In Decision No. 2009-PDG-0064 in the matter of CMC Markets UK Plc (June 16, 2009), the Quebec Autorité des marchés financiers (AMF) granted a temporary exemption to a London-based firm regulated by the UK Financial Services Authority from requirements under section 82 of the Derivatives Act (Quebec) (QDA) in connection with the offering of contracts for differences (CFDs) in Quebec. This is one of the first exemption decisions granted by the AMF since the coming into force of the QDA on February 1, 2009. The QDA regulates all activities with respect to OTC and exchanges traded-derivatives carried on in Quebec.
Section 82 of the QDA requires that a person other than a "recognized regulated entity" who "creates or markets a derivative" be qualified by the AMF (under rules which have yet to be prescribed) before the derivative is offered to the public (the Qualification Requirement). The person must also have the derivative authorized by the AMF (the Authorization Requirement). The Authorization Requirement is not currently in force.
In this decision, the AMF exempted the applicant firm from the Qualification Requirement in connection with the "creation and marketing" of CFDs through a proprietary electronic trading platform and through its Canadian affiliate which is registered as a dealer with the AMF and is a member of The Investment Industry Regulatory Organization of Canada (IIROC). The Canadian registered affiliate is responsible for KYC and suitability reviews on prospective counterparties.
The decision states that the applicant firm had previously furnished detailed information to the AMF relating to the terms and conditions of the products and associated risks, trading methods, execution and risk management systems, margin requirements, etc.
The decision is conditional on (1) the applicant firm conducting all CFD-related activities in Quebec through its electronic trading platform or through a registered representative of the Canadian registered affiliate, (2) the applicant firm, the Canadian registered affiliate and its registered representatives carrying on this business in compliance with applicable IIROC rules, requirements applicable to registered firms under the QDA and related regulations and any other derivatives-related rules applicable to their activities, (3) the applicant firm informing the AMF on a timely basis of any material changes to its business and of (4) any disciplinary actions against it, the Canadian registered affiliate or its registered representatives with respect to their CFD-related business, and (5) delivery on an annual basis of the applicant firm's audited financial statements and a statement of the number of CFDs entered into with Quebec counterparties over the preceding financial period.
The exemption is granted retroactively to February 1, 2009 and will expire automatically on the earliest of June 16, 2010 or the date of the coming into force of regulations implementing the Qualification Requirement.
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