Canada: What’s Ahead? An Outline of Key Developments in Canadian Securities Regulation

Last Updated: May 31 2006
Most Read Contributor in Canada, November 2017
Common Securities Regulator
It’s Time. Wise Persons Committee to review the structure of securities regulation in Canada. Minister of Finance (Canada) December 2003. Modernizing Securities Regulation in Canada Discussion paper of the Management Board Secretariat (Ontario) June 2004. A Blueprint for a New Model. A Discussion Paper by the Crawford Panel on A Single Canadian Securities Regulator December 2005. Summary Report on the Roundtable Process Crawford Panel on a Single Canadian Securities Regulator April 2006. The Crawford Panel held "roundtable" public consultations on its discussion paper during the first quarter of 2006. It is accepting written submissions and expects to release its final report by June 2006. See Both the Ontario and federal governments confirmed their respective commitments to work towards a common securities regulator in their Spring 2006 Budgets.
Uniform securities regulation
Blueprint for Uniform Securities Laws for Canada. CSA January 2003. CSA Notice and Request for Comment 11-404 Consultation Drafts of the Uniform Securities Act and the Model Administration Act CSA December 2003. CSA Notice 11-307 Responses to Comments Received on Consultation Drafts for a Uniform Securities Act and a Model Securities Administration Act CSA September 2004. Status and next steps unknown, although the CSA is working to harmonize various aspects of securities regulation through national instruments, such as the prospectus and registration exemption rule (NI 45-106), the continuous disclosure rule (NI 81-106) and the proposed national registration rule (see CSA Registration Reform Project).
Passport System for Provincial Securities Regulation
Securities Regulation in Canada: An Interprovincial Securities Framework. Provincial Ministers responsible for securities regulation (Steering Committee) June 2003. Provincial/Territorial Memorandum of Understanding Regarding Securities Regulation and Action Plan Provincial/Territorial Securities Initiative Action Plan to Improve Canada’s Securities Regulatory Framework September 2004. Multilateral Instrument 11-101 Principal Regulator System and Companion Policy 11-101CP Principal Regulator System CSA (other than OSC) August 2005 (published in final form). CSA Notice 12-309 Impact of the MI 11-101 Principal Regulator System on the Mutual Reliance Review System for Exemptive Relief Applications CSA August 2005. OSC Notice 11-754 Multilateral Instrument 11-101 Principal Regulator System (etc.) OSC August 2005. Principal regulator system in force since September 2005 in all provinces and territories, other than Ontario. Issuers and registrants deal only with their "principal regulator" with respect to many disclosure requirements (including NI 81-101 and NI 81-106), although disclosure documents and fees are still required to be filed and paid in all jurisdictions. MI 11-101 not adopted in Ontario. System has no practical effect for investment funds whose managers are located in Ontario. Investment funds whose managers are located outside Ontario deal with the OSC and their principal regulator under MI 11-101. OSC considering implementing similar "mobility registration exemption" to that contained in MI 11-101.
Task Force to Modernize Securities Legislation in Canada
News Release: IDA launches the Task Force to Modernize Securities Legislation in Canada June 2005. IDA created and is funding the Task Force. The mandate, terms of reference and membership of the Task Force are posted at its Web site Task Force is accepting written submissions, has carried out in-person consultations and has commissioned over 25 research studies. Its final report is scheduled for September 2006.
Ontario Legislative Review
Five Year Review Committee Final Report: Reviewing the Securities Act (Ontario) March 2003. Standing Committee on Finance and Economic Affairs Report on the Five Year Review of the Securities Act October 2004. Ontario provincial government committed to implement specified changes: single securities regulator (see above), civil liability for secondary market disclosure (implemented effective December 31, 2005), role of SROs and adjudicative function of the OSC. OSC’s draft 2007 fiscal year priorities include supporting the Ontario government’s initiative for a single securities regulator, as well as responding to certain other recommendations contained in the Five Year Review Committee Report and the Standing Committee Report.
British Columbia Securities Legislation
Securities regulation that works (four volume set) British Columbia Securities Commission April 2003. Bill 38 British Columbia Securities Act passed by BC Government May 2004; proclamation deferred until at least December 31, 2007. News Release 2006/05 Securities Laws to be Harmonized Across Canada BCSC February 2006. BC government has deferred implementation of the new securities legislation in British Columbia until at least December 31, 2007 to allow provincial securities regulators to fully participate in the passport regulatory system.
