The Companion Policy states that under s. 1(1) of the
Securities Act, the following three components of the
definition of "security" could describe a forex
(a) a document, instrument or writing commonly known as a
(l) an investment contract;
(n) an instrument that is a futures contract or an option but is
not an exchange contract.
The Blanket Order states that a contract or other obligation to
purchase or sell the currency of any jurisdiction, where the terms
of the transaction require settlement not later than three business
days after the entering into of the transaction, is not a
futures contract, provided that the contract or obligation
is not otherwise a security under the Securities Act. The
purpose of the Companion Policy is to clarify that the Blanket
Order is limited to determining when a foreign exchange contract is
not a futures contract. A forex contract may still be a
"security" if it falls under any of the other relevant
branches of the definition.
In this respect, the Companion Policy cites three decisions of
the B.C. Securities Commission where the Commission concluded that
a forex contract was an "investment contract" and,
therefore, a security. The Companion Policy thus clarifies that in
determining whether a forex contract is a security, the Blanket
Order cannot be relied upon in a vacuum. Whether another part of
the definition of security applies to the relevant contract must
also be considered, even when settlement is required within three
business days by the terms of the transaction. The Companion Policy
notes that the Blanket Order is also designed to provide relief
from registration and prospectus requirements for those managing
currency risk in their business operations and is not meant to
provide registration relief for other investors.
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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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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