings and Listings of Asset Backed Securities". The report is intended to "provide guidance to securities regulators who are developing or reviewing their regulatory disclosure regimes for public offerings and listings of asset-backed securities (ABS)." Specifically, the report outlines the information that should be included in any offer or listing document for a publicly offered or listed ABS.
Posted on April 8, 2010
On March 22, the British Columbia Securities Commission (BCSC) announced the adoption of BC Instrument 21-504. The Instrument provides recognized exchanges with an exception from the requirement to file, within the prescribed 45-day period, changes to information previously provided in 21-101F1 Exhibit N (fees), provided they file, in the manner set out in 21-101F1, the required amendment to Exhibit N at least seven business days before implementing the change.
Posted on April 7, 2010
On March 25, the British Columbia government introduced Bill 6, the Finance Statutes Amendment Act, 2010 in the provincial legislature. Among other things, the Bill would amend the B.C. Securities Act so as to allow for the regulation of credit rating agencies by British Columbia Securities Commission and, according to the Ministry of Finance, "harmonize registration legislation across Canada relating to point-of-sale disclosure for mutual funds and segregated funds". Meanwhile, amendments to the Financial Institutions Act would "enhance the regulatory tools and framework for the financial services sector."
Posted on April 7, 2010
On March 29, 2010, the Ontario legislature's Standing Committee on Government Agencies released a report reviewing the operations of the Ontario Securities Commission (OSC). The Committee received testimony from staff and members of the OSC and various stakeholders and ultimately recommended, among other things, that:
- In considering the OSC's response to the ABCP crisis, the Ministry of Finance review the scope of the OSC's public interest jurisdiction;
- The province establish a dedicated capital markets crime unit to investigate and prosecute capital market misconduct;
- The government give priority to legislative amendments intended to strengthen regulatory enforcement;
- In order to better protect investors, the OSC be given the power to make restitution orders; and
- The OSC review the potential for conflict of interest between the regulatory and commercial functions of the TSX.
In response to the report's release, the OSC stated that it intends to study the Committee's recommendations carefully.
Posted on April 7, 2010
As we mentioned in our post of January 22, the Ontario Securities Commission (OSC) recently proposed amendments to OSC Rule 13-502 Fees and OSC Rule 13-503 (Commodity Futures Act) Fees. Pursuant to their recent approval by the Minister of Finance, the Rule amendments came into force earlier this week, on April 5.
Posted on April 6, 2010
On April 1, the Investment Industry Regulatory Organization of Canada (IIROC) published a notice 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 second quarter of 2010 as 1,050 points, 2,150 points and 3,200 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 Index. The TSX trigger levels are: Level 1 (10%) - 1,200 points; Level 2 (20%) - 2,400 points and Level 3 (30%) - 3,600 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.
Posted on April 6, 2010
The U.S. Securities and Exchange Commission published a staff legal bulletin on March 15 providing the views of its Division of Corporation Finance respecting the circumstances under which issuers may suspend their reporting obligations under section 15(d) of the Securities Exchange Act of 1934 by relying on Rule 12h-3. Citing the routine nature of no-action requests by issuers, the large body of no-action precedent and the guidance in the bulletin, the Division is of the view that, on a going-forward basis, issuers that fit within the situations identified by the bulletin and that satisfy the relevant conditions do not need a no-action response before filing the applicable form to suspend its section 15(d) reporting obligations.
Posted on April 1, 2010
The U.K. Financial Services Authority (FSA) announced new rules last week intended to improve the clarity respecting the costs charged by investment advisers. Specifically, as of 2011, firms will need to be upfront with respect to the costs of their services and will no longer be able to embed the cost of their advice in the cost of a product. Further, firms will not be permitted to accept commissions for recommending specific products. According to FSA director Sheila Nicoll, “[t]here is a need to reconnect the adviser and client, where one pays for the services of another, and without the distraction of commission. Only then can consumers have real confidence and trust in the advice they are receiving.”
Posted on March 29, 2010
On March 22, the Mutual Fund Dealers Association of Canada (MFDA) released a bulletin in which it discussed the "significant financial compliance deficiencies" identified during on-site examinations of its member firms. Specifically, the bulletin identified the following serious deficiencies: (i) incorrect margin rate applied to securities owned; (ii) securities not held at acceptable securities locations; (iii) incomplete reporting on Form 1; (iv) trust bank accounts not reconciled to back office system; and (v) nominee name client assets not reconciled to third party information on a monthly basis. According to the MFDA, such deficiencies are often "a result of a firm not adequately managing or considering the capital implications of significant changes in their business".
Meanwhile, an MFDA bulletin released on the same day reviewed common deficiencies identified during MFDA staff's review of auditor working paper files. Financial audits of MFDA members occur in accordance with Rule 3.5.1(b) and the MFDA intended the bulletin "to enhance awareness and understanding of the special audit requirements for external auditors".
Posted on March 29, 2010
Earlier this month, U.S. Senator Chris Dodd, Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, unveiled the "Restoring American Financial Stability Act of 2010". According to Senator Dodd, the bill will (i) end "too big to fail" bailouts; (ii) create a strong and independent consumer protection watchdog; (iii) create an early warning system; and (iv) bring transparency and accountability to "exotic instruments" like hedge funds and derivatives. Of particular note, the bill also contains provisions regarding executive compensation (Subtitle E, beginning on page 868) and corporate governance (Subtitle G, beginning on page 895). A summary of the proposed legislation was also released.
Posted on March 26, 2010
The Autorité des marchés financiers (the "AMF", Quebec’s financial services regulator) announced today that the temporary exemption provided under its February 1, 2009 blanket decision from the derivatives dealer and adviser registration requirements under the Derivatives Act (Quebec) (the "Act") for specified derivatives activities carried out solely with “accredited investors” (as defined under National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106"), will remain available until September 28, 2010. Prior to this announcement, the temporary exemption had been set to expire on March 27, 2010. The exemption remains available subject to the following conditions:
- the derivatives activities must be carried out solely with “accredited investors” in accordance with the conditions set forth in NI 45-106 (including the filing of a report under Part 6); and
- the activities must relate only to certain specified categories of derivatives, including:
- an option or a negotiable futures contract pertaining to securities, or a Treasury bond futures contract;
- an option on a commodity futures contract or financial instrument futures contract; or
- commodities futures contracts, financial futures contracts, currencies futures contracts and stock indices futures contracts.
The AMF also announced that the corresponding exemption from the derivatives qualification rules under the Act will continue to remain available for the time being and that the AMF will advise market participants of any changes to this exemption.
Posted on March 26, 2010
The Ontario Securities Commission (OSC) announced today that it has approved amendments to MFDA Rule 2.4.1 to allow Approved Persons of MFDA Member firms to have remuneration from the Member paid directly to an unregistered corporation, subject to certain conditions. The final version of the amendments include changes made since their initially publication for comment in June 2009.
Posted on March 26, 2010
Earlier today, the Investment Industry Regulatory Organization of Canada (IIROC) released proposed amendments to its rules respecting business conduct and client accounts. Specifically, proposed Rule 3100 - Business Conduct would consolidate various current rules relating to business conduct and impose on Dealer Members a duty to use due diligence to ensure orders and recommendation are within the bounds of good business practice. Meanwhile, proposed Rule 3200 - Client Accounts would also consolidate various rules and impose responsibilities on Dealer Members with respect to, among other things, client identification, account information, discretionary trading and conflicts of interest. A table of concordance was also released by IIROC, which is accepting comments on the proposals for 90 days.
Posted on March 26, 2010
The Ontario Securities Commission (OSC) today published a revised Statement of Priorities for the financial year ending March 31, 2011. The OSC initially released a draft Statement of Priorities in December 2009, and the revised version includes changes made in consideration of public comments received. Specifically, the changes to the draft publication include (i) a reference to the creation of an independent panel focusing on investor issues; and (ii) a new initiative to signal the OSC's intention to direct more resources to the regulation of OTC derivatives.
Posted on March 19, 2010
The Securities Act (Ontario) is scheduled to be amended as of March 1, 2011, to include a new section 21.2(0.1), which will prohibit clearing agencies from carrying on business in Ontario unless they are recognized by the OSC or receive an exemption from the recognition requirement. The term “clearing agency” is defined in the Act as a person or company that,
(a) acts as an intermediary in paying funds or delivering securities, or both, in connection with trades and other transactions in securities,
(b) provides centralized facilities for the clearing of trades and other transactions in securities, including facilities for comparing data respecting the terms of settlement of a trade or transaction, or
(c) provides centralized facilities as a depository of securities,
but does not include,
(d) the Canadian Payments Association or its successors,
(e) a stock exchange or a quotation and trade reporting system,
(f) a registered dealer, or
(g) a bank, trust company, loan corporation, insurance company, treasury branch, credit union or caisse populaire that, in the normal course of its authorized business in Canada, engages in an activity described in clause (a), but does not also engage in an activity described in clause (b) or (c).
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Posted on March 8, 2010
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On February 26, 2010, members of the Canadian Securities Administrators (CSA) each issued omnibus/blanket orders in response to applications requesting exemptions from certain provisions of National Instrument 31-103 Registration Requirements and Exemptions (31-103). 31-103, together with amendments to related instruments and policies, came into effect on September 28, 2009 (the Effective Date). Notice of these orders was provided under CSA Staff Notice 31-315 Omnibus/Blanket Orders exempting registrants from certain provisions of National Instrument 31-103 Registration Requirements and Exemptions, which was also published on February 26, 2010. The orders are summarized below.
Continuation of transition/grandfathering provisions for registrants adding jurisdiction
Each regulator issued an order that provides a person or company adding a jurisdiction to his, her or its registration, with the benefit of certain grandfathering and transition provisions provided under Part 16 of 31-103 in that additional jurisdiction. Specifically, those grandfathering and transition provisions that deal with proficiency, capital, insurance, relationship disclosure information, referral arrangements, dispute resolution service and client statement requirements were included in the order. To rely on the order, the registrant must: (i) have been continuously registered in a jurisdiction in Canada since the Effective Date; (ii) remain registered in that jurisdiction during its reliance on the order; (iii) be exempt under the relevant section of Part 16 in that jurisdiction; and (iv) register, after the Effective Date, in the same category of registration (and in the case of an individual, with the same sponsoring firm) in an additional jurisdiction.
