On June 8, 2017, the Canadian Securities Administrators (“CSA”) published for a 90-day comment period (ending on September 6, 2017), proposed amendments (the “Proposed Amendments”) to National Instrument 45-106 Prospectus Exemptions (“NI 45-106”) that would amend the report of exempt distribution (the “Report”) set out on Form 45-106F1 Report of Exemption Distribution that must be filed following a distribution of securities in reliance on certain prospectus exemptions under NI 45-106. The current version of the Report came into effect on June 30, 2016 and requires filers to provide substantially more information than … Continue Reading
The Canadian Securities Administrators (CSA) issued CSA Staff Notice 33-319 (the Notice) to provide an update on the “Best Interest Standard” and “Targeted Reforms” proposed last year in an important CSA Consultation Paper that we discussed in a previous post.
Most regulators have decided to abandon the Best Interest Standard which would have introduced a “client best interest” standard against which all registrant-client obligations would be interpreted.
The CSA will still proceed with a refined set of Targeted Reforms. Even in the absence of a Best Interest Standard in most jurisdictions, the Targeted Reforms would nonetheless … Continue Reading
On March 9, 2016, the Canadian Securities Administrators published CSA Staff Notice 51-348 (the “Notice”) which reports on a study of social media use by reporting issuers and provides guidance for public companies who engage with investors and other stakeholders using those channels.
Scope of Review
The review was conducted by securities regulatory authorities in Alberta, Ontario and Quebec and surveyed the social media activity of 111 reporting issuers of varying sizes and industries listed on the TSX, TSXV and CSE. The review included information on websites such as Facebook, Twitter, Instagram, LinkedIn, YouTube and others, as well … Continue Reading
The Canadian Securities Administrators (CSA) recently released its annual report on the enforcement activities of its members. The CSA is an umbrella group of Canada’s securities regulators.
Summary of 2016 Results
Generally, enforcement and pre-enforcement activity, and monetary sanctions imposed by regulators decreased compared to 2015 but were higher than they were in 2014.
|Restitution, Compensation and Disgorgement||$349,654,379||$111,651,429||$65,717,760|
|Commenced Cases (by notice of hearing, statement of allegations, or sworn Information)||56||108||105|
|Most prevalent violations||Illegal Distributions|
Le 23 février 2017, les Autorités canadiennes en valeurs mobilières (ACVM) ont annoncé le lancement d’un bac à sable réglementaire. L’objectif du bac à sable réglementaire est d’appuyer les Fintech en leur permettant de faire une demande à l’organisme de réglementation compétent afin de bénéficier d’une approche plus adaptée en matière de réglementation. Cette approche doit faciliter l’utilisation d’applications, de produits et de services novateurs chez les entreprises au Canada, tout en protégeant adéquatement les investisseurs.
Par conséquent, les ACVM évalueront au cas par cas le bien-fondé de chaque modèle et autoriseront les entreprises innovantes à s’inscrire, ou leur accorderont … Continue Reading
On February 23, 2017, the Canadian Securities Administrators (CSA) announced the launch of a regulatory sandbox. A regulatory sandbox aims at supporting Fintech businesses by allowing them to apply to the regulator to benefit from a more tailored approach to regulation that balances the need to facilitate the use of innovative products, services and applications all across Canada with appropriate investor protection.
As a result, the CSA will assess the merits of each business model, on a case-by-case basis, and allow innovative businesses to register or grant them relief from certain requirements to permit them to test their products and … Continue Reading
En 2015, les Autorités canadiennes en valeurs mobilières (ACVM) ont proposé de rendre obligatoire la compensation par contrepartie centrale de certaines transactions normalisées de dérivés de gré à gré en vue d’accroître la transparence sur le marché des dérivés de gré à gré et d’atténuer davantage le risque systémique avec le Règlement 94-101 sur la compensation obligatoire des dérivés par contrepartie centrale et l’Instruction générale relative au Règlement 94-101 (Règlement 94-101) ainsi que le Règlement 94-102 sur la compensation des dérivés et la protection des sûretés et des positions des clients et l’Instruction générale … Continue Reading
In 2015, the Canadian Securities Administrators (CSA) proposed mandatory central counterparty clearing of certain standardized over-the-counter (“OTC”) derivatives transactions consistent with its goal to improve transparency in the OTC derivatives market and enhance the overall mitigation of systemic risk: National Instrument 94-101 Mandatory Central Counterparty Clearing of Derivatives and its related Companion Policy 94-101CP (NI 94-101) and National Instrument 94-102 Derivatives: Customer Clearing and Protection of Customer Collateral and Positions and its related Companion Policy 94-102CP (NI 94-102).
