Canada: What’s Ahead? - An Outline Of Key Developments In Canadian Securities Regulation

WHAT'S HAPPENED

WHAT'S NEXT?

Single 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 Canadian Securities Commission. The Crawford Panel on A Single Canadian Securities Regulator June 2006.

Government of Canada Appoints Expert Panel to Review Securities Regulation News Release of the Minister of Finance (Canada) February 2008.

Public Consultation Paper Expert Panel on Securities Regulation in Canada April 2008.

Both the Ontario and federal governments have made commitments to work towards a single securities regulator. Other provincial governments have expressed opposition.

Expert Panel on Securities Regulation in Canada appointed by the federal government in February 2008 is seeking submissions on five broad consultation questions. Submissions due by July 15, 2008. See www.expertpanel.ca.

Passport System For Provincial Securities Regulation

Multilateral Instrument 11-102 Passport System, Companion Policy 11-102CP Passport System, National Policy 11-202 Process for prospectus reviews in multiple jurisdictions, National Policy 11-203 Process for exemptive relief applications in multiple jurisdictions. CSA January 2008.

Passport system in place March 17, 2008 for prospectus filings and exemptive relief applications. OSC not participating, but interfaces provided. Passport system for registration expected to be published for comment during 2008/09.

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.

Second five-year review committee to be appointed during 2008.

CSA Registration Reform Project

Proposed National Instrument 31-103 Registration Requirements CSA February 2008 (proposed National Instrument and Companion Policy, together with other consequential amendments including revisions to National Instrument 45-106).

Establishment and Amendment of IDA Rules to Implement the Core Principles of the Client Relationship Model Investment Dealers Association of Canada February 2008.

Updating Securities Act Registration Requirements A Consultation Draft of Amendments to the Ontario Securities Act Ministry of Finance (Ontario) April 2008.

Notice and Request for Comment Draft Act Amendments and Consequential Amendments to Proposed National Instrument 31-103 Registration Requirements OSC April 2008.

Second comment period on proposed National Instrument 31-103 and related amendments ends May 29, 2008. Comments on the IDA proposals and on the draft Ontario legislation due May 29, 2008.

See BLG's nine-part series Keeping Reforms in Sight: Understanding VERSION 2 of the Registration Reform Proposals — Canadian Securities Regulators Release Second Version of Comprehensive Registration Regime for Comment (March 2008), Registered Dealers and Advisers What's New, Registration of Investment Fund Managers, Enhanced Compliance and Supervision Expectations, Impact on the Exempt Securities Market, Impact on the Hedge Fund Industry, Impact on Non- Canadian Securities Market Participants, The Client Relationship Model and Relationship Disclosure. Proposed National Instrument 31-103 At A Glance Investment Management Advisories April 2008 Borden Ladner Gervais LLP.

Registrant Regulatory Compliance

Joint Regulatory Notice on the Role of Compliance and Supervision Investment Dealers Association of Canada, Mutual Fund Dealers Association of Canada, Market Regulation Services Inc. and Bourse de Montréal Inc. December 2006.

2007 Annual Report Compliance Team, OSC August 2007.

2007 Examination Report Card, Capital Markets Regulation, British Columbia Securities Commission.

OSC Staff Notice 33-729 Marketing Practices of Investment Counsel/Portfolio Managers OSC November 2007.

MFDA Member Regulation Notice 0069 Suitability Guidelines MFDA April 2008.

2007 OSC and BCSC reports outline common deficiencies and proposed regulatory action for fund managers and entities registered as advisers (investment counsel and portfolio managers) and limited market dealers (in Ontario).

See Canadian SROs Focus on Role of Compliance and Supervision in Member Firms Registrant Regulation and Compliance Alert Investment Management Advisory December 2006 Borden Ladner Gervais LLP.

See Ontario Securities Commission Staff Notice Released on Marketing Practices of Registered Advisers Registrant Regulation and Compliance Alert Investment Management Advisory November 2007 Borden Ladner Gervais LLP.

