With respect to CP, the proposed amendments would remove
the current "split rating condition" that requires CP to
have a designated rating at or above the designated ratings
thresholds, and if a second rating is obtained, require that it not
be below any of the same designated rating
thresholds. Instead, a "modified split rating
condition" is proposed that would require that CP not having
any rating below a different (and generally lower) set of
designated rating thresholds. Among other things, this is intended
to remove the disincentive for issuers of commercial paper to seek
additional ratings. According to the CSA, the modified condition
would also provide for consistent treatment of commercial paper
issuers with similar credit risk and maintain the current credit
quality of commercial paper distributed under the exemption.
Meanwhile, the CSA announced that since securitization activity
in Canada, with the exception of non-bank ABCP, does not raise
systemic risk or investor protection concerns, they do not
intend to proceed with their
2011 proposals to introduce a new framework for the regulation
of securitized products. However, more targeted amendments focusing
on short-term securitized products were included as part of the
proposal released yesterday. (For more comprehensive commentary on
the various aspects of the earlier proposals, see our
Canadian Structured Finance Law blog posts from 2011)
Specifically, the CSA proposal would exclude short-term
securitized products from being distributed under the short-term
debt exemption (discussed above), as well as the private issuer,
friends and family, founders, and OM prospectus exemptions.
However, a new prospectus exemption for short-term securitized
products would be introduced that would only be available to ABCP
backed by conventional or traditional assets. The proposed
exemption would also be subject to the satisfaction of a number of
new conditions, including the requirement to have ratings from at
least two designated rating organizations and prescribed liquidity
support and asset pool requirements. In addition, the conduit would
be required to prepare an information memorandum in a prescribed
form to be made available to investors prior to the investor
purchasing the short-term securitized product and would be subject
to certain other timely and ongoing disclosure obligations.
Comments on the proposals are being accepted until April 23,
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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