Month: November 2022
Nov 30, 2022 | Regulatory Compliance
The Ontario Securities Commission (OSC) has released its most recent draft statement of priorities (SoP) in OSC Notice 11-797 – Request for Comments Regarding Statement of Priorities for Financial Year to End March 31, 2024.
The draft SoP is open for comment until December 22, 2022, and describes the OSC’s key priority initiatives, broken down into one of the following four strategic goals for the year:
- Building Trust and Fairness in Ontario’s Capital Markets;
- Strengthening Investor Safeguards;
- Adapting Regulation to Align with Innovation and Evolving Markets; and
- Enabling the Organization to Deliver Effective Regulation.
A key priority under the first goal relates to advancing work on environmental, social, and governance (ESG) disclosures for reporting issuers. In addition to engaging in further targeted consultations to inform their work, including with Indigenous organizations, staff will complete their focused review of ESG disclosures by investment funds, and publish a summary of findings and any guidance updates by the end of 2023. With respect to the Total Cost Reporting (TCR) proposals that were released in April 2022, the draft SoP notes that the Canadian Securities Administrators and the Canadian Council of Insurance Regulators are moving forward with final TCR amendments. Another key priority under this goal relates to the OSC’s ongoing review of diversity on boards and in executive positions. In the first quarter of fiscal 2023-2024, the OSC intends to publish for comment proposed changes to the disclosure requirements on diversity, board renewal and the director nomination process.
Also under the first strategic goal, the OSC will continue to enhance the domestic derivatives oversight framework. Actions next year will include finalizing and implementing the derivatives dealer business conduct rule by the third quarter of the OSC’s fiscal year. With respect to the new consolidated SRO (New SRO), the OSC intends to initiate the work required to assess incorporating other registration categories into the New SRO, including Portfolio Managers, Exempt Market Dealers and Scholarship Plan Dealers.
As noted above, the second strategic goal set out in the draft SoP is to strengthen investor safeguards. One key priority under this goal relates to the Ombudsman for Banking Services and Investments (OBSI). As indicated earlier this year by press release, the CSA is developing a proposal that will provide OBSI with binding decision making authority. The draft SoP notes that actions in 2023-2024 will also include determining next steps in response to the independent evaluation of OBSI’s investment mandate together with the CSA, other members of the Joint Regulators Committee and OBSI. A stated expected outcome of these proposals will be that investors do not experience undue pressure to accept offers to settle claims for less than they are entitled to receive. As an aside, we note that OBSI stated in response to its external review recommendations that it intends to consult on its loss calculation methodology for exempt market product cases in 2023.
The third stated goal involves aligning regulation with innovation and our evolving markets. The first key priority continues to refer to the crypto asset sector. Actions next year will involve continued application of regulatory obligations to crypto firms while completing the registration or approval process, including obtaining pre-registration undertakings from firms pending completion of the registration or approval process. Actions also include implementing and refining the program for ongoing oversight of crypto asset trading platforms. A stated action may also specifically impact investment funds, as the regulators intend to develop a regulatory framework with appropriate safeguards for how investment funds invest in crypto assets.
In connection with the existing CSA work on streamlining disclosure requirements for both investment fund and corporate finance reporting issuers, one planned action for the next fiscal year is to review the requirements in National Instrument 81-106 Investment Fund Continuous Disclosure and other disclosure requirements to publish rule amendments in December 2023, focusing on Management Reports of Fund Performance and non-IFRS content in issuers’ financial statements. Regarding the delivery options for continuous disclosure materials, final amendments are expected to be published to allow for an access-based instead of delivery model for investment fund issuers continuous disclosure filings by December 2023. The legacy CSA filing systems are also expected to be replaced over time by SEDAR+, beginning with Phase 1 in mid-2023.
Under the final strategic goal of enabling the organization to deliver effective regulation, the OSC continues to review strategies to attract and retain talent, execute on its inclusion and diversity strategy, and integrate data and processes to support effective decision making and risk monitoring. The latter key priority includes rolling out the OSC’s external portal, to streamline participants’ interaction with OSC staff.
Readers may be interested in understanding that this is the first SoP published by the OSC under its new structure (separate tribunal, separate roles for the Chair and the CEO of the OSC).
November 30, 2022
Nov 30, 2022 | Investment Funds, Regulatory Compliance
Earlier this month, the Canadian Securities Administrators (CSA) released CSA Consultation Paper 21-403 Access to Real-Time Market Data, focusing on the costs of various types of access. As defined in the Consultation Paper, ‘real-time market data’ is order and trade information that is distributed immediately after an order has been entered, amended, or cancelled or a trade has been executed”. Issues have been raised about the cost of accessing data, particularly in Canada where there are multiple marketplaces, comprised of exchanges and alternative trading systems, competing for the same securities to trade. The Consultation Paper is of interest to anyone responsible for investment, order routing and execution decisions and sets out in a comprehensive manner the current regulatory regime, including the regulation of direct feeds and consolidated data, summarizes concerns that have been raised to date, and sets out potential initial and longer-term options under consideration by the CSA.