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Posted on March 5, 2010
The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) are hosting a forum on March 23 at the Design Exchange in Toronto to discuss Consultation Paper 23-404, "Dark Pools, Dark Orders, and Other Developments in Market Structure in Canada", published in September 2009. Interested parties can register on the IIROC website.
Posted on March 5, 2010
The Canadian Coalition for Good Governance (CCGG) submitted a brief to the House of Commons' Standing Committee on Industry, Science and Technology in February regarding the Committee's five-year review of the Canada Business Corporations Act (CBCA). The brief follows the CCGG's appearance before the Committee in November 2009.
According to the CCGG's brief, governance requirements for public companies in Canada have not kept pace with best practices. As such, the CCGG recommends enshrining basic democratic and governance norms for public companies into the CBCA. Specifically, the CCGG recommends that the CBCA be amended to: (i) prohibit slate voting; (ii) require a majority voting standard for director elections; (iii) require annual director elections for all CBCA public companies; (iv) require public companies to disclose the detailed results of shareholder votes for matters on the ballot; (v) give significant shareholders access to the proxy circular; (vi) require all shareholders to be treated equally in the proxy process, irrespective of whether they want to protect the privacy of their information; (vii) facilitate "notice and access", whereby shareholders would be able to access documents from companies' websites; (viii) generally require the separation of the roles of CEO and Chair of the Board; (ix) require shareholder approval for significantly dilutive acquisitions; and (x) give shareholders more meaningful ways to resolve claims under the oppression remedy.
It is unclear what steps the Committee will take at this point, however, as Parliament has only just resumed after prorogation and no activities are yet listed on its schedule.
Posted on March 4, 2010
Budget 2010, delivered this afternoon by Finance Minister Jim Flaherty, contains an update of the Canadian government's intention with respect to the establishment of a federal securities regulator and implementation of a federal securities act. Specifically, the budget sets a three-year target for the establishment of a federal securities regulator and identifies key next steps. These steps include: (i) the release of a draft Canadian securities bill this Spring; (ii) referral of the draft bill to the Supreme Court for an opinion as to Parliament's authority under the Constitution with respect to federal regulation of the securities sector; (iii) delivery of an organizational and administrative transition plan by the Canadian Securities Transition Office this Summer; and (iv) ongoing work on rules and regulations that will complement the federal securities act. While inviting and encouraging all jurisdictions to join the federal effort, Budget 2010 states that the government will move forward with a majority of provinces and territories through voluntary participation.
Posted on March 3, 2010
As of March 1, the U.S. Financial Industry Regulatory Authority (FINRA) Trade Reporting and Compliance Engine (TRACE) will now include debt issued by federal government agencies, government corporations and government-sponsored enterprises as well as primary market transactions in new corporate debt issues. The expansion of TRACE represents a 50% increase in the number of debt securities subject to its reporting requirements.
Posted on March 2, 2010
The Provincial/Territorial Council of Ministers of Securities Regulation (Council) issued its 2009 Progress Report yesterday outlining the various regulatory activities undertaken last year across Canadian jurisdictions. The issues considered in the Council's Progress Report include the federal transition to a single securities regulator, the upcoming changeover to IFRS and the introduction in various jurisdictions of harmonized securities transfer legislation.
The Progress Report also provides a preview of initiatives that the Council anticipates the CSA will undertake during the next year, namely, a new rule dealing with oversight of credit rating organizations, the development of a harmonized regulatory framework for derivatives, including OTC derivatives, hedge fund regulation and executive compensation requirements.
Posted on March 1, 2010
On February 26, the Ontario Securities Commission (OSC) announced the creation of an Investor Advisory Panel in order to afford investors better representation in the OSC's consideration of various issues. Specifically, the panel will provide input on such things as OSC proposals, concept papers and the annual statement of priorities. The panel will consist of seven members representing a broad range of investors and according to the OSC, applications for membership will be solicited within a few weeks. The Canadian Foundation for Advancement of Investor Rights (FAIR Canada), meanwhile, welcomed the OSC's announcement and provided a number of recommendations to the OSC in its formulation of the panel.
Posted on February 25, 2010
On Monday, the International Organization of Securities Commissions (IOSCO) published a final report entitled "Principles for Periodic Disclosure by Listed Entities". The report is intended to provide securities regulators with a framework for establishing or reviewing their periodic disclosure regimes. According to the report, its principles-based format "allows for a wide range of application and adaptation by securities regulators."
Specifically, the report identifies the following principles as being "essential" for periodic disclosure regimes: (i) periodic reports should contain relevant information; (ii) for those periodic reports in which financial statements are included, the persons responsible for the financial statements provided should be clearly identified and should state that the financial information provided is fairly presented; (iii) the issuer's internal control over financial reporting should be assessed or reviewed; (iv) information should be available to the public on a timely basis; (v) periodic reports should be filed with the relevant regulator; (vi) the information should be stored to facilitate public access; (vii) disclosure criteria; (viii) equal access to disclosure; and (ix) equivalence of disclosure.
Posted on February 23, 2010
On February 12, Quebec's Autorité des marchés financiers (AMF) reported on its enforcement activities for 2009. In its release, the AMF highlighted its collaborative efforts with police forces and other partners in fraud prevention and response and provided enforcement figures for the preceding year. Specifically, the AMF cited a total of 855 charges laid for violations under Quebec's Securities Act and An Act respecting the distribution of financial products and services, which led to the sanctioning of 783 individuals. Further, over $81 million in fines and penalties were assessed which, according to the AMF, represented over half of such penalties imposed in Canada.
As we noted in an earlier post, the CSA also released its 2009 enforcement report earlier this month.
Posted on February 19, 2010
The Canadian Securities Administrators (CSA) published implementation milestones today for the order protection rule contained in recent amendments to National Instrument 23-101 Trading Rules. The order protection rule, which comes into effect on February 1, 2011, requires marketplaces to establish and ensure compliance with policies and procedures designed to prevent trade-throughs on that marketplace. The CSA notice, meanwhile, aims to facilitate implementation of the order protection rule by establishing various technical milestones for marketplaces to meet. According to the notice, marketplaces will be expected to provide the CSA with information regarding their progress on each milestone date. The CSA are also encouraging marketplaces to consider whether to publicly disclose progress-related information. A notice providing details about an industry-wide test is expected to be published by the CSA in the coming months.
Posted on February 17, 2010
Individuals with criminal records that are filing Form 4 - Personal Information Form will now have to be fingerprinted due to new procedures being implemented by the Ontario Provincial Police (OPP). According to a TSX notice released today, effective immediately, the OPP will no longer provide the TSX with information regarding the positive results of criminal record checks without fingerprint verification from the individual. An RCMP Records Release Form, which will be provided by the TSX on an as-needed basis, will have to be signed and submitted at the time of fingerprinting to give the OPP permission to release the information to the TSX.
Thus, the TSX is recommending that individuals that have pled, or have been found guilty of an offence as defined by the Form, be digitally fingerprinted at an RCMP-accredited agency providing such services. The TSX has also advised that the OPP will only accept criminal consent forms submitted within 90 days from the date the consent was signed.
Similar consideration to the new procedures should be given by those filing Form 2A respecting TSX-Venture companies.
Posted on February 3, 2010
On February 1, the Canadian Securities Administrators (CSA) released its 2009 Enforcement Report. According to the report, 141 enforcement cases were concluded in 2009, resulting in over $153 million in fines and administrative penalties ordered and over $92 million in restitution, compensation and disgorgement. The fines and penalties assessed in 2009 represented a large increase from the $12 million ordered in 2008. The report also discusses the preventative measures employed by the CSA as well as the sharp increase in the use of reciprocal orders since 2008. Meanwhile, a number of case summaries are presented in the report to describe the main categories of violations and to illustrate the type of activity that constitutes each type of violation.
Posted on January 29, 2010
In response to last summer's British Columbia Court of Appeal (BCCA) decision in Shapray v. British Columbia (Securities Commission), the British Columbia Securities Commission (BCSC) has announced the rescission of BC Instrument 15-501 Disclosure of Investigation Information and its related policy, while also deleting section 2.6(d) of BC Policy 15-601 Hearings. In its place, the BCSC has announced a new BC Instrument 15-501 Disclosure of Investigation Information, which provides consent to disclose "any information or evidence obtained or sought to be obtained or the name of any witness examined or sought to be examined under section 143, 144 or 145 of the Securities Act."
In Shapray, the petitioner commercial litigation lawyer argued that section 148(1) of the British Columbia Securities Act, which restricted disclosure of information and evidence obtained pursuant to an investigation by the BCSC, was unconstitutional. Mr. Shapray claimed that the provision made it impossible for him to adequately defend allegations of misconduct under the Securities Act or to properly prepare witnesses. Section 148(1) of the Act, which is similar to provisions found in the securities laws of other provinces, states:
Without the consent of the commission, a person must not disclose, except to the person's counsel, any information or evidence obtained or sought to be obtained or the name of any witness examined or sought to be examined...
Ultimately, the BCCA struck down s. 148 of the Act as unconstitutional, but delayed the order of invalidity for a year so as to allow the Legislature to consider alternatives. The instruments and policies recently revoked, meanwhile, provided the BCSC's consent for the disclosure of investigation information under prescribed circumstances. The new instrument provides for a broader consent, effective December 3, 2009, until the earlier of July 8, 2010 and the date the legislature repeals section 148.
Posted on January 28, 2010
Amendments to MFDA Policy No. 3 Complaint Handling, Supervisory Investigations and Internal Discipline and consequential amendments to related MFDA rules and policies are scheduled to come into effect on February 1, 2010. The amendments are intended to provide "additional guidance with respect to the standards that Members should have in place regarding complaint handling and supervisory investigations" as well as consistency with the new registration regime and IIROC complaint handling requirements. The amended Policy No. 3 considers such issues as the assessment and handling of complaints, settlement agreements, supervisory investigations, internal discipline and record retention.
Posted on January 22, 2010
The Ontario Securities Commission (OSC) has announced that it has made amendments to OSC Rule 13-502 Fees and OSC Rule 13-503 (Commodity Futures Act) as well as to their respective companion policies. Earlier versions of the rules were published in October 2009 and on receipt of Ministerial approval, the amendments are expected to come into force on April 5, 2010.
Posted on January 22, 2010
Earlier this week, the Ontario Securities Commission (OSC) issued a report summarizing its compliance review of various types of investment funds. The review began in September 2008 in response to concerns respecting market turmoil and focused on assessing compliance by fund managers with Ontario securities laws. Funds were reviewed in three phases, beginning with money market funds, followed by non-conventional investment funds and finally focusing on hedge funds.