Limited Market Dealers

OSC Staff Notice 11-758 Review of Limited Market Dealers OSC June 2006.

National roll-out of exempt market dealer regime proposed as part of CSA Registration Reform Project.

See OSC Staff Releases Compliance Report on Advisers Registrant Regulation and Compliance Alert, Investment Management Advisory September 2006 Borden Ladner Gervais LLP.

Investment Fund Manager Compliance

OSC Staff Notice 11-760 Report on Mutual Fund Sales Practices under Part 5 of National Instrument 81-105 Mutual Fund Sales Practices OSC April 2007.

OSC plans to continue "inter-Branch" compliance field reviews of investment fund market participants. OSC's draft Statement of Priorities for fiscal year ending March 31, 2009.

See OSC Provides Guidance on Complying with Mutual Fund Sales Practices Rule Investment Management Advisory May 2007 Borden Ladner Gervais LLP.

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. OSC's draft Statement of Priorities for fiscal year ending March 31, 2009 includes OSC's plan to develop proposals to modernize securities regulation of scholarship plans.

Investment Fund Governance

National Instrument 81-107 Independent Review Committee for Investment Funds CSA July 2006.

CSA Staff Notice 81-317 Frequently Asked Questions on National Instrument 81-107 Independent Review Committee for Investment Funds CSA March 2007.

In force November 1, 2006. IRCs were to be established by May 1, 2007 and fund managers and IRCs given until November 1, 2007 for complete compliance with the rules.

See Canadian Investment Fund Governance Becomes Reality: Final National Instrument 81-107 Released Investment Management Advisory August 2006 Borden Ladner Gervais LLP; and BLG's ten-part series of Practice Bulletins entitled BLG's Countdown to Governance: Getting Ready, June 2006 to September 2006. Reminder of May 1, 2007 Deadline for Independent Review Committees Investment Management Advisory February 2007 Borden Ladner Gervais LLP.

One Month to Independence- Reminder of November 1 Deadline for Compliance with NI 81-107 Investment Management Advisory September 2007 Borden Ladner Gervais LLP.

Fund Valuation

Handbook of Canadian Institute of Chartered Accountants Section 3855 Financial instruments - recognition and measurement April 2005.

In the Matter of AGF Funds Inc. et al Decision Document of Canadian securities regulators dated September 28, 2007.

Proposed Amendments to National Instrument 81-106 Investment Fund Continuous Disclosure Form 81-106FI and Companion Policy 81-106CP and related amendments CSA June 2007.

Comment period on amendments to National Instrument 81-106 ended August 31, 2007. Comment letters, including comment letter of Borden Ladner Gervais LLP, being considered by the CSA and available on the OSC's website. Amendments expected to be in force by September 30, 2008.

Point Of Sale Disclosure For Mutual Funds And Segregated Funds

Proposed Framework 81-406 Point of Sale Disclosure for Mutual Funds and Segregated Funds Joint Forum of Financial Market Regulators June 2007.

Comment period on the proposed Framework ended October 15, 2007. Comment letters, including comment letter of Borden Ladner Gervais LLP, being considered by the CSA and available on the OSC's website.

See Proposals for New Point of Sale Disclosure for Canadian Mutual Funds and Segregated Funds Comments due by October 15, 2007 Investment Management Advisory September 2007 Borden Ladner Gervais LLP.

Investment Fund Prospectus Disclosure

National Instrument 41-101 General Prospectus Requirements and related amendments CSA December 2007.

National Instrument 41-101 came into force March 17, 2008. OSC's draft Statement of Priorities for fiscal year ending March 31, 2009 includes OSC's plans to monitor compliance issues with the new long-form prospectus form for investment funds and compile issues for possible one-year amendments.

See New Developments for Canadian Structured Products Investment Management Advisory March 2007 Borden Ladner Gervais LLP.