CSA Registration Reform Project
The Fair Dealing Model Concept Paper of the Ontario Securities Commission January 2004. CSA News Release: Canadian Securities Regulators launch Registration Reform Project Web site June 2005. CSA Registration Reform Project Proposal on Registration Reform January 2006. CSA Registration Reform Project established in Fall 2004 and took over from the Fair Dealing Model. See The CSA Registration Reform Project includes implementing the CSA National Registration System (in force April 2005), implementing three "core principles" from the Fair Dealing Model and "harmonizing, streamlining and modernizing registration requirements (including categories of registration)." The three "core principles" of the Fair Dealing Model being developed by the CSA in conjunction with the SROs are: clarity and transparency regarding relationships, transparency of costs and conflicts and transparency regarding performance and risks. A national registration requirements rule is being developed, with "harmonized, streamlined and modernized registration categories, proficiency requirements for intermediaries and conduct rules". A draft rule is scheduled to be published for comment by December 2006. Proposals for registration reform include registration of fund managers in a new registration category, removal of barriers to incorporation of sales representatives and streamlined categories of registration.
Limited Market Dealers
OSC Staff Notice 11-752 Limited Market Dealer Initiative – Compliance Team OSC May 2005. OSC Compliance Team carried out surveys, focus group interviews and on-site visits during 2005. Industry report scheduled for release by Summer 2006. National roll-out of limited market dealer regime being considered. See Limited Market Dealer Compliance Initiative Compliance and Registrant Regulation Advisory May 2005 Borden Ladner Gervais LLP.
Investment Fund Manager Compliance
Report on Mutual Fund Trading Practices Probe Ontario Securities Commission March 2005. Proposed National Instrument 81-108 scheduled to be published for comment during Summer 2006 and is expected to propose that investment fund managers implement a compliance program. Proposed guidance on fair value pricing will also be provided. See Ontario Securities Regulators Wrap Up Probe into Mutual Fund Trading Practices The Material Change Report Summer 2005 Borden Ladner Gervais LLP.
Investment Fund Governance
Proposed National Instrument 81-107 Independent Review Committee for Investment Funds CSA May 2005 (second publication for comment). Comment period ended August 2005. Comment letters, including comment letter of Borden Ladner Gervais LLP, available on OSC Web site. Final rule publication expected by Summer 2006. See Mutual Fund Governance: Moving Closer to Reality Investment Funds Advisory February 2004 Borden Ladner Gervais LLP; and Canadian Securities Regulators Propose Mandatory Investment Fund Oversight Investment Management Advisory June 2005 Borden Ladner Gervais LLP.
Investment Fund Continuous Disclosure
National Instrument 81-106 Investment Fund Continuous Disclosure CSA March 2005 (NI and CP, and consequential amendments to certain other NIs, published in final form). Canadian Securities Administrators Staff Notice 81-315 Frequently Asked Questions on National Instrument 81-106 Investment Fund Continuous Disclosure November 2005. In force June 1, 2005, with effect for investment funds with financial years ending on or after June 30, 2005. OSC to implement a continuous disclosure review program. See Working with the New Canadian Continuous Disclosure Rules for Investment Funds Investment Management Advisory April 2005 Borden Ladner Gervais LLP.
Canadian Accounting Standard Change
Handbook of Canadian Institute of Chartered Accountants Section 3855 Financial instruments - recognition and measurement April 2005. Canadian securities regulators considering administrative guidance in light of section 3855 and Part 14 of NI 81-106. New financial instrument accounting standard has effect for entities for their financial years commencing on and after October 1, 2006.
Scholarship Plan Dealers’ Business Practices
OSC News Release OSC Acts to Improve Scholarship Plan Dealers’ Business Practices July 2004. Industry Report Scholarship Plan Dealers Compliance Team, Capital Markets, Ontario Securities Commission July 2004. Continued monitoring of scholarship plan dealers by OSC (terms and conditions). Proposed National Instrument 46-102 to modernize the scholarship plan regime, including improved point of sale disclosure, a priority for the CSA. Proposed NI 46-102 is scheduled for publication for comment before March 31, 2007.
