Canadian Securities Law Online [v2] : Canadian Securities Lawyer & Attorney : Stikeman Elliott Law Firm : Montreal, Ottawa, Calgary, Vancouver, Montreal, Toronto

Earlier this month, U.S. Senator Chris Dodd, Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, unveiled the "Restoring American Financial Stability Act of 2010". According to Senator Dodd, the bill will (i) end "too big to fail" bailouts; (ii) create a strong and independent consumer protection watchdog; (iii) create an early warning system; and (iv) bring transparency and accountability to "exotic instruments" like hedge funds and derivatives. Of particular note, the bill also contains provisions regarding executive compensation (Subtitle E, beginning on page 868) and corporate governance (Subtitle G, beginning on page 895). A summary of the proposed legislation was also released.

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The European derivatives exchange Eurex recently announced that Quebec's Autorité des marchés financiers (AMF) has provided a regulatory exemption allowing Eurex to offer its products in Quebec. According to the Eurex release, Quebec customers will now have direct access to trading on its exchange. 

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The Autorité des marchés financiers (the "AMF", Quebec’s financial services regulator) announced today that the temporary exemption provided under its February 1, 2009 blanket decision from the derivatives dealer and adviser registration requirements under the Derivatives Act (Quebec) (the "Act") for specified derivatives activities carried out solely with “accredited investors” (as defined under National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106"), will remain available until September 28, 2010. Prior to this announcement, the temporary exemption had been set to expire on March 27, 2010. The exemption remains available subject to the following conditions:

1. the derivatives activities must be carried out solely with “accredited investors” in accordance with the conditions set forth in NI 45-106 (including the filing of a report under Part 6); and
    
2. the activities must relate only to certain specified categories of derivatives, including:
   
   
   1. an option or a negotiable futures contract pertaining to securities, or a Treasury bond futures contract;
   2. an option on a commodity futures contract or financial instrument futures contract; or
   3. commodities futures contracts, financial futures contracts, currencies futures contracts and stock indices futures contracts.

The AMF also announced that the corresponding exemption from the derivatives qualification rules under the Act will continue to remain available for the time being and that the AMF will advise market participants of any changes to this exemption.

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The Ontario Securities Commission (OSC) announced today that it has approved amendments to MFDA Rule 2.4.1 to allow Approved Persons of MFDA Member firms to have remuneration from the Member paid directly to an unregistered corporation, subject to certain conditions. The final version of the amendments include changes made since their initially publication for comment in June 2009.

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Earlier today, the Investment Industry Regulatory Organization of Canada (IIROC) released proposed amendments to its rules respecting business conduct and client accounts. Specifically, proposed Rule 3100 - Business Conduct would consolidate various current rules relating to business conduct and impose on Dealer Members a duty to use due diligence to ensure orders and recommendation are within the bounds of good business practice. Meanwhile, proposed Rule 3200 - Client Accounts would also consolidate various rules and impose responsibilities on Dealer Members with respect to, among other things, client identification, account information, discretionary trading and conflicts of interest. A table of concordance was also released by IIROC, which is accepting comments on the proposals for 90 days.

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The Ontario Securities Commission (OSC) today published a revised Statement of Priorities for the financial year ending March 31, 2011. The OSC initially released a draft Statement of Priorities in December 2009, and the revised version includes changes made in consideration of public comments received. Specifically, the changes to the draft publication include (i) a reference to the creation of an independent panel focusing on investor issues; and (ii) a new initiative to signal the OSC's intention to direct more resources to the regulation of OTC derivatives.

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On March 12, the Investment Industry Regulatory Organization of Canada (IIROC) published a Rules Notice (the FAQ) addressing frequently asked questions regarding IIROC's registration reform related rule amendments, as well as the impact of National Instrument 31-103 Registration Requirements (NI 31-103) and related instruments on Dealer Members. IIROC's registration reform related rule amendments and NI 31-103 became effective September 28, 2009. The questions addressed in the FAQ were compiled from questions raised at various registration reform workshops hosted by IIROC in 2009. The FAQ covers issues such as NRD filing requirements, reinstatements, new NRD functionality, passport applications, category selection, proficiency requirements, termination notices and the business trigger.

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On March 10, 2010, the Investment Industry Regulatory Organization of Canada (IIROC) published a guidance note outlining its expectations with respect to Dealer Members reporting changes to their business models. According to IIROC, it is "essential" that it be made aware of "significant changes" to a member's business model as such reporting will enable more efficient and effective regulatory supervision. While a "significant change" depends on the circumstances of each case, the note provides some examples of changes that are expected to be reported. Further, IIROC expects the notifications to be thorough and detailed so as to allow it to "fully understand and assess" the changes to the business model.

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As we reported back in January, the New Brunswick Securities Commission published answers to frequently asked questions regarding Local Rule 91-501 Derivatives. Last week, the NBSC published a revised notice expanding on its answer regarding whether the rule applies to spot foreign exchange contracts. Specifically, the revised notice states that "LR 91-501 does not apply to spot foreign exchange transactions involving the purchase or sale of a currency (i.e. transactions such as changing money at a currency exchange or withdrawing cash at a foreign ATM)." Whether other spot foreign exchange transactions are subject to LR 91-501, however, remains unclear, as the NBSC's use of "i.e." raises questions as to whether the example provided was intended to be comprehensive.

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