Capital Accumulation Plans Guidelines And Proposed Exemptions For Mutual Funds

Joint Forum of Financial Market Regulators Guidelines for Capital Accumulation Plans May 2004.

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.

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.

Straight-Through Processing

National Instrument 24-101 Institutional Trade Matching and Settlement and Companion Policy 24-101CP January 2007.

CSA Staff Notice 24-304 CSA Industry Working Group on National Instrument 24-101 Institutional Trade Matching and Settlement CSA July 2007.

CSA Notice 24-307 Exemption from Transitional Rule: Extension of Transitional Phase-In Period in National Instrument 24-101 Institutional Trade Matching and Settlement CSA April 2008.

National Instrument 24-101 in force on April 1, 2007, but the transitional phase-in period (set previously at July 1, 2008) has been extended by blanket order and/or rule until July 1, 2010.

See October 1, 2007 Deadline for Institutional Trade- Matching by Canadian Capital Markets Participants Investment Management Advisory September 2007 Borden Ladner Gervais LLP.

Soft Dollars

Proposed National Instrument 23-102 Use of Client Brokerage Commissions as Payment for Order Execution Services or Research Services CSA January 2008.

Comment period ended April 10, 2008. Comment letters, including comment letter of Borden Ladner Gervais LLP, being considered by the CSA and available on the OSC's website.

See Canadian Securities Regulators Propose Revised Rules to Regulate Use of Client Brokerage Commissions Investment Management Advisory February 2008 Borden Ladner Gervais LLP.

Best Execution And Other Trading Rules

Joint CSA/Market Regulation Services Inc. Notice and Request for Comment on Proposed Amendments to National Instrument 21-101 Marketplace Operation and National Instrument 23-101 Trading Rules and Related Universal Market Integrity Rules CSA and RS April 2007.

Comment period ended July 19, 2007. CSA considering comments received.

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.

CSA Staff Notice 81-316 Hedge Funds CSA January 2007.

Due Diligence Guidelines on Principal-protected Notes Investment Dealers Association of Canada March 2007.

CSA Notice 46-304 Update on Principal Protected Notes July 2007.

Principal Protected Notes Regulations Department of Finance (Canada) November 2007.

OSC to complete its review of non-conventional investment funds and develop a framework for regulation of all investment funds. OSC's draft Statement of Priorities for fiscal year ending March 31, 2009. Draft PPN regulations released by the federal government for comment comment period ended December 23, 2007. PPN Regulations revised in response to comments and expected to come into force by July 1, 2008.

See Hedge Fund Managers: Time for Your Annual Check-up? Quick Tips for a Doing a Self-Diagnosis Investment Management Advisory September 2007 Borden Ladner Gervais LLP.

See New Regulations for Principal Protected Notes Proposed by the Canadian Government Investment Management Advisory December 2007 Borden Ladner Gervais LLP.

Regulation Of Derivatives

Regulation of Derivatives Markets in Québec Autorité des marchés financiers May 2006.

Final Report Ontario Commodity Futures Act Advisory Committee January 2007.

Regulatory Analysis of Contracts for Differences (CFDs) Investment Dealers Association of Canada June 2007.

Proposed Framework for Regulation of Derivatives Market in Québec Autorité des marchés financiers August 2007.

Towards Better Oversight of Derivatives Trading in Québec Press Release Minister of Finance (Québec) April 2008 and Introduction of Bill 77 Derivatives Act (Québec).

The 2006 AMF and Ontario government reports were released for public comment and the comment periods for both reports ended in July 2006. The 2007 AMF report was released for public comment and the comment period ended November 2007.

A Québec parliamentary commission expected to be held during Spring 2008 with a view to Bill 77 being adopted by June 2008. AMF currently drafting regulations under the Derivatives Act as well as policies which should reflect the principles established in the August 2007 AMF proposed Framework. AMF expects the Derivatives Act and related regulations and policies to come into force by late 2008 or early 2009.