While the OSC noted "some instances of non-compliance" during site visits, the report states that no industry-wide compliance issues were observed. The report, however, makes a number of observations and includes suggested practices for fund managers.
Posted on January 22, 2010
On January 11, Nunavut's Local Rule 31-503 came into effect, setting out a new schedule of costs and fees adopted under s. 169 of the Securities Act (Nunavut).
Posted on January 18, 2010
The Ontario Securities Commission (OSC) has released the January 2010 edition of The Investment Funds Practitioner, a publication intended to assist those that regularly prepare public disclosure documents and applications for exemptive relief on behalf of investment funds. Authored by staff of the OSC's Investment Funds Branch, the Practitioner contains an overview of recent issues emerging from applications for discretionary relief, prospectuses and continuous disclosure documents. Specifically, the OSC provided a number of observations and practice points that may be of interest. Among other things, the publication considers the following:
- Responding to "novel applications" for relief from the various conflict provisions under Ontario's Securities Act (Act) and National Instrument 81-102 Mutual Funds (NI 81-102) based on IRC approval. The OSC reminded filers that the Canadian Securities Administrators deliberately chose to maintain the various conflict provisions in local securities legislation and codify only limited exemptions in National Instrument 81-107 Independent Review Committee for Investment Funds. The OSC stated that it intends to complete reviews to assess how the IRC approval system is working with existing codified exemptions.
- The OSC noted a number of "recurring issues" respecting the mergers and reorganizations of mutual funds, including applications missing required information and filers failing to properly factor in securities regulatory approval into the transaction planning process.
- The OSC also noted that it generally does not require a parallel application for relief from the conflicts of interest prohibitions under the Act where relief is sought under NI 81-102 to facilitate fund on fund arrangements that do not comply with all the conditions in section 2.5(2) of NI 81-102. The OSC indicated that it is of the view that the exemption codified under section 2.5(7) of NI 81-102 still applies even where the fund has obtained an exemption from some of the conditions in section 2.5(2).
- Filers were also reminded by the OSC that those wishing to receive a receipt for a (preliminary) prospectus that the (preliminary) prospectus and accompanying material should be received by the OSC on or before noon on the day the receipt is required.
- The OSC noted that while it has granted relief to file a prospectus beyond the 90 day period, it encourages filers to make applications for this type of relief prior to the expiration of the 90 day period.
Posted on January 15, 2010
Back in December, the U.K. Financial Services Authority (FSA) announced the publication of proposals intended to "rebuild people's trust and confidence in the retail investment market by raising standards of professionalism." The FSA's proposals address issues respecting the governance of professional standards for retail investment advisers, the application of principles to the corporate pension market and advice on pure protection products (certain types of insurance). With respect to professional standards, the FSA proposes an internal FSA model to govern professional standards.
The FSA is accepting responses on its proposals until March 16, 2010.
Posted on January 5, 2010
Yesterday, the Investment Industry Regulatory Organization of Canada (IIROC) published a notice 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 first quarter of 2010 as 1,050 points, 2,100 points and 3,150 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 Index. The TSX trigger levels are: Level 1 (10%) - 1,150 points; Level 2 (20%) - 2,300 points and Level 3 (30%) - 3,450 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.
Posted on December 23, 2009
On December 22, 2009, the Investment Industry Regulatory Organization of Canada (IIROC) published guidance for members on maintaining an adequate branch supervisory program. The notice follows a review by IIROC of the branch supervision processes of various IIROC members in early 2009. The published notice identifies common concerns with members' branch audit programs and outlines a number of best practices in response to each concern.
Posted on December 22, 2009
The Ontario Securities Commission, the Autorité des marchés financiers and the Investment Industry Regulatory Organization of Canada yesterday announced that they had reached settlements with various financial firms in connection with the regulators' investigations into the Canadian asset-backed commercial paper market. The settlements reportedly represent a total of $138.8 million in administrative penalties and investigation costs.
Posted on December 18, 2009
On December 11, the U.S. House of Representatives approved comprehensive legislation intended to "modernize America's financial rules" in response to last year's market meltdown. The Wall Street Reform and Consumer Protection Act of 2009, which passed by a vote of 223-202, combines a number of legislative initiatives announced in the past year into a single piece of legislation numbering almost 1300 pages in length.
The bill includes provisions respecting (i) shareholder approval of executive compensation and golden parachutes; (ii) enhanced compensation structure reporting; (iii) the regulation of OTC derivatives and specifically the requirement that all standardized swap transactions between dealers and "major swap participants" be cleared and traded on an exchange or electronic platform; and (iv) the registration and regulation of advisers to private pools of capital.
There is no guarantee, however, that the bill will become law, as it must now go to the Senate for consideration.
Posted on December 18, 2009
The U.S. Securities and Exchange Commission (SEC) yesterday announced the adoption of rule amendments to "substantially increase the protections" for investors that trust their assets with SEC-registered investment advisers. Depending on the investment adviser's custody arrangement, the rules would require (i) advisers to engage independent public accountants to conduct annual surprise exams to verify that client assets exist; and (ii) a written custody control review that "describes the controls in place at the custodian, tests the operating effectiveness of those controls and provides the results of those tests" when the adviser or affiliate acts as custodian of client assets. The amended rules would also impose new controls on advisers to hedge funds and other private funds that comply with the custody rule. Such advisers would have to obtain an audit of the fund and deliver the fund's financial statements to fund investors, while the auditor would have to be registered with and subject to inspection by the Public Company Accounting Oversight Board.
According to SEC Chairman Mary Schapiro, "[t]hese new rules will apply additional safeguards where the safeguards are needed most - that is, where the risk of fraud is heightened by the degree of control the adviser has over the client’s assets."
Posted on December 11, 2009
The Ontario Securities Commission today published a request for comments regarding the draft Statement of Priorities for its fiscal year ending March 31, 2011. The document sets out the OSC's goals for the year and identifies key regulatory priorities. Specifically, the Commission has identified the following goals: (i) identifying the important issues and dealing with them in a timely way; (ii) delivering fair, vigorous and timely enforcement and compliance programs; (iii) championing investor protection, especially for retail investors; and (iv) supporting and promoting a more flexible, efficient and accountable organization.
Further, the OSC's key regulatory priorities for 2010-11 include: (i) deepening its focus on investor protection; (ii) responding to market developments (iii) addressing the adequacy of regulatory coverage; (iv) maintaining a strong and visible enforcement presence; and (v) improving the way the Commission works. Of particular interest may be the OSC's comments regarding the adequacy of regulatory coverage. On this point, the OSC identified its intention to address:
- the risks related to products and the distribution of securities in the exempt market;
- the regulatory framework for trading OTC derivatives;
- regulatory requirements applicable to non-conventional investment funds; and
- the appropriate regulation of credit rating agencies.
The OSC is accepting written submissions until February 15, 2010.
Posted on December 11, 2009
On December 7, the TSX published a staff notice providing guidance on: (i) acceptable standards for anti-dilution provisions for convertible securities; (ii) recent amendments to the TSX Manual respecting security-based compensation arrangements that provide for cashless exercises; and (iii) the application of the uptick prohibition for purchases made pursuant to normal course issuer bids (NCIBs).
Anti-dilution provisions for convertible securities
Convertible securities, such as warrants, options, debentures and preferred shares typically contain anti-dilution provisions designed to compensate holders of convertible securities for changes in a listed issuer's capital. The notice clarifies the standards that the TSX applies in considering such changes. Specifically, the notice states that the TSX generally does not accept downward adjustments to the exercise or conversion price of a convertible security when a listed issuer completes a subsequent issuance of securities at a lower subscription price unless:
- in the case of warrants and options, the exercise price is not lower than the market price at the time the convertible security as issued; and
- in the case of a convertible instruments (such as debentures and preferred shares) the adjustment results in a conversion price that is not lower than the market price at the time the convertible security was issued, less the maximum discount allowed under the TSX Manual.
Where an adjustment results in the issuance of additional securities rather than a change to the subscription or conversion price, the TSX will consider the effect on the effective subscription or conversion price in order to apply the above rules. If the above pricing conditions are not satisfied, disinterested security holder approval will be required.
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Posted on December 4, 2009
The OSC has just released its 2009 Corporate Finance Branch Report, summarizing the operational activities of the Branch for fiscal 2009, which ended on March 31, 2009. The report highlights the Branch’s activities in the area of mergers and acquisitions, specifically relating to OSC staff views on negative bid variations and bid withdrawals, significant M&A related decisions and use of the financial hardship exemption under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101). The report also summarizes the Branch’s activities relating prospectus and rights offerings as well as continuous disclosure reviews and continuous disclosure issues relating to market conditions and transition to international financial reporting standards (IFRS).
Mergers and Acquisitions
According to OSC staff, actions such as a bidder amending a bid in its discretion to make it less favourable or unilaterally withdrawing a bid prior to its expiry may be regarded as “inconsistent with the take-over bid regime” and its “underlying purpose to provide a transparent and predictable framework for take-over bids.” As such, staff intend to monitor such actions by bidders to determine whether the bidder has failed to comply with securities legislation or otherwise acted in a manner contrary to the public interest. Such reviews will focus, in particular, on whether the bidder's actions were based on a reasonable interpretation of bona fide conditions in its offer.
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Posted on December 4, 2009
Pursuant to section 3.7(1) of the Ontario Securities Act, the OSC and Minister of Finance must enter into a Memorandum of Understanding (MOU) every five years, setting out, among other things, each party's respective roles and responsibilities and their accountability relationship. The most recent MOU, executed on November 5, 2009, was published today by the OSC.
Posted on November 20, 2009
On November 16, the Government of Ontario introduced Bill 218, An Act to implement 2009 Budget measures and to enact, amend or repeal various Acts in the provincial Legislature. Of particular interest, Schedule S of the Bill clarifies that the deeming provisions found in sections 90 and 91 of the Securities Act apply to the “early warning” provisions under sections 102.1 and 102.2 of the Act. Essentially, the amendments clarify that the deeming provisions applicable to offerors in the takeover bid context also apply to aquirors with respect to early warning reporting requirements.
