In the Notice, OSC staff state their view that the hedger
exemption is not available to an unregistered non-Canadian dealer
that wishes to trade with a hedger. In our view, the longstanding
and accepted interpretation of the hedger exemption has been that
the exemption may be relied on by an unregistered non-Canadian
dealer. The Notice represents a surprising and very restrictive
interpretation of the availability of the "hedger"
exemption commonly relied on by unregistered non-Canadian dealers
when trading futures with Ontario resident "hedgers", and
runs counter to over thirty years of accepted legal interpretation
and industry practice.
The Notice also contains guidance on the use of the
"unsolicited trade" exemption under the CFA, in respect
of which the OSC staff state their view that the unsolicited trade
exemption under the CFA was intended to apply to occasional,
isolated trades by customers in Ontario that are not solicited by
or on behalf of a non-Canadian dealer. OSC staff do not believe
that the exemption is available to permit the operation of
unsolicited order-execution-only accounts by unregistered
non-Canadian dealers with customers in Ontario. Currently, a trade
in an exchange contract resulting from an unsolicited order placed
with an individual who is not a resident of, and does not carry on
business in, Alberta, British Columbia or New Brunswick, is exempt
from the dealer registration requirements. However, this exemption,
available under National Instrument
31-103 Registration Requirements, Exemptions and Ongoing
Registrant Obligations is scheduled to be
repealed with the implementation of a wide range of
changes to NI 31-103 that are expected to come
into force on January 11, 2015.
We continue to engage in discussions with OSC Staff regarding
their interpretation of these exemptions and encourage those
relying on the exemption to contact their advisers regarding any
concerns with or discuss possible implications of OSC staff's
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.
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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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