NI 94-101 requires certain counterparties to clear specified standardized OTC derivatives through a central … Continue Reading
On September 22, 2016, the Canadian Securities Administrators (the “CSA”) published CSA Notice and Request for Comment – Modernization of Investment Fund Product Regulation – Alternative Funds (the “Proposed Amendments”). The Proposed Amendments represent the final phase of the CSA’s ongoing policy work to modernize investment fund product regulation in Canada (the “Modernization Project”). While primarily aimed at the development of a more comprehensive regulatory framework for commodity pool mutual funds that are currently governed by National Instrument 81-104 – Commodity Pools (“NI 81-104”), if adopted, the Proposed Amendments will also have a meaningful impact on other types of mutual … Continue Reading
On September 29, 2016, the Canadian Securities Administrators published a further revised version of CSA Staff Notice 45-308 (Revised) – Guidance for Preparing and Filing Reports of Exempt Distribution under National Instrument 45-106 Prospectus Exemptions.
On September 29, 2016, the Canadian Securities Administrators (“CSA”) published a further revised verison of CSA Staff Notice 45-308 (Revised) – Guidance for Preparing and Filing Reports of Exempt Distribution under National Instrument 45-106 Prospectus Exemptions (the “Notice”). The Notice amends and restates a previous amended and restated version of the Notice, which was published on April 7, 2016. The purpose … Continue Reading
IIROC is providing all dealer member firms it regulates (Firms) with a confidential cybersecurity “report card” that will include:
- an individual assessment of the Firm’s cybersecurity preparedness program
- a comparison of the Firm’s cybersecurity practices against the industry and other Firms of similar size and business model
- a list of cybersecurity areas to which the Firm should be giving priority attention.
The report cards were generated based on the results of an extensive assessment survey that Firms completed in June 2016. The survey responses were benchmarked against a National Institute of Standards and Technology cybersecurity framework that … Continue Reading
In August 2016, the Canadian Securities Administrators (“CSA”) published for comment Proposed Amendments to National Instrument 24-101 (“NI 24-101”) – Institutional Trade Matching and Settlement, Proposed Changes to Companion Policy 24-101 (“CP 24-101”) – Institutional Trade Matching and Settlement and CSA Consultation Paper 24-402 – Policy Considerations for Enhancing Settlement Discipline in a T+2 Settlement Cycle Environment (the “Consultation Paper”).
The proposed amendments to NI 24-101 and CP 24-101 (the “Proposed Amendments”) are intended to assist in a successful migration to T+2 settlement from the current T+3 regime. The … Continue Reading
The Canadian Securities Administrators recently released the results of its second review of compliance with the new gender diversity disclosure rules.
Last year new rules came into effect requiring Canadian public companies to disclose, on an annual basis (either in their annual proxy circular or annual information form), certain information regarding women on boards and in executive positions (the Gender Disclosure Rules).
The Gender Disclosure Rules represent some of the most significant changes to the annual disclosure requirements of Canadian public companies that have come into effect in the last few years, and the Canadian Securities Administrators (CSA… Continue Reading
The Canadian Securities Administrators (CSA) published on July 7, 2016 their priorities for the three-year period 2016 to 2019 under four categories: “Enhanced Investor Protection”, “Fair and Efficient Markets and Reduction of Risks to Market Integrity”, “Enhancement of Enforcement Effectiveness” and “Enhancement of Information Technology”.
The CSA states its strategic objectives without once mentioning the possible impact on it of the proposed national Cooperative Capital Markets Regulatory Authority (CCMRA) some of its members support. On July 22, it was announced that the CCMRA is expected to be operational in 2018.
Enhanced Investor Protection
The CSA proposes to … Continue Reading
Les Autorités canadiennes en valeurs mobilières (les ACVM) ont publié un important document de consultation dans lequel il est proposé de rehausser considérablement les obligations de tous les conseillers, courtiers et représentants, y compris les membres de l’OCRCVM et de l’ACFM (les personnes inscrites). Les commentaires sur ce document de consultation peuvent être présentés jusqu’au 26 août.… Continue Reading
Recently, the Canadian Securities Administrators (CSA) released an important Consultation Paper that proposes to significantly increase the obligations of all advisers, dealers and representatives, including IIROC and MFDA members (Registrants). Comments on the Consultation Paper can be made until August 26.
