On February 10, 2016, the amendments to the Securities Act (Saskatchewan) (the
SSA) that incorporate a framework for derivatives regulation were
proclaimed into force.
Derivatives, not exchange contracts or futures
In introducing the concept of a "derivative" and
deleting references to "exchange contracts" and
"futures contracts", Saskatchewan adopts similar amendments previously made in respect
of the Securities Act (Alberta). The previous
situation in Saskatchewan was that the definition of securities
included "futures contracts" which in turn were defined
widely enough to cover many over-the-counter derivatives
transactions. This resulted in securities dealer registration
and prospectus requirements potentially applying to
over-the-counter derivatives. To deal with this, the
Saskatchewan Financial Services Commission issued General
Order 91-907 Over-The-Counter Derivatives
(General Order 91-907) in November 2009 exempting certain
derivatives (those between qualified parties, certain commodity
derivatives) from the registration and prospectus requirements. Now
derivatives are dealt with as a separate category of instrument
(the term "derivative" is explicitly excluded from the
definition of a "security") as they are in Ontario and
Registration and Prospectus Exemptions
The amendments have two important results with respect to the
fundamental securities law prospectus and registration
requirements. First, the amendments remove derivatives from
the ambit of the prospectus requirement. The result is that a
trade in derivatives in Saskatchewan no longer requires reliance on
a prospectus exemption or the prospectus exemption in General Order
Second, the amendments create a dealer registration requirement
for any person or company engaging in or holding itself out as
engaging in the business of trading in derivatives in
Saskatchewan. Until a model registration rule for derivatives
is adopted, there will be no registration categories specifically
for derivatives dealers and a dealer in derivatives will presumably
have to be registered as a securities dealer. We understand
Financial and Consumer Affairs Authority of
Saskatchewan that General Order 91-907 will be amended
to allow the registration exemption to continue to apply to trades
in derivatives between qualified parties and certain commodity
transactions as well.
The amendments also add a new requirement that a disclosure
document that complies with the requirements of the regulations
must be accepted and filed with the Financial and Consumer Affairs
Authority of Saskatchewan as a prerequisite to trading a
derivative. Presumably this requirement will not be effective
until disclosure document regulations are enacted. No
provinces with this requirement have yet enacted regulations.
These regulations will be developed on a coordinated basis through
Securities Administrators (CSA). Helpfully, the SSA
provides that the failure to file the disclosure document will not
render a derivatives trade void or unenforceable.
The market conduct rules in the SSA will now explicitly apply to
derivatives. For example, the prohibition on making
misleading and untrue statements now applies if such statements
would reasonably be expected to have a significant effect on the
market price or value of a derivative. In addition, the
Financial and Consumer Affairs Authority of Saskatchewan is now
vested with additional powers in respect of altering or setting
aside a derivatives transaction in the case of non-compliance with
the law, a decision of the Financial and Consumer Affairs Authority
of Saskatchewan or a written undertaking by a person or
company. The Financial and Consumer Affairs Authority of
Saskatchewan also has new powers to order a cease trade with
respect to derivatives transactions where doing so is in the public
The amendments now also confer jurisdiction on the Financial and
Consumer Affairs Authority of Saskatchewan to recognize derivatives
exchanges, clearing houses and trade repositories.
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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