On May 14, 2010, the British Columbia Securities Commission (BCSC) granted relief to CMC Markets UK plc and CMC Markets Canada Inc. (together, CMC Markets) that will permit CMC Markets to distribute "contracts for difference" (CFDs) and foreign exchange contracts (forex) to British Columbia investors without the necessity of a prospectus filing. A copy of the BCSC order (BCSC Order) is available here.
Under similar exemptions issued in 2009 by the Ontario and Québec securities regulators, CMC Markets distributes CFDs and forex to both accredited investors and non-accredited investors (retail investors) in Ontario and Québec in accordance with requirements of the Securities Act (Ontario) and the Derivatives Act (Québec), respectively. Please see BLG's Securities & Capital Markets Alert OSC Issues Staff Notice 91-702 Offerings of Contracts for Difference and Foreign Exchange Contracts to Investors in Ontario October 2009 available here.
Borden Ladner Gervais LLP is proud to have represented CMC Markets in Canada in applying for and obtaining registration as an investment dealer and membership with the Investment Industry Regulatory Organization of Canada (IIROC) and obtaining the exemptions in Ontario, Québec and now British Columbia.
The granting of the BCSC Order speaks to the continued efforts of the Canadian Securities Administrators (CSA) to establish a harmonized position on the trading and distribution of over-the-counter (OTC) derivatives, including CFDs and forex, to retail investors across the country.
Amongst other conditions, and as with the OSC and AMF orders, the relief granted to CMC Markets under the BCSC Order is conditional on (i) the distribution of a risk and product disclosure document to investors, (ii) CMC Markets UK plc remaining registered with the UK Financial Services Authority and (iii) CMC Markets Canada Inc. remaining registered as an investment dealer in the relevant provinces and a member of IIROC.
Under National Instrument 31-103 Registration Requirements and Exemptions, firms that seek to distribute CFDs and forex (products that have a leverage or margin component) to Canadian investors (both accredited and non-accredited investors) generally must be registered as investment dealers in the relevant provinces and become members of IIROC. We understand that members of the CSA will not permit firms registered only as exempt market dealers to trade in CFDs and forex, even if they restrict their offerings to accredited investors only.
For further information on the exemptions available in British Columbia, Ontario and Quebec for the distribution of CFDs and forex in those provinces and the evolving regulatory regime, please contact the authors of this Alert or one of the leaders of BLG's Securities and Capital Markets Group. More information about BLG's Securities and Capital Markets Group is available here.
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.