Labour-Sponsored Investment Funds
News Release (Ontario) Ontario Plans to End Tax Credit for Labour Sponsored Investment Funds Ministry of Finance August 2005. Ontario government 2006 Spring Budget contains several initiatives related to the phase-out of the tax credit (which will continue until year end 2010).
Capital Accumulation Plans Guidelines and Proposed Exemptions for Mutual Funds
Joint Forum of Financial Market Regulators Guidelines for Capital Accumulation Plans May 2004. CSA Request for Comment Amendments to National Instrument 45-106 Prospectus and Registration Exemptions and Adoption of Local Prospectus and Registration Exemptions for Certain Capital Accumulation Plans CSA October 2005. Guidelines are final, with implementation on or as of December 2005. All Canadian regulators, other than the OSC and the Quebec regulator, granted "blanket" prospectus and registration exemptions to allow mutual funds to be used as investment options for CAPs. Comment period on proposed amendments to NI 45-106 ended January 19, 2006. Comment letters, including comment letter of Borden Ladner Gervais LLP, being considered by CSA.
Point of Sale Disclosure for Mutual Funds and Segregated Funds
CSA Notice 81-311 Report on Consultation Paper 81-403 Rethinking Point of Sale Disclosure for Mutual Funds and Segregated Funds April 2004. CSA response provided to comments on February 2003 consultation paper. CSA developing a fund summary document, a foundation document and new cooling off rights. CSA working on draft national instrument to propose new disclosure requirements and introduce new cooling-off requirements. To be published for first comment during 2006/07.
Straight-through Processing
Canadian Securities Administrators Notice and Request for Comment on Proposed National Instrument 24-101 Institutional Trade Matching and Settlement and Proposed Companion Policy 24-101CP CSA March 2006. Comment period ended May 2, 2006. Regulators intend for proposed NI 24-101 to come into force on July 1, 2006. Trade matching requirements will be phased-in from July 1, 2006 to June 30, 2008.
Best Execution and Soft Dollars
Concept Paper 23-402 Best Execution and Soft Dollar Arrangements Ontario, British Columbia, Alberta and Manitoba Securities Commissions and the Autorité des marchés financiers du Québec February 2005. CSA Notice 23-303 Update on Concept Paper 23-402 Best Execution and Soft Dollar Arrangements December 2005. Comments on Concept Paper summarized and next steps suggested. Proposals for new soft dollar requirements scheduled to be published by Fall 2006.
Hedge Funds and other Alternative Investment Products
Regulatory Analysis of Hedge Funds Hedge Funds Working Group Investment Dealers Association of Canada May 2005. MFDA MR-0048 Know-Your-Product MFDA October 2005. OSC working with CSA to identify areas of concern arising out of its review of hedge funds and similar products. Regulatory responses may be proposed, although the OSC chair acknowledged in a speech presented in February 2006 that "hedge funds per se do not require their own separate regulatory regime". The OSC enforcement proceedings brought against Portus Alternative Asset Management Inc., together with the IDA paper, can be expected to result in a continued review of alternative investment products, sales and marketing practices followed in distributing these products, as well as the qualifications of entities managing and structuring these products.
OSC Participation and Activity Regulatory Fees
Ontario Securities Commission Rule 13-502 Fees and Notice of Replacement of OSC 13-502 Fees. OSC January 2006. New Rule 13-502 effective April 1, 2006. Comment period on the proposed revised rule ended November 10, 2005. Comment letters, including comment letter of Borden Ladner Gervais LLP, available on OSC Web site. Some changes to Rule made, including clarification that managers of investment funds that are sold in Ontario must pay participation fees to the OSC, even if they are not registered with the Commission and/or are not resident in Canada.

BLG's Investment Management Group leaders are:
John E. Hall - National Leader, Brad J. Pierce - Calgary Regional Leader, Richard W. Shannon - Montréal Regional Leader, Jeremy S.T. Farr - Ottawa Regional Leader, Lynn M. McGrade - Toronto Regional Leader and Jason J. Brooks - Vancouver Regional Leader

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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