Canada: New Proposed Provincial Capital Markets Legislation: What It Means For Registrants And Other Market Participants

The Canadian government and the British Columbia, New Brunswick, Ontario, Prince Edward Island and Saskatchewan governments have signed a memorandum of agreement to formalize the terms and conditions of the new proposed cooperative capital markets regulatory system (Cooperative System). For more information on this, please see our September 2014 Blakes Bulletin: Cooperative Capital Markets Regulatory System Agreement and Draft Legislation Released.

A consultation draft of the uniform Provincial Capital Markets Act (PCMA) was released in September for public comment. Given the scope of the new proposed legislation at both the federal and provincial levels, Blakes is publishing a series of bulletins regarding various aspects of the proposed Cooperative System. This bulletin focuses on the elements of the PCMA dealing with registration and related activity.

FUNDAMENTALS

The PCMA continues the trend to provide a broad platform of powers in the statute and to delegate the details to regulations to be enacted by the administrative regulator, as opposed to being specified in statutes passed by provincial legislatures. A number of key provisions relating to registrants currently in existing Securities Acts have not been included, such as provisions relating to registration of individuals, categories of registration, and exemption from registration requirements.

While the requirement to be registered is set out in the PCMA, none of the registration categories, conditions of registration, including proficiency, capital, insurance, compliance, and other ongoing business conduct requirements have been set out. They and all exemptions are left to the regulations. It is as yet unclear what differences there will be in requirements for dealers, advisers and investment fund managers as compared to the current regime.

The basic registration obligation continues in the PCMA, in that a person must not act as a dealer, adviser or investment fund manager unless registered in accordance with regulations. The business triggers for dealer and adviser registration continue to be "being engaged in the business of" trading in or advising with respect to securities.

The investment fund manager registration trigger would be new, comprising managing the business, operations or affairs of an investment fund from a location inside the province or from outside the province and "knows or reasonably ought to know that the investment fund has a security holder resident in the province." This would have the effect of expanding Ontario's current interpretation of registration requirements for non-resident investment fund managers to the other provinces under the PCMA.

BROADER SCOPE OF MARKET PARTICIPANTS AND COMPLIANCE REVIEWS

The definition of "market participant" would be significantly broadened under the PCMA. As with current legislation, market participants would be subject to reviews by the regulator and the tribunal under the PCMA could order that a market participant submit to a review of its practices and procedures and make prescribed changes. Among the new types of market participants under the PCMA would be: control persons of reporting issuers, persons engaged in investor relations activities on behalf of a reporting issuer or a security holder of a reporting issuer, a "designated entity" (which could include information processors or persons who provide investors or market participants with prescribed services), a person providing recordkeeping services to a registrant (which might cover, for example, Broadridge), and anyone distributing prospectus-exempt securities.

The compliance review powers would be expanded under the PCMA. Under current securities legislation, a securities commission may designate a person to review the books, records and documents required to be kept by a market participant. A person conducting such review may enter the business premises of a market participant and examine and make copies of such books, records and documents. Under the PCMA, a person conducting a review may require that a market participant provide any information, record "or thing" in the market participant's possession or under its control. When on the business premises, the reviewer may also "examine anything in the place."

DERIVATIVES

The PCMA generally tracks the proposed amendments to the Securities Act (Ontario) relating to derivatives, including extending the registration requirements for persons or companies trading in derivatives, as well as prescribing classes of derivatives that are deemed to be securities, and prescribing requirements relating to derivatives, including disclosure and recordkeeping requirements. Most of these amendments are currently unproclaimed under the Securities Act (Ontario). We will be publishing another bulletin on the derivatives aspects of the Cooperative System.

TRANSITION AND REGULATIONS

Without the draft regulations supporting the PCMA having yet been made available for comment, it is unclear what significant changes in the regulation of registrants will be forthcoming.

In addition, although there are placeholders for transitional provisions, the current draft of the PCMA does not address important transitional issues, such as how existing registrants in one or more of the participating jurisdictions will become registrants under the new legislation, or how this will affect registrants registered in both a participating jurisdiction and a jurisdiction that does not adopt the PCMA.

Once further guidance is issued through details on transitional issues and the development of supporting regulations, we can have a better understanding of the impact of the PCMA on registrants going forward.

MATERIAL ORDER INFORMATION

The PCMA also introduces a number of new elements of particular relevance to registrants. Similar to but expanded beyond the prohibitions against insider trading or tipping by persons in a special relationship with an issuer, the PCMA introduces a new prohibition against persons who are "connected to an investor," such as dealers and advisers, who know of "material order information" either purchasing or trading in a security that is the subject of that information or informing another person of that material order information unless it is necessary in the course of the person's or investor's business.

"Material order information" means information that relates to an unexecuted order or to the intention of an investor to purchase or trade a security, if the security's market price would reasonably be expected to be affected by the execution of the order, the placement of an order to carry out the intention or the disclosure of any of the information.

A dealer or adviser would be considered to be "connected to the investor" if it engages in, is considering or evaluating whether to engage in, or proposes to engage in a trading or advising relationship with or on behalf of the investor or an insider, affiliate or associate of the investor.

Expanding the prohibition against tipping, the PCMA goes further by adding a prohibition against recommendations, where a person who is connected to an investor and who knows of material order information. In such situations, the connected person who knows of the material order information must not recommend or encourage another person to purchase or trade a security that is the subject of that information or to enter into a transaction involving a related financial instrument, i.e. even without conveying the material order information itself.

There would be the usual defences for material order information offences, similar to tipping defences, such as where a trade is pursuant to a written automatic plan or a legal obligation entered into before acquiring knowledge of the material order information, or if the person traded as agent. Similarly, there is an "information wall" defence for recommendations made by a person (who is not an individual), where no individual involved in making the recommendation had knowledge of the material order information nor was acting on the recommendation or encouragement of an individual who had that knowledge. This would allow for a defence where different departments or individuals within the same organization have access to different information.

NEW DEADLINE FOR COMMENT

Comments on the Consultation Drafts may be submitted until December 8, 2014 (recently extended from November 7 "as a result of requests from some stakeholders"). This remains an ambitious deadline for comments on these two significant pieces of legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
14 Nov 2018, Speaking Engagement, Ontario, Canada

Join members of the Blakes Environmental and Enterprise Risk & Crisis Response groups for a discussion of hot topics and trends in Canadian environmental law.

15 Nov 2018, Webinar, Toronto, Canada

Join us for a live webcast with partners from our Employment & Labour and Litigation & Dispute Resolution groups as they discuss employment-related challenges and considerations surrounding the recent legalization of recreational cannabis in Canada.

15 Nov 2018, Webinar, Toronto, Canada

Join us for a live webcast with partners from our Employment & Labour and Litigation & Dispute Resolution groups as they discuss employment-related challenges and considerations surrounding the recent legalization of recreational cannabis in Canada.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions