Following a year of only modest growth, financial markets enter 2014 with a more positive outlook as global economies continue to emerge from fiscal tightening. As always, it is useful to look back on the experience and phenomena of the past year to inform our approach to the year ahead. In 2013, Canadian regulators continued to focus on adapting to market trends while improving the efficiency of the markets. Several key developments took place in 2013, including the initiative of the federal and two provincial finance ministers to create a cooperative capital markets regulator by the summer of 2015 as well as changes proposed and implemented to many existing regulations.
We expect that the developments and trends that evolved in 2013 will continue to shape the Canadian capital markets in 2014. With this in mind, the following key issues and developments are covered in this fourth annual report by Davies on the year that was and the year ahead for Canadian capital markets.
- Following the CSA's 2012 guidance to market participants regarding initial public offerings, the Toronto Stock Exchange introduced proposed new guidelines in 2013 for participants planning to go public. In New TSX Requirements for IPOs, we provide an overview of the TSX's proposed guidelines and the effort to balance investor protection with efficient capital markets for listed issuers.
- 2013 saw a return of the instalment receipt to Canadian capital markets. Offerings of Note: The Return of the Instalment Receipt? describes the instalment receipt mechanism and its place in Canadian capital markets.
- Last summer saw wholesale changes of rules governing marketing activities for Canadian public offerings. This move to a more rules-based regime means issuers, underwriters and their counsel must devote significantly more time and attention to any proposed marketing activities for public offerings. Living with the New Marketing Rules for Public Offerings highlights some of the key elements of the new rules with a focus on areas of potential tension.
- The governments of British Columbia, Ontario and Canada are continuing to negotiate details of their initiative to establish a cooperative capital markets regulatory system by July 1, 2015. Move Towards a Single Canadian Securities Regulator Delayed summarizes the key elements of the proposed cooperative system and associated new federal legislation, and provides an update on the recently announced delay in the project's timelines.
- Corporate governance remains a hot topic in Canada. Headline-grabbing regulatory trends from 2013 such as increasing gender diversity on boards, imposing term limits and tenure policies for directors, and the continued rise in shareholder activism are expected to continue in 2014 and we canvass them here in Key Issues and Trends in Corporate Governance.
- The continued phenomenon of shareholder activism and proxy contests has made attracting high-quality board candidates more and more challenging, which has led some activists to implement compensation arrangements for director nominees. These arrangements received heightened attention in Canada last year, particularly as a result of JANA Partners' proxy contest with Agrium. We discuss such arrangements in Shareholder Compensation of Board Nominees: "Golden Leashes" or Valid Incentives?
- Davies published a comprehensive review of Canada's proxy voting infrastructure in 2010 and in response the CSA has begun an undertaking to determine what changes may be needed to ensure the integrity and reliability of the voting system in Canada. Securities Regulators Ponder New Regulation for Proxy Voting System provides an overview of these recent regulatory developments and initiatives.
- Perception that the current exempt market regime in Canada has not kept pace with other global market participants has prompted the CSA to undertake a review of the current regime and consider introducing a number of new prospectus exemptions to facilitate capital raising, particularly for small to medium-sized issuers. This initiative is canvassed in Trying to Keep Pace: CSA Considers Additional Capital Raising Rules.
- Last year, Davies played an important role in reshaping foreign private placements in Canada for certain securities dealers, paving the way for proposed legislative change to make the exemption available for all similarly situated dealers. We provide an overview of the proposed legislative changes in Updates from the Wrapper World.
- In the aftermath of the financial crisis, the G20 countries agreed to increased regulation of their OTC derivatives markets. In 2013, an important step was taken toward fulfilling Canada's commitments with the adoption of new laws in respect of product determination, trade repositories and derivative data reporting. Derivatives Regulatory Update: Canada Follows Through on G20 Commitments provides an overview of the new rules as well as other regulatory initiatives in this area.
- Finally, in Recent Developments in U.S. Law Affecting Canadian Issuers, we touch on several highlights from U.S. regulatory developments over the past year, including initiatives to permit general solicitations in certain non-registered offerings.
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