Meanwhile, changes to sections 138.8 and 138.9 of the Act would amend procedures under the secondary market civil liability provisions. Specifically, applicants and appellants would be required to provide notice to the Ontario Securities Commission of various court dates, each party would have to provide the OSC with copies of relevant facta and the OSC would gain the authority to intervene in appeals respecting leave or in an appeal of a decision respecting liability.
The Bill would also amend the situations in which a representative’s registration would be automatically suspended. Under the amendments, a representative would be automatically suspended at the time he or she ceased to have the authority to act on behalf of a registrant in a capacity that required registration by reason of one of the following: (i) the representative’s termination; (ii) the changing of employment functions; or (iii) the change or end of the partnership or agency relationship of the representative with the registrant. Meanwhile, the revocation of registration after an automatic suspension under the Act would be delayed until a proceeding was completed, while the right to a hearing would be extended to those whose registration was suspended automatically under the Act.
Posted on November 16, 2009
As described in our post of October 21, the U.S. Securities and Exchange Commission (SEC) recently voted to propose measures intended to increase the transparency of private automated trading systems known as "dark pools". On November 13, the SEC published its proposed rules and amendments to joint-industry plans. The proposals would: (i) amend the Exchange Act quoting requirements so as to apply expressly to actionable "Indications of Interest", which are similar to a typical buy or sell quote and permit others to trade; (ii) revise the order display requirements of Regulation ATS, including a substantial lowering of the trading volume threshold that triggers public display obligations for alternative trading systems; and (iii) amend the joint-industry plans for publicly disseminating consolidated trade data to require real-time disclosure of the identity of dark pools and other alternative trading systems on the reports of their executed trades.
Posted on November 12, 2009
Yesterday, Quebec's Autorité des marchés financiers (AMF) released its Continuous Disclosure Review Program Activity Report for the fiscal year ending March 31, 2009. The report presents the findings of the AMF's review of the continuous disclosure documents of Quebec-based companies and investment funds. The AMF stated in its release that it focused its reviews on financial services companies and those with high indebtedness given the credit and liquidity challenges experienced over the last year.
While the report found a high quality of disclosure records overall, the AMF noted that deficiencies were found in the application of accounting requirements, specifically with respect to financial instrument disclosure. Thus, the AMF encouraged issuers "to rigorously apply all GAAP and to pay special attention to new accounting requirements." The AMF also noted that for the 2009-2010 fiscal year, it will be particularly focused on disclosure relating to the upcoming changeover to IFRS and the recent amendments to the CICA Handbook regarding fair market measurements.
Posted on November 6, 2009
On October 30, the British Columbia Securities Commission (BCSC) announced amended conditions of registration for investment dealers that maintain an office in British Columbia and trade in U.S. OTC markets, and who have not filed a prescribed form of undertaking. Specifically, the BCSC has clarifed certain aspects of the previous obligations, amended Form B (reporting of OTC trading commissions) and revised language to reflect National Instrument 31-103 Registration Requirements. Of particular note, the conditions now specify who can act as a designated individual, as IIROC has removed that definition from its Dealer Member Rules. Like their previous incarnation, the conditions of registration include the effective management of risks and monitoring, recordingkeeping and reporting requirements. An interpretation note was also published to explain how the BCSC interprets the conditions. The amended obligations are effective immediately and are set to expire on December 31, 2011.
Posted on November 2, 2009
The Investment Industry Regulatory Organization of Canada (IIROC) will be hosting a compliance seminar in Montreal on November 18 from 4:30 to 6:00 p.m. The event will be presented in English but provide attendees the opportunity to ask questions in both English and French. The topics to be covered include trading conduct compliance, best execution obligations and short sales. An on-demand webcast of the event, meanwhile, will be available on the IIROC website in January 2010. IIROC will also be releasing the French version of its annual webcast highlighting enforcement issues and concerns on November 10 at 4:00 p.m. IIROC's catalogue of English and French webcasts are available here.
Posted on October 30, 2009
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.
Posted on October 30, 2009
On October 27, the U.S.
House Committee on Financial Services announced the introduction, in conjunction with the
Treasury Department, of
draft legislation intended "to address the issue of systemic risk and 'too big to fail' financial institutions." Specifically, the legislation would establish a "Financial Services Oversight Council" to identify financial companies and financial activities that should be subject to "heightened prudential standards in order to promote financial stability and mitigate systemic risk". A variety of options would be available to regulators in response to identified risks and according to the release, the proposed legislation would provide "for the orderly wind-down of failing firms" to ensure that "industry and shareholders absorb the risks and costs of failure, not taxpayers."
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."
Posted on October 22, 2009
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.
Posted on October 22, 2009
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.
Posted on October 21, 2009
The U.S.
Securities and Exchange Commission (SEC) today
voted to propose measures to increase transparency of private automated trading systems known as "dark pools". Such private systems do not display quotes in the public quote stream and, according to the SEC, the lack of transparency associated with dark pools could create a "two-tiered market that deprives the public of information about stock prices and liquidity." As such, the SEC's proposals include requiring the public disclosure of information regarding "Indications of Interest" (IOIs), which are similar to a typical buy or sell quote and permit others to trade. As described in
our post of June 19, SEC Chairman Mary Schapiro has discussed the need to regulate dark pools in the past, while in Canada, regulators
recently published a consultation paper on the subject.
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.
Posted on October 20, 2009
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.
Posted on October 19, 2009
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.
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Posted on October 19, 2009
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.
Posted on October 16, 2009
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.
Posted on October 9, 2009
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.
Posted on October 2, 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.
Posted on October 2, 2009
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.
Posted on September 25, 2009
The Canadian Securities Administrators (CSA) today published for comment proposed amendments to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) and its companion policy as well as related consequential amendments to National Instrument 14-101 Definitions. As previously discussed, International Financial Reporting Standards (IFRS) will apply to Canadian publicly accountable enterprises for financial years beginning on or after January 1, 2011. The amendments are intended to "provide an efficient transition mechanism for issuers and registrants to reflect the change to IFRS".
The Canadian Accounting Standards Board (AcSB) has announced that it plans to incorporate IFRS into the Handbook of the Canadian Institute of Chartered Accountants (the CICA Handbook) as “Canadian GAAP for publicly accountable enterprises.” As a result, Part 1 of the CICA Handbook will contain a version of Canadian GAAP to be known as Canadian GAAP for publicly accountable enterprises that will apply for financial years beginning on or after January 1, 2011, and Part IV will contain a version known as Canadian GAAP for public enterprises that are the standards constituting Canadian GAAP before the mandatory effective date (current Canadian GAAP).
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Posted on September 25, 2009
The Ontario Securities Commission (OSC) today released its 2009 Compliance Team Annual Report, which summarizes the team's activities for fiscal 2009. The report outlines: (i) the compliance team's role; (ii) the team's response to recent market turmoil; (iii) general compliance initiatives; (iv) deficiencies found in the team's review of portfolio managers and limited market dealers; (v) the outcome of the team's reviews; (vi) the recent registration reform project; and (vii) how the move to IFRS may affect market participants.
Posted on September 18, 2009
The U.S. Securities and Exchange Commission (SEC) also voted yesterday to take a number of measures with the intent of increasing the oversight of credit ratings agencies. Among other things, the SEC decided to: (i) adopt rules to provide greater information respecting ratings histories; (ii) propose amendments to require annual compliance reports; and (iii) propose new rules that would require the disclosure of information respecting what a credit rating covered, any material limitations on the scope of the rating and whether "ratings shopping" had occurred. Public comments are being accepted by the SEC for 60 days from the publication of the amendments by the Federal Register.
Posted on September 17, 2009
The U.S.
Securities and Exchange Commission (SEC) and the U.K.
Financial Services Authority (FSA)
announced plans today "to explore common approaches to reporting and other regulatory requirements for key market participants such as hedge funds and their advisers." Specifically, the two regulators "agreed to identify a common, coherent set of data to collect from hedge fund advisers/managers" in order to help the regulators identify risks to their regulatory mandates and objectives. The announcement, subsequent to a meeting between the SEC and FSA, stated that discussions also included OTC markets and central clearing, accounting issues, regulatory reform, credit agency oversight, short selling and corporate governance and compensation practices. Today's release follows an
announcement by the U.S.
Commodity Futures Trading Commission (CFTC) yesterday that the CFTC had signed a memorandum of understanding with the FSA "to enhance cooperation and the exchange of information relating to the supervision of cross-border clearing organizations."
Posted on September 17, 2009
Yesterday, the U.S. Securities and Exchange Commission (SEC) announced the creation of its new Division of Risk, Strategy, and Financial Innovation, which combines the Office of Economic Analysis, the Office of Risk Assessment and certain other functions. According to the SEC, the new division will "provide the Commission with sophisticated analysis that integrates economic, financial, and legal disciplines." The three broad areas that fall under the new division's responsibilities are risk and economic analysis, strategic research and financial innovation.
Posted on September 17, 2009
On September 14, the International Organization of Securities Commissions (IOSCO) released a report outlining proposed standards "aimed at addressing regulatory issues of investor protection which have arisen due to the increased involvement of retail investors in hedge funds through funds of hedge funds." The report's proposals focus on the two particular areas of concern identified in an earlier report of June 2008, being: (i) liquidity risk; and (ii) the due diligence process. As stated by the release, the standards "form part of a larger body of work that IOSCO has been engaged in with regards to addressing the regulatory issues presented by hedge funds."
Posted on September 16, 2009
On September 15, 2009, the federal Department of Justice announced that the government of Canada intends to introduce legislation during the current session of Parliament to address white-collar crime. According to the Justice Department, the proposed amendments to the Criminal Code "will include creating a mandatory jail sentence for those who commit serious fraud and additional aggravating factors to justify longer sentences." While details are not yet available, the proposed legislation is also expected to include provisions respecting restitution to victims of white-collar crime.
Posted on September 15, 2009
The TSX announced last week that the temporary relief granted with respect to the Remedial Review Process will not be extended beyond the end of this month. As described in our post of March 26, the relief was initially granted on November 3, 2008 and, after providing for an extension, is set to expire on September 30, 2009. The relief, initiated in response to the "extraordinary market conditions" prevalent late last year, extends from 120 to 210 days the maximum time period that an issuer has to remedy deficiencies that triggered a delisting review.
Posted on September 11, 2009
The Canadian Securities Administrators today released a staff notice outlining the results of their recently conducted review regarding compliance with provisions of National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings. CSA staff notes that 38% of reporting issuers reviewed substantively complied with NI 52-109. Some level of non-compliance was identified in the remaining 62%, however, with 30% of reporting issuers being required to refile their annual MD&A and/or certificates.