The CSA is proposing two distinct categories of changes that, if adopted, will significantly impact the economics of existing Registrant business models and Registrant compliance costs:
1. Best Interest Standard: A “client best interest” standard against which all Registrant-client obligations would be interpreted.
2. “Targeted Reforms”: A comprehensive set of so-called “targeted reforms” will affect … Continue Reading
Our Business Law and Financial Services lawyers wrote an article on the Revised Clearing Rule Mandatory Central Counterparty Clearing of Derivatives (NI 94-101) — published by the Canadian Securities Administrators (CSA) in February 2016 — which modifies the proposed requirements for regulated clearing agencies to clear certain OTC derivatives transactions. The authors describe the new NI 94-101 requirements of the Revised Clearing Rule, as well as outline the changes that will now affect the Initial Clearing Rule drafted last February.… Continue Reading
Our Business Law and Financial Services lawyers wrote an article on a new customer clearing rule published by the Canadian Securities Administrators (CSA) called Derivatives: Customer Clearing and Protection of Customer Collateral and Positions (NI 94-102) and its related Companion Policy 94-102CP, both of which replace CSA’s 2014 Model Provincial Rule on Derivatives. The authors discuss and dissect key features of the new NI 94-102 proposal, as well as comment on the proposed amendments to the Québec Derivatives Regulation (QDR) proposed by Autorité des marchés financiers (AMF).… Continue Reading
On April 6, IIROC published Notice 16-0068 – Managing Conflicts in the Best Interest of the Client (the 2016 IIROC Notice). IIROC intends to strengthen compliance by Dealer Members (DMs) with IIROC’s conflicts of interest rules, with a particular focus on the management of compensation-related conflicts.
Specifically, IIROC announced that it will take the following actions:
- Immediately enhance its compliance test procedures to more closely examine compensation grids, supervisory oversight of advisors recommending products with high commissions, and the monitoring of advisors approaching compensation thresholds;
- By June 2016, conduct a comprehensive survey to gather more detailed information
Securities regulators across Canada impose significant monetary sanctions against market participants each year. The CSA recently reported that provincial securities regulators collectively imposed $138.3 million in fines and administrative penalties and $111.7 million in restitution, compensation and disgorgement orders in 2015. This was an increase of 102% from the previous year and the highest amount of monetary sanctions imposed since 2009.
At the same time that regulators are imposing increasing monetary sanctions, they are facing an increasing inability to actually collect these sanctions. For example, the British Columbia Securities Commission has collected less than 5% of monetary sanctions imposed … Continue Reading
On February 23, 2016, the Canadian Securities Administrators (CSA) released its annual report on the enforcement activities of its members. Enforcement and pre-enforcement activity has increased significantly in 2015. Monetary sanctions imposed by regulators more than doubled year-over-year and regulators concluded 38% more cases in 2015 even as the number of new proceedings increased slightly.
The 2015 Results
Monetary sanctions doubled: The regulators collectively imposed the highest amount of monetary sanctions on market participants since 2009, the year their investigation into the crash of the asset-backed commercial paper market was settled. In 2015, regulators imposed $138.3 … Continue Reading
In the world of private companies (where shares are not listed for trading on public stock exchanges) there are often restrictions set out in the charter documents requiring that when the company needs fresh capital it will offer its existing shareholders rights to purchase additional shares before it offers them to new investors (a “rights offering”). The thinking is that if there is to be a new round of financing, it’s only fair that current shareholders have the first opportunity to buy those shares, particularly if they are to be offered for sale at a discount.
In some jurisdictions, … Continue Reading
The Canadian Securities Administrators (CSA) are proposing to introduce a mandatory standardized risk classification methodology for mutual funds and ETFs (the Proposed Methodology). Fund managers would be required to use the Proposed Methodology to determine the investment risk level of conventional mutual funds (which must be disclosed in the Fund Facts document) and exchange-traded mutual funds (ETFs) (to be disclosed in the proposed ETF Facts document). Currently, fund managers may determine the risk level of a mutual fund using a methodology of their choosing, though the methodology developed by the Investment Funds Institute of … Continue Reading
Last week, the Canadian Securities Administrators (CSA) published for comment Proposals that would require trade information for all corporate debt securities executed by dealers to be made publicly available, subject to delayed dissemination and volume caps, by the end of 2017. The CSA Proposals aim to enhance the regulation and transparency of the Canadian fixed income market, partly in response to certain limitations highlighted in a Report on “The Canadian Fixed Income Market 2014” published earlier this year by the Ontario Securities Commission which suggested that retail investors in corporate fixed income securities have less access to … Continue Reading