The Autorité des marchés
financiers (AMF), Quebec's financial services
regulator, issued an important decision yesterday which provides
for the revocation effective September 5, 2015 of Decision No.
2009-PDG-0007 General Decision Respecting the Exemption from
the Application of Sections 54, 56 and the First Paragraph of
Section 82 of the Derivatives Act (the Blanket
Decision). The decision can be found beginning on page 413 of
the April 30, 2015 Bulletin.
The AMF had issued the Blanket Decision on January 22, 2009 in
conjunction with the enactment of the Quebec Derivatives Act (QDA)
to provide transitional relief for transactions and other
activities in relation to certain specified derivatives, subject to
certain conditions. Canadian and foreign market participants which
have relied on this exemption should review their current
derivatives markets activities in Quebec and determine whether any
other statutory relief may be available, whether there may be a
basis to apply for focused discretionary relief under the QDA or
whether any current client arrangements with Quebec counterparties
should be discontinued by the September 5, 2015 deadline.
Significantly, the revocation of the Blanket Decision does not
affect the statutory exemptions under Quebec derivatives
legislation for OTC and exchange-traded derivatives transactions
with "accredited counterparties" undertaken under the
terms of those exemptions.
The Blanket Decision provides exemptions, subject to certain
terms and conditions, from the derivatives dealer and adviser
registration requirements and the derivatives qualification
requirement in relation to trades in specified categories of
derivatives previously regulated under the Quebec Securities
Act prior to the enactment of the QDA.
Among other conditions, the Blanket Decision requires that a
person seeking the benefit of these exemptions "carry out
their derivatives activities solely with accredited
investors within the meaning and according to the
conditions set forth in Regulation 45-106 [respecting
Prospectus and Registration Exemptions]".
The AMF had issued a Staff Notice on May 24, 2012 confirming that
(1) the Blanket Decision remained in effect notwithstanding the
terms of section 11.37 of the Quebec Derivatives
Regulation (QDR) which purports to revoke
discretionary exemptions from the derivatives qualification
requirement previously granted by the AMF, and (2) the exemption
from the derivatives qualification requirement under the Blanket
Decision also implied an exemption from the derivatives
authorization requirement enacted following the issuance of the
Blanket Decision. (SeeNotice Regarding
Application of Section 11.37 of the Derivatives Regulation, R.R.Q..
C. I-14.01, R. 1 and Certain Issues Pertaining to the Qualification
and Authorization Obligation in Respect of Marketing a
Derivative, May 24, 2012.)
The revocation decision No. 2015-PDG-0066 (the Revocation
Decision) cites, in support of the decision, the fact that, as a
result of legislative amendments in other Canadian jurisdictions,
transactions in the specified derivatives covered by the Blanket
Decision may no longer be undertaken on the basis of the
"accredited investor" exemption under National Instrument 45-106Prospectus and Registration Exemptions.
The Revocation Decision also provides transitional exemptive
relief from the requirement to deliver a risk acknowledgement form
(RAF) to individual "accredited investors" in connection
with transactions in the specified derivatives covered by the
Blanket Decision. The RAF-related exemptive relief applies
effective as of May 5, 2015 (when the RAF requirement comes into
force) until the revocation of the Blanket Decision effective
September 5, 2015. (For further information on the RAF requirement,
our post of April 17, 2015).
The Blanket Decision was last extended by way of a Notice of the
AMF on September 24, 2010 in which the AMF specified that it would
give "appropriate" notice of its intention to make any
changes to the exemption. The general market expectation was that
the decision would be revoked in conjunction with the adoption by
the Canadian Securities Administrator (CSA) of harmonized
derivatives registration rules. Rulemaking in this area, however,
is still ongoing following publication in April 2013 of CSA Consultation Paper 91-407 –
Derivatives: Registration on which we reported at the time. Release by the CSA of a
harmonized derivatives registration instrument is currently not
expected for another several months.
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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