A majority of refilings that were required were on account of (i) issuers not fully disclosing their conclusions about the effectiveness of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR) in their MD&A, and (ii) issuers making significant amendments to the wording of the certificates.
In connection with the deficiencies that were observed, the CSA staff made the following comments:
- Issuers may not qualify their conclusions about the effectives of DC&P and ICFR unless the qualifications are explicitly permitted by NI 52-109.
- If issuers choose to discuss a limitation in their MD&A (such as lack of segregation of duties or a lack of knowledgeable accounting staff in technically complex areas), the MD&A should also clearly disclose if the limitation is a material weakness relating to ICFR or a weakness in DC&P that is significant.
- Issuers should be careful not to confuse the concepts of "mitigating procedures" and "compensating controls". A mitigating procedure may help to reduce, but does not eliminate the financial reporting risk that the deficient ICFR component failed to address, whereas a compensating control fully addresses a material weakness and allows certifying officers to conclude that ICFR and DC&P are effective.
- With respect to the lack of segregation of duties, the threshold for the additional involvement of the audit committee or board of directors constituting a compensating control, rather than a mitigating procedure, is high. If the issuer has implemented only a mitigating procedure, it should identify the lack of segregation of duties as a material weakness and conclude that ICFR is not effective. In this respect, CSA Staff note that section 10.3 of the Companion Policy to NI 52-109 also states that if the certifying officers identify a material weakness in the issuer's ICFR, this will almost always represent a weakness that is significant in the issuer's DC&P.
The total sample size reviewed consisted of 198 non-venture issuers and 53 venture issuers.
Posted on August 20, 2009
On Wednesday, the Investment Industry Regulatory Organization of Canada released a rules notice respecting the anticipated implementation of its client complaint handling rule proposals. IIROC first proposed amendments to its Dealer Member Rules to establish a framework for complaint handling in February 2009, and the proposals just released incorporate what IIROC has described as "minor" changes in response to public comments received. The complaint handling process requires Dealer Members to appoint a designated complaints officer and establish written complaint-handling procedures, while also setting out the general process and timelines for responding to complaints.
IIROC has submitted its proposals to the Canadian Securities Administrators (CSA) for final approval and the proposals will become effective 30 days after CSA approval and the issuance of an IIROC rules notice. Thus, IIROC advises Dealer Members to start preparing for implementation. A black-line copy reflecting changes to its earlier proposal was also provided.
Posted on July 29, 2009
The Securities and Exchange Commission's Investor Advisory Committee, having held its first meeting on Monday, announced today that it has agreed on a broad agenda. Identified topics for discussion moving forward include: the fiduciary duties of financial intermediaries, disclosures to investors, whether majority voting for directors should be mandatory for all U.S. companies and whether investors have the information necessary to make informed proxy voting decisions.
Posted on July 28, 2009
The U.S. Securities and Exchange Commission yesterday announced that it is taking further steps in an attempt to curtail abusive "naked" short selling in equity securities and improve transparency respecting short sales generally. To that end, the SEC is making permanent, with some limited modifications, its interim final rule of October 2008 requiring broker-dealers to promptly purchase or borrow securities to deliver on a short sale. Further, the SEC stated that it is working with self-regulatory organizations to make short sale volume and transaction data available on SRO websites. The SEC's consideration of proposals on short sale price tests and circuit breaker restrictions also continues.
Posted on July 23, 2009
The U.S. Department of the Treasury announced on Monday that it was delivering to Congress proposed legislation intended to address the situation of recent years where "investors were overly reliant on credit rating agencies that often failed to accurately describe the risk of rated products." Under the proposed legislation and rules to be adopted by the Securities and Exchange Commission, credit rating agencies would, among other things, have to register with the SEC and be subject to a higher degree of oversight, they would be prohibited from providing consulting services to companies that contract for ratings, agencies would be required to manage and disclose conflicts of interest and preliminary ratings would have to be publicly disclosed to reduce "ratings shopping". According to the Treasury Department's fact sheet, the proposals will "increase transparency, tighten oversight, and reduce reliance on credit rating agencies."
Posted on July 16, 2009
The Ontario Securities Commission recently released its 2009 Annual Report, highlighting its initiatives for the last year and outlining its broad goals going forward. The OSC's compliance and enforcement activities for the 2008-09 fiscal year were reviewed and the report noted the "substantial increase" in adjudicative activity for the year, representing a 48% increase in hearing days from the previous year. A total of 21 enforcement proceedings were commenced before an adjudicative panel, leading to almost $21 million in administrative penalties, disgorgement, settlement amounts and costs. The report also states that the OSC intends to maintain or increase its hearings schedule and expects to enhance its adjudicative case management process with proposals to be published in 2009-10.
Posted on July 16, 2009
The U.S. Securities and Exchange Commission has now published proposed amendments to its rules in order to "improve the disclosure shareholders of public companies receive regarding compensation and corporate governance, and facilitate communications relating to voting decisions." The proposals, announced earlier this month, would expand the scope of compensation disclosure and analysis to require disclosure of a company's overall compensation program as it related to risk management. Disclosure requirements regarding the qualifications of directors and nominees would also be extended and certain issues relating to the solicitation of proxies and the granting of proxy authority would be clarified. Comments on the proposals are being accepted by the SEC until September 15, 2009.
Posted on July 15, 2009
Chairman Mary Schapiro of the
Securities and Exchange Commission (SEC) testified before the
House Committee on Financial Services' Subcommittee on Capital Markets, Insurance and Government-Sponsored Enterprises yesterday respecting the SEC's "role in helping to address the financial crisis" as well as the actions being taken "to improve investor protection and restore confidence" in financial markets. In
her testimony, Ms. Schapiro provided an overview of the SEC's recent work and its accomplishments during her tenure at the Commission and outlined the steps the SEC is taking to address ongoing issues, including strengthening examination and oversight, improving transparency and investor protection, combating abusive short selling, enhancing the regulation of credit rating agencies and strengthening shareholder rights. Of interest, Ms. Schapiro noted that the SEC's
most recent proposals regarding the regulation of short sales resulted in over 3,700 comment letters, which are currently being reviewed by SEC staff.
Posted on July 14, 2009
On July 8, the Court of Appeal for British Columbia found the prohibition contained in section 148 of the British Columbia Securities Act that restricts disclosure by any person, except to his or her counsel, of "any information or evidence obtained or sought to be obtained or the name of any witness examined or sought to be examined" pursuant to an investigation by the British Columbia Securities Commission (BCSC) to be unconstitutional. The petitioner in the case, a Vancouver commercial litigation lawyer, argued that the provisions made it difficult to adequately defend allegations of misconduct under the Securities Act or to prepare a witness to give evidence. While the provisions allow for disclosure with the consent of the BCSC, the Court of Appeal found that the prohibition, which is similar to the one found under section 16 of Ontario's Securities Act, infringes on the right to freedom of expression enshrined in the Canadian Charter of Rights and Freedoms. The order of invalidity, however, was delayed for a year. Whether new provisions are drafted that pass constitutional muster, or whether other provinces are affected by the persuasive force of the decision, remains to be seen.
Posted on July 13, 2009
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| Secretary Geithner speaking in February |
Citing the "enormous scale" and "critical role" of over-the-counter (OTC) derivatives in the financial markets, U.S.
Treasury Secretary Timothy Geithner outlined the steps the
Obama Administration intends to take to regulate OTC derivatives in
testimony to Congress on July 10. The steps include: (i) requiring that all standardized derivative contracts be cleared through well-regulated central counterparties and executed either on regulated exchanges or regulated electronic trade execution systems; (ii) encouraging greater use of standardized OTC derivatives through capital requirements and other measures to facilitate migration of such derivatives onto central clearinghouses and exchanges; (iii) requiring all OTC derivative dealers and other major market participants to be subject to supervision and registration; (iv) making OTC derivative markets fully transparent by the imposition of recordkeeping and reporting requirements; (v) providing the
Securities and Exchange Commission (SEC) and the
Commodity Futures Trading Commission (CFTC) with authority to enforce the regulation of OTC derivative markets; (vi) working with the SEC and CFTC to improve standards governing who can participate in OTC derivative markets and (vii) working with international counterparts to ensure that the U.S. regulatory regime is matched by effective regimes internationally. The testimony follows on
recent testimony by SEC Chairman Mary Schapiro on the same subject.
Posted on July 10, 2009
On June 23, OPTI Canada Inc., a Calgary-based oil company announced the filing of a preliminary short form prospectus in connection with a public offering of shares. While the TSX will "generally accept notice of distributions by way of prospectus", under Section 606 of the TSX Company Manual, the TSX may apply the provisions respecting private placements, such as requiring securityholder approval, if the offering price of the shares falls below a certain discount to the market price. In deciding whether to apply the private placement provisions, the TSX will consider factors such as: the method of distribution; the participation of insiders; the number of placees; the offering price; and the economic dilution.
On June 25, OPTI announced that the TSX had decided to exercise its discretion to apply the private placement rules as the offering price fell below the permissible discount. While OPTI believed it impractical to conduct a shareholders meeting, it was successful in going forward with the public offering subsequent to an increase in the offering price, coupled with a decrease in the market price of its shares.
Posted on July 3, 2009
Schedule 26 of Ontario Bill 162, the Budget Measures Act, 2009, contains amendments to the Securities Act, as described in our post of May 22. While Royal Assent of Bill 162 was granted on June 5, 2009, some of the Bill's provisions are yet to come into force. Today's OSC Bulletin summarizes the changes and provides a table highlighting the provisions not yet in effect. The Ministry of Finance is expected to recommend dates to the Lieutenant Governor for two proclamation dates for the remaining provisions, the earlier to be near the end of September 2009 to facilitate the implementation of the new registration requirements in National Instrument 31-103 Registration Requirements at the same time across Canada.
Posted on July 3, 2009
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:
- consumers have, understand, and can use the information they need to make responsible decisions about consumer financial products or services;
- consumers are protected from abuse, unfairness, deception, and discrimination;
- markets for consumer financial products or services operate fairly and efficiently with ample room for sustainable growth and innovation; and
- 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."
Posted on July 3, 2009
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."
Posted on July 2, 2009
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.
Posted on June 23, 2009
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.
Posted on June 22, 2009
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:
- Hedge funds and/or hedge fund managers/advisers should be subject to mandatory registration;
- 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;
- 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;
- Hedge fund managers/advisers and prime brokers should provide information for systemic risk purposes to the relevant regulator;
- Regulators should encourage and take account of the development, implementation and convergence of industry good practices, where appropriate; and
- 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.
Posted on June 22, 2009
The Minister of Finance today announced the launch of a Transition Office to "lead Canada's effort to establish the Canadian securities regulator." Doug Hyndman, Chair of the British Columbia Securities Commission has been tapped to lead the Transition Office as its Chair and CEO.
Posted on June 19, 2009
On June 19, the International Organization of Securities Commissions announced the publication of Regulation of Short Selling, a report containing "high level principles for the effective regulation of short selling." The four principles recommended by the report are as follows:
- Short selling should be subject to appropriate controls to reduce or minimise the potential risks that could affect the orderly and efficient functioning and stability of financial markets.
- Short selling should be subject to a reporting regime that provides timely information to the market or to market authorities.
- Short selling should be subject to an effective compliance and enforcement system.
- Short selling regulation should allow appropriate exceptions for certain types of transactions for efficient market functioning and development.
Posted on June 19, 2009
In a speech to New York financial writers yesterday, Securities and Exchange Commission Chairman Mary Schapiro discussed the SEC's concerns with private automated trading systems known as "dark pools". Such private systems do not display quotes in the public quote stream and according to Ms. Schapiro, the "lack of transparency has the potential to undermine public confidence in the equity markets, particularly if the volume of trading activity in dark pools increases substantially." As such, the SEC intends to take a "serious look" at potential regulatory actions to protect investors and market integrity.
Posted on June 18, 2009
As described yesterday, the U.S. Treasury Department's "Financial Regulatory Reform: A New Foundation" includes numerous proposals to address perceived inadequacies in U.S. financial regulation. Of particular note, the report proposes requiring that investment advisers to hedge funds and other private pools of capital (including private equity and venture capital funds) whose assets under management exceed "some modest threshold" be registered with the Securities and Exchange Commission under the Investment Advisers Act. Registration of such investment advisers would make them subject to recordkeeping and disclosure requirements, including requirements to report to investors, creditors and counterparties, as well as regulators. While the reporting may vary across the different types of private pools of capital, the report proposed confidential reporting to regulators of the amount of assets under management, borrowings, off-balance sheet exposures and other “necessary” information. As stated in the report, "[r]equiring the SEC registration of investment advisers to hedge funds and other private pools of capital would allow data to be collected that would permit an informed assessment of how such funds are changing over time and whether any such funds have become so large, leveraged, or interconnected that they require regulation for financial stability purposes."
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Posted on June 17, 2009
On June 17, U.S. President Barack Obama announced a series of proposed financial regulatory reforms, found in the Treasury Department's "Financial Regulatory Reform: A New Foundation". The recommendations include proposals to create comprehensive regulation of all OTC derivatives, harmonize futures and securities regulation and strengthen oversight of systemically important payment, clearing and settlement systems. An executive summary of the proposals was also released, as were related fact sheets.
Posted on June 16, 2009
The TSX has released its fee schedule as of July 1, 2009, amending the fees associated with exchange traded funds.
Posted on June 12, 2009
The U.S. Securities and Exchange Commission released a statement Wednesday by Chairman Mary Schapiro regarding executive compensation. While recognizing that the SEC's role is not to set pay scales or cap compensation, Ms. Schapiro stated that the SEC will actively consider "a package of new proxy disclosure rules that will provide further sunshine on compensation decisions." A number of disclosure requirements that will be considered by the SEC were listed in the statement, including information regarding a company's overall compensation approach, potential conflicts of interest by compensation consultants and the experience and qualifications of director nominees.
On a similar note, Treasury Secretary Timothy Geithner released a statement after meeting with Ms. Schapiro, stating that legislation will be pursued in two specific areas respecting compensation practices. The first, "say on pay" legislation, would provide the SEC with authority to require that companies allow non-binding shareholder votes on executive compensation. The second proposed piece of legislation would provide the SEC with "the power to ensure that compensation committees are more independent, adhereing to standards similar to those in place for audit committees as part of the Sarbanes-Oxley Act."
Posted on June 5, 2009
On June 3, the U.S. Securities and Exchange Commission announced the creation of an Investor Advisory Committee. The Committee's scope includes advising the SEC on investors' concerns, providing perspectives on regulatory issues and serving as a source of information and recommendations with respect to the SEC's regulatory programs. The Committee is expected to begin its work in the next few weeks.
Posted on May 29, 2009
The Minister of Finance has approved the revocation and replacement of OSC Rule 13-502 Fees and OSC Rule 13-503 (Commodity Futures Act) Fees. The Rules and related companion policies were previously published and approved by the OSC.
Posted on May 28, 2009
The Office of the Superintendent of Financial Institutions and the Bank of Canada have authored "Lessons from banking reform: A Canadian perspective", which reviews the recent performance of Canadian banks, the regulatory environment and includes a discussion regarding financial reform.
Posted on May 21, 2009
On May 21, the Canadian Securities Administrators published Staff Notice 52-324 to provide an update on issues related to the impending transition from Canadian GAAP to International Financial Reporting Standards (IFRS). As detailed in our previous posts, the CSA have published various notices detailing their proposals on a wide range of transition issues for the time-period leading up to the Canadian transition date for publicly accountable enterprises for fiscal years beginning on or after January 1, 2011. This most recent notice sets out the current views of the CSA on early transition to IFRS, requirements for interim financial statements in the year of IFRS adoption and references to IFRS and Canadian GAAP.
With respect to early transition, the CSA reiterate that domestic issuers wishing to adopt IFRS for fiscal years prior to January 1, 2011 must apply for exemptive relief, which will be recommended on a case by case basis based on the criteria outlined in Staff Notice 52-321. Further, the CSA propose requiring issuers to disclose compliance with International Accounting Standard 34 Interim Financial Reporting in their interim financial statements in the year of IFRS adoption. A domestic issuer would also have to include an IFRS-compliant balance sheet as at the issuer's transition date. The staff notice also includes proposed options for referring to IFRS as opposed to Canadian GAAP in notes to financial statements and in the auditor's report and proposes providing relief from existing requirements that financial statements be prepared in accordance with the same accounting principles for all periods presented in the financial statements. The CSA are also considering extending the filing deadline for a domestic issuer's first interim filings after January 1, 2011 in order to assist issuers with the challenges associated with transitioning to IFRS.
The CSA expect to publish details of their proposals from this staff notice for comment later this year.
Posted on May 8, 2009
On May 8, the TSX published a staff notice respecting the additional information required to be submitted in the case of changes and new appointments in directors, officers and trustees of listed issuers. The additional information now required on Form 3 - Change in Officers/Directors/Trustees includes a ten-year address history, citizenship and previously used names. According to the TSX, the additional information "will permit TSX to conduct a meaningful media review" on new appointees. The expanded Form 3 is expected to be available on May 15 and once operational, non-exempt issuers will no longer be required to file a Form 4 - Personal Information Form for new appointees. Form 4 will still be required, however, for original listings and on the TSX's request.
Posted on May 6, 2009
Following publication by the UN's Security Council Committee established pursuant to resolution 1718 (2006), a list of entities has now been established under the Regulations Implementing the United Nations Resolution on the Democratic People's Republic of Korea (UNRDPK).
Similar to their obligations under the the Criminal Code, Regulations Implementing the United Nations Resolutions on the Suppression of Terrorism (UNRST), United Nations Al-Qaida and Taliban Regulations (UNAQTR) and Regulations Implementing the United Nations Resolution on Iran (UNRI), entities authorized under provincial legislation to engage in the business of dealing in securities (dealers), or to provide portfolio management or investment counselling services (advisers), must review their records on a continuing basis to determine whether or not they are in possession or control of property owned by or on behalf of an entity designated under the list. Together with their reports under the Criminal Code, UNRST, UNAQTR and UNRI, dealers and advisers are to report their findings on a monthly basis to their principal regulator in Canada.
Names of persons and entities included under the lists provided for under the Criminal Code, UNRST, UNAQTR, UNRI and UNRDPK are published on the Office of the Superintendent of Financial Institutions Canada (OSFI) website. OSFI publishes separate lists for each of the Criminal Code/UNRST/UNAQTR, UNRI and UNRDPK.
Posted on May 6, 2009
On May 1, 2009, the Ontario Securities Commission (OSC) published a statement setting out its proposed priorities for the fiscal year ending March 31, 2010. The OSC's strategic goals consist of identifying important issues and dealing with them in a timely fashion, delivering fair, vigorous and timely enforcement and compliance programs, championing investor protection and supporting a more flexible, efficient and accountable organization. Specific initiatives for the upcoming fiscal year, meanwhile, include drafting National Instrument 31-103 Registration Requirements, managing the transition to IFRS, focusing compliance efforts on new and high-risk market participants and expanding capabilities and sensitivities to investor issues.
Posted on April 17, 2009
As recently announced, the SEC has been considering imposing restrictions on short sales and has now published its proposals on the subject. The options being considered include a short sale price test and a "circuit breaker" approach. The SEC is accepting comments on the proposals until June 19, 2009.
Posted on April 15, 2009
The U.S. Court of Appeals for the Eighth Circuit recently released its opinion in Gallus v. Ameriprise, a case considering the scope of a mutual fund adviser’s fiduciary duties under section 36 of the Investment Company Act of 1940 (ICA). The Circuit Court found that while the Gartenberg v. Merrill Lynch case provided a “useful framework for resolving claims of excessive fees”, the size of the fee was not the only factor in considering an alleged violation of the ICA and that the adviser’s conduct during negotiation should also be considered. “[W]e read the plain language of § 36(b) to impose on advisers a duty to be honest and transparent throughout the negotiation process.”
In reversing the Minnesota District Court's decision, the Eighth Circuit found that the lower court should have compared the fees charged to institutional and mutual fund clients. “Indeed, the argument for comparing mutual fund advisory fees with the fees charged to institutional accounts is particularly strong in this case because the investment advice may have been essentially the same for both accounts.” Further, the District Court should have considered the defendants’ conduct “independent of the result of the negotiation” and specifically whether the defendants misled the plaintiffs with respect to the discrepancy in fees.
As such, the Eighth Circuit reversed the decision of the District Court granting the defendants summary judgment and remanded the case for further consideration.
Posted on March 26, 2009
On March 26, 2009, the TSX published a notice continuing temporary relief to listed issuers with respect to the Remedial Review Process. Originally granted on November 3, 2008 due to "extraordinary market conditions", the relief extends the maximum time period that an issuer has to remedy deficiencies that triggered a delisting review from 120 to 210 days. Unless further extended, the relief continues until September 30, 2009.
Posted on March 13, 2009
The OSC has approved the revocation and replacement of OSC Rule 13-502 Fees and its Companion Policy as well as OSC Rule 503 (Commodity Futures Act) Fees and its Companion Policy. If the Minister of Finance approves the Rules, the changes will come into force on June 1, 2009.
Posted on March 11, 2009
The Ontario Securities Commission (OSC) recently announced that it has approved the new Rules of Procedure of the Ontario Securities Commission. The new Rules, which will apply to all proceedings heard before the OSC, will replace the current Rules of Practice effective April 1, 2009. The Rules set out the various steps involved in participating in a hearing before the OSC and provide "clearer guidance on key procedural issues." The OSC states that the objective of the new Rules is to ensure that adjudicative proceedings are "more transparent and accessible".
Posted on February 20, 2009
Charles R. Kraus
Amid daily news stories and statements from U.S. public officials about bolstering financial system transparency through increased regulation, two U.S. senators have introduced a bill called the Hedge Fund Transparency Act (the Bill). If passed, the Bill would have significant implications not only for hedge funds, but for venture capitalists, private equity funds and other private funds, including potentially Canadian-domiciled and other offshore funds (Private Funds) that rely on commonly-used exemptions from the definition of “investment company” under the Investment Company Act of 1940 (the ICA). A statement issued by one of the Bill’s sponsors makes clear the intention to cast a wide net:
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Posted on February 20, 2009
Simon Romano and Ramandeep Grewal | PDF Version | Version française
Introduction
As the Canadian implementation date for the changeover from Canadian generally accepted accounting principles (Canadian GAAP) to international financial reporting standards (IFRS) approaches, the broad potential impact is becoming more apparent. The Canadian Accounting Standards Board (CASB) has adopted a transition plan that requires adoption of IFRS by public companies (and certain others, including non-listed financial institutions and securities dealers) for financial years beginning on or after January 1, 2011. While 2011 may still seem a long way off, given the substantial differences between IFRS and Canadian GAAP, it would not be untimely for issuers to now begin thinking about transition issues and developing a transition plan.
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Posted on January 30, 2009
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.
Posted on January 23, 2009
PDF Version | Version française
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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Posted on January 21, 2009
The Dealer Member reporting obligations are described in IIROC Member Regulation Notices MR0102 and MR0458.
Posted on January 13, 2009
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.
Posted on January 12, 2009
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.
Posted on December 19, 2008
On December 16, the Canadian Radio-television and Telecommunications Commission (CRTC) released Telecom Circular CRTC 2008-3, which seeks to clarify the obligations of the investment industry with respect to the National Do Not Call List and the application to the investment industry of the Unsolicited Telecommunications Rules.
Posted on December 18, 2008
On December 17, 2008, the British Columbia Securities Commission proposed changes to BC Policy 15-601 Hearings, BC Policy 15-602 Electronic Hearings and BC Instrument 15-501 and Companion Policy 15-501CP Disclosure of Investigation Information. The changes are intended to address inefficiencies in the hearing process, reflect changes in practice and consolidate the policies into a single policy.
Posted on November 28, 2008
The CSA have announced that they are extending the time for public comment on their consultation paper regarding the effects of recent credit market turmoil on ABCP markets in Canada to February 16, 2009. For more information on the consultation paper, see our post of October 6, 2008. The comment period was originally set to expire on December 20, 2008.
Posted on November 27, 2008
Daniella Laise | PDF Version | Version française
On August 12, 2008, the Minister of Finance approved amendments to National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106), that came into force September 8, 2008 (the NI 81-106 Amendments). The NI 81-106 Amendments respond to the potential impact on investment funds following the introduction of Section 3855 Financial Instruments -- Recognition and Measurement of the Canadian Institute of Chartered Accountants (CICA) Handbook (section 3855).
Background
In 2005, the Accounting Standards Board of the Canadian Institute of Chartered Accountants introduced section 3855, which applies to interim and annual financial statements relating to fiscal years beginning on or after October 1, 2006. Section 3855 provides more specific guidance on how to measure financial instruments at fair value for financial statement purposes when fair value measurement is required. To comply with the guidance in section 3855, investment funds would have needed to change how they value a large portion of the securities in their portfolios, particularly those that are traded on a recognized exchange. For example, those securities traded on a recognized exchange would need to be valued at the bid or ask price on each valuation day, as opposed to valued at the closing price, which is predominantly the current valuation practice.
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Posted on November 24, 2008
On November 24, 2008, the TSX published a staff notice to provide guidance on (i) the adoption by listed issuers of securityholder rights plans with triggering thresholds of less than 20% and (ii) special year-end distributions by trusts.
Posted on November 21, 2008
Following its annual review of its Listing Fee Schedule, the TSX has made certain adjustments to its listing fees effective January 1, 2009. The fee review included a consideration of the difficult market environment currently facing many TSX-listed issuers and the need to be competitive with other major exchanges.
The amendments to the Listing Fee Schedule include changes to:
- the base and maximum sustaining fees for corporate issuers (variable fee rates remain unchanged);
- the fees payable for corporate reorganisations, which includes income trust conversions; and
- the maximum fees payable for security-based compensation arrangements (minimum fees and the variable fee rates remain unchanged).
Original listing and additional listing fees (other than for security-based compensation arrangements) remain unchanged.
As the revised Listing Fee Schedule will be effective as of January 1, 2009, the new listing fees will apply to applications, transactions and notices filed on or after January 1, 2009.
Posted on October 6, 2008
PDF Version
On October 6, 2008 the Canadian Securities Administrators (the CSA) published CSA Consultation Paper 11-405 entitled “Securities Regulatory Proposals Stemming from the 2007 – 08 Credit Market Turmoil and its effect on the ABCP Markets in Canada” (the Consultation Paper). The Consultation Paper is divided into two parts, with the first part providing a narrative overview of the background to the credit market turmoil in the United States, its spread into Canada and its impact on the non-bank sponsored portion of the asset-backed commercial paper (ABCP) market in Canada. The second part of the paper sets out proposals made under the Concept Paper to deal with the credit market turmoil and related issues in Canada.
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Posted on October 3, 2008
The MFDA is publishing for comment proposed amendments to Rule 2.6 Borrowing for Securities Purchases. The proposed amendments would require leverage risk disclosure only when an Approved Person makes a recommendation to invest using borrowed funds or becomes aware of a client borrowing for investment. The proposed amendments would also exempt RRSP loans from the disclosure requirements of Rule 2.6. In conjunction with the proposed amendments, MFDA staff will be revising the prescribed risk disclosure language in MR-0006 to provide a brief explanation of key risks and relevant considerations in plain language. The comment period expires November 3, 2008.
Posted on September 26, 2008
The CSA and IIROC have issued a news release outlining the actions that they have taken, or are taking, in response to recent developments in financial markets.
Posted on September 23, 2008
On September 22, the OSC issued an amended Temporary Order with respect to the restrictions on short sales in order to address technical and operational matters originating from their original Temporary Order and to support similar issues addressed by the SEC.
Further, IIROC has released a Restated Reminder Respecting Obligations in the Conduct of Short Sales in order to review the obligations of Participants and Access Persons in the handling of short sales. Of interest, the reminder also states that as part of its market activity monitoring, IIROC intends to increase surveillance of short selling activity, in particular of issuers in the financial sector not covered by the OSC's Temporary Order.
Posted on September 22, 2008
On September 19, the OSC issued a Temporary Order to restrict short selling in certain TSX-listed financial companies that are interlisted in the U.S. or have outstanding securities that are interchangeable into shares of a financial company listed in last week's SEC Order. The OSC's order is intended "to prevent regulatory arbitrage with respect to short selling in Ontario of...and promote fair and orderly markets in Ontario for" the relevant securities. Unless extended, the Temporary Order will expire on October 3, 2008.
Posted on September 18, 2008
The U.S. SEC has recently issued new rules, effective September 18, which require short sellers and broker-dealers to deliver securities by the close of business on the settlement date. A broker-dealer in violation of the close-out requirement will be forced to locate and pre-borrow securities for future short sales in the same security. The SEC took action due to its concern "about the possible unnecessary or artificial price movements based on unfounded rumors regarding the stability of financial institutions and other issuers exacerbated by 'naked' short selling."
Posted on September 12, 2008
OSC Notice 51-706 Corporate Finance Branch Report 2008, which summarizes the operational activities of the OSC's Corporate Finance Branch during the 2008 fiscal year, was published on September 12, 2008.
The Staff Notice summarizes the operational activities of the OSC’s Corporate Finance Branch for 2008, including its undertakings relating to Continuous Disclosure Reviews, Exemptive Relief Applications and Offering Document Disclosure, as well as the Branch’s views on developing issues and current priorities.
Continuous Disclosure Reviews: Predominant issues with continuous disclosure identified across all industries include deficiencies in MD&A disclosure relating to liquidity and capital resources, risks and uncertainties, related-party transactions and changes in accounting policies. Along with these deficiencies, the OSC Staff also remind issuers that the MD&A should be a “self-contained” document and that incorporating by reference from financial statements and/or the annual information form may not necessarily satisfy MD&A requirements. With respect to financial statements, some of the issues identified include premature recognition of revenue, issues with revenue recognition policy disclosure, stock-based compensation and volatility and reporting relating to cash and cash equivalents, especially given the focus on liquidity issues relating to non-bank-sponsored asset-backed commercial paper (or ABCP). The report also goes on to highlight specific issues associated with the banking, mining, manufacturing and retail, real estate and entertainment and communications industries. Targeted reviews also resulted in findings of deficiencies relating to environmental liabilities and risks.
Applications for Relief, including relief from Take-over Bid requirements: With respect to applications for relief, the OSC Staff dealt with applications to allow designated foreign issuers to file short form prospectuses (relying on half-year financial statements in place of interim statements), applications for relief from continuous disclosure requirements for an issuer subject to a compulsory acquisition and for relief relating to discounted normal course issuer bids carried out in accordance with exchange procedures. The Staff Notices highlights that staff will continue to review these on a case-by-case basis and outlines the conditions or circumstances under which relief will be considered. With respect to take-over bids, the Staff Notice also focuses on exemptive relief granted from identical consideration requirements for vendor placements, where non-Canadian target shareholders are entitled to receive cash from vendor placement sales while Canadian target shareholders receive the bidder’s securities as consideration. Factors the staff will consider in granting such relief are set out in the Staff Notice.
Offering Documents: With respect to Offering Documents, issuer oriented reviews highlighted issues with disclosure relating to MD&A, risk factors and use of proceeds. The Staff Notice also states that a number of preliminary prospectuses reviewed did not comply with new requirements under Form 41-101F1 (adopted on March 17, 2008) that require disclosure relating to the underwriters’ over-allocation position and stabilization activities.
Developing issue relating to determining when a person has beneficial ownership, or control or direction, including reporting for Derivatives: The Staff Notice highlights that with respect to determining “beneficial ownership” and “control or direction” over securities, the OSC is looking at the potential use of derivatives to avoid early warning disclosure and similar securities law requirements, and the related issues. With respect to reporting of insider holdings, the Staff Notice also sets out factors the Staff will consider in determining whether an insider has “control or direction” over securities held in a trust, and reaffirms that a person will be considered to have such “control or direction” where they directly or indirectly have or share the power to (a) vote or direct votes or (b) invest, which includes the power to acquire or dispose of securities or to direct their acquisition.
For fiscal 2009, the Notice also highlights areas of interest for the OSC, which include disclosure of non-GAAP financial measures, forward-looking information disclosure (for compliance with new requirements contained in Part 4 of NI 51-102) and disclosure relating to transition to IFRS. With respect to IFRS, the Staff Notice also cautions that although the IFRS implementation date is January 1, 2011, to comply with securities law requirements, issuers should be mindful of the fact that they will need to provide comparative audited financial statements prepared in accordance with IFRS for both 2010 and 2011 year-ends.
Posted on September 8, 2008
The OSC Compliance team has published Staff Notice 33-731, its report for the 2008 fiscal year (April 1, 2007 to March 31, 2008), which includes a summary of the following:
- The results of the OSC’s review of investment counsel portfolio managers, investment fund managers and limited market dealers (collectively, “market participants”), including the 10 most common deficiencies among portfolio managers, the three most significant deficiencies of each market participant and suggested practices;
- OSC staff notices published during the 2008 fiscal year;
- Proposed rules published by the OSC and how they could affect the business operations of market participants; and
- How the change to IFRS affects market participants in preparing financial statements.
Posted on August 29, 2008
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.
Posted on August 29, 2008
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.
Posted on August 26, 2008
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.
Posted on August 7, 2008
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.
Posted on July 25, 2008
The OSC has published Staff Notice 11-763 to summarize findings from its 2007 review of securities valuation and operating expense allocation of fund managers.
In reviewing the methodologies used to value portfolio securities and practices related to charging of expenses, the Staff Notices states that overall the fund managers reviewed had adequate policies and procedures, used appropriate valuation techniques, followed practices consistent with their disclosure and were adequately overseeing service providers.
Posted on July 16, 2008
Important developments for Canadian and cross-border derivatives activities in the Québec market
Alix d'Anglejan-Chatillon
Québec's new Derivatives Act (the Act) received royal assent on June 20, 2008 and will come into force on dates to be set by the Government. The Act will regulate both over-the-counter (OTC) and exchange-traded derivatives in standalone legislation, subject to certain carve outs for OTC derivatives activities involving "accredited counterparties" and in other cases to be specified by regulation.
Some of the highlights of the new legislation are noted below. Since the key provisions of the Act cross-reference regulations that have yet to be published, it is still too early to determine the exact scope and application of the Act and its potential impact on the various segments of the Canadian and cross-border derivatives market. It is expected that the Act and companion regulations (once published) will enter into force at the same time over the course of the next few months.
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Posted on July 4, 2008
The OSC recently published
OSC Notice 11-753 (Revised) outlining its priorities for the financial year to end March 31, 2009.
Posted on July 4, 2008
CSA Staff Notice 52-321 is an update to CSA Concept Paper 52-402 published in February 2008 and sets out conclusions that the CSA staff have reached on the following issues (which represent some but not all issues raised in the concept paper):
- Early adoption of IFRS: Staff are prepared to recommend exemptive relief for issuers wanting to transition to IFRS before January 1, 2011. However, if a domestic issuer has previously filed financial statements prepared in accordance with Canadian GAAP or US GAAP for interim periods in the first year that the issuer proposes to adopt IFRS the staff will recommend that the issuer file revised interim financial statements prepared in accordance with IFRS-IASB, revised interim management discussion and analysis, and new interim certificates.
- Staff are proposing to retain the exemption in NI 52-107 for a domestic issuer that is also an SEC issuer to continue to use US GAAP.
- Staff are proposing to retain references to IFRS-IASB (instead of referring to post 2011 principles as Canadian GAAP), however, issues relating to the availability of an appropriate French translation of IFRS and reference to both IFRS-IASB and Canadian GAAP are continuing to be considered.
Posted on June 26, 2008
Philip Henderson
On June 11, 2008, the federal government published the new Principal Protected Notes Regulations (the Regulations), which are intended to come into force on July 1, 2008. The Regulations were introduced in response to the growing variety and complexity of principal protected notes (PPNs) currently being offered by financial institutions and build on the existing Index-linked Deposits Interest Disclosure Regulations, which will be repealed with the adoption of the new Regulations. The new requirements seek to ensure that investors in PPNs are adequately informed by improving the manner, content and timing of disclosure for these types of investments.
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Posted on June 24, 2008
The CSA have approved amendments to NI 55-102 effective June 13, 2008.
Amendments have been made to SEDAR filing procedures as well as to Form 55-102F1 Insider Profile, Form 55-102F2 Insider Report, Form 55-102F3 Issuer Profile Supplement and Form 55-102F6 Insider Report. These amendments are mostly of a house-keeping nature intended to streamline the filing and flow of information on SEDI.
Posted on February 29, 2008
Robert Carelli and
Alex Colangelo |
Version française
On November 9, 2007, Bill 19,
An Act to amend the Securities Act and other legislative provisions (Bill 19) came into force in Quebec. Bill 19 introduces a regime of secondary market civil liability, enabling investors to sue issuers and others for failing to make timely disclosure of material changes and for misrepresentations contained in public disclosure. Bill 19 closely follows the Ontario regime and readers will notice a substantial similarity between the two. Quebec also joins other provinces, such as Alberta and British Columbia, which have enacted, or are in the process of enacting, secondary market civil liability provisions.
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Posted on December 1, 2007
On November 24, 2007, Canada's federal Department of Finance announced proposed new regulations under the Bank Act, Cooperative Credit Associations Act and Trust and Loan Companies Act that will apply to Principal Protected Notes (PPNs). As reported in the Canada Gazette, the new regulations would define PPNs and specify "the content, manner and timing of disclosure that federally regulated deposit-taking institutions are required to provide at the point of sale for various sales channels" as well as other consumer-related requirements. The proposal is part of the federal government's "Advantage Canada" competitiveness program, designed to promote flexible outcomes-focussed approaches to regulation in response to rapid developments in global financial markets. Those wishing to comment have 30 days from the date of publication to respond.
The draft regulation is available online in the Canada Gazette, Part I for November 24, 2007, beginning on page 3279.
Posted on August 9, 2007
Andrew Cunningham, Andrea Alliston
As of August 1, 2007, significant amendments to the OBCA have come into effect. The changes, which affect both public and private companies, can be roughly grouped into four types, respectively concerning (i) directors and officers, (ii) shareholders’ rights, (iii) corporate procedures and organization, and (iv) corporate finance. While many of the amendments are intended to bring the OBCA into line with the CBCA, others represent departures from the CBCA that may be relevant to the choice of incorporation jurisdiction.
Click here for the full text of this update.
Posted on July 18, 2006
OSC Staff Notice 55-701 sheds light on the circumstances in which the purchase or disposition of securities under pre-arranged structured sales or acquisition plans by an insider do not constitute illegal insider trading.
On June 2, 2006 the Ontario Securities Commission (the "OSC") released OSC Staff Notice 55-701 - Automatic Securities Disposition Plans and Automatic Securities Purchase Plans (the "Staff Notice"), addressing frequently asked questions concerning the exemption from insider trading and insider reporting for acquisitions and dispositions of securities under certain types of automatic disposition or purchase plans in Ontario.
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Posted on June 19, 2006
Proposed OSC Policy 51-604 provides guidance on how the OSC interprets the defence to misrepresentations in forward-looking information under the newly enacted civil liability provisions of the Securities Act (Ontario).
Amendments to the Securities Act (Ontario) (the "Securities Act") that came into force December 31, 2005 (the "Bill 198 Amendments") now allow secondary market purchasers to assert a new statutory cause of action for misrepresentations contained in public documents and public oral statements. Along with these newly created causes of action, the Bill 198 Amendments also make available certain statutory defences, including a defence for misrepresentations contained in forward-looking information (the "forward-looking information defence") included in either a document or a public oral statement.
The purpose of proposed OSC Policy 51-604 Defence for Misrepresentations in Forward-Looking Information (the "Draft Policy") is to express the views of the Ontario Securities Commission (the "OSC") on the policy considerations underlying the forward-looking information defence and to explain how the OSC interprets certain aspects of this defence. It includes guidance on satisfying the requirement to present cautionary language "proximate" to the forward-looking information which it qualifies and on application of the materiality thresholds that qualify the risk factors and assumptions that are to be disclosed. While issuers may have hoped for more detailed direction on how the technical elements of the defence are to be applied, the Draft Policy does provide valuable insight into the underlying objectives of the defence and is welcome guidance for all those dealing with disclosure compliance under Ontario's new secondary market liability regime. The Draft Policy is open for comments until August 2, 2006.
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Posted on March 19, 2006
New OSC Rule 13-502 introduces more streamlined structure and reduced fees
Proposed OSC Rule 13-502
Fees, (the "New Rule") which replaces the existing Rule 13-502 is set to come into force on April 1, 2006. The New Rule preserves most aspects of the existing fee regime, with an aim of creating a clearer and more streamlined fee structure, as well as imposing fees at levels that more accurately reflect costs incurred by the Ontario Securities Commission (OSC) in connection with capital markets-related services.
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