In its review, staff of the CSA considered:
- Changes in core marketplace revenues to identify changes and trends;
- Fees that impact the costs incurred by market participants that access and use real-time market data;
- The need to access Level 2 consolidated real-time market data [depth-of-book, i.e. information on all visible orders in the marketplace and all trades] versus Level 1 consolidated real-time market data from listing markets only [top-of-book information for each security, generally the last sale, the best bid and offer and the aggregated volume available for purchase or sale at those prices]; and
- The fees charged in Canada compared to those charged in the U.S. and other global markets.
The research indicated that fees differ across marketplaces for access and use of real-time market data and may include additional fees such as distribution fees if the data is redistributed, user display fees (or non-display fees), and charges associated with how participants connect to the data (e.g. co-location fees). The CSA’s research indicated that providing access to Level 2 data could as much as double the cost to consume data from all marketplaces when compared to only the listing markets.
Of note, the Consultation Paper stated that everyone interviewed by staff as part of their research indicated that the use of real-time market data should be tailored to a participant’s needs, and that not all participants needed access to the same data. However, most market participants were also of the view that they must acquire real-time market data from all marketplaces in order to comply with both their best execution obligations and the order protection rule.
The potential initial options focus on fair access to real-time market data for both direct marketplace and consolidated feeds. One suggestion is to impose standardized terminology to describe various products and how those products are accessed and enhance the transparency of any fee changes proposed by marketplaces by requiring them to publish proposed changes for public comment.
Longer-term options would instead propose an overhaul of the regulations applicable to accessing consolidated real-time market data. For example, consideration is being given to leveraging the current information processor model and imposing a cap on fees charged by marketplaces for marketplace order and trade data that is consumed through the consolidated products distributed by an enhanced information processor. The CSA is also contemplating introducing a new model for data consolidation through the use of a new administrative information processor that would be responsible for setting and managing the components of the model (including products, fees and revenue sharing).
A number of CSA considerations and areas for feedback are set out in the Consultation Paper, ranging from the need to enhance the transparency of any fee proposals related to real-time market data, any unintended consequences that could spring from the suggestions made, to how to incentivize market participants to provide consolidated real-time market data to all clients at reasonable prices.
Comments on the Consultation Paper are due by February 10, 2023. Any further regulatory proposals that result from the consultation will be published for further comment.
November 30, 2022
Nov 30, 2022 | Investment Funds, Regulatory Compliance
The Ontario Securities Commission (OSC) recently announced that new OSC Rule 13-502 Fees and OSC Rule 13-503 (Commodity Futures Act) Fees and their respective companion policies will come into effect on April 2, 2023. As noted in our January 2022 bulletin article, the OSC had been consulting on changes to the fee calculations for certain market participants to reflect the growth in Ontario’s over-the-counter (OTC) derivatives market activities. The revised rules will introduce a new fee for entities that enter into OTC derivatives transactions but will moderately reduce participation fees for certain reporting issuers and registrants.
The amendments will also eliminate certain activity and late fees, and permanently eliminate late fees on certain registration form updates, including outside activities. With respect to fees for exempt trade reports, the fees payable will be reduced to $350.
No changes have been made to the original proposals regarding the simplification of the annual capital markets participation fee, where it will no longer be necessary to estimate revenues that are later adjusted. The fee will be based instead on actual financial information from the most recently audited financial statements. In addition, the current rush that registrants face to file the fee forms by the deadline of December 1 will be alleviated by a requirement to file between September 1 and November 1.
November 30, 2022
Nov 30, 2022 | Investment Funds, Regulatory Compliance
On November 25, the Financial Services Regulatory Authority of Ontario (FSRA) proposed amendments to the existing Unfair or Deceptive Acts or Practices (UDAP) Rule. The amendments would eliminate deferred sales charges (DSC) on new segregated fund contracts effective June 1, 2023. DSCs are payable by clients when they withdraw money from a segregated fund contract before the end of the time period specified in the contract. New requirements would also be introduced with respect to existing DSCs, including customer disclosure and limits on the use of existing DSC options. Comments are the two sets of proposed amendments are due February 23, 2023.
September 28, 2022
Nov 30, 2022 | Investment Funds, Regulatory Compliance
The CSA recently published notices that recognize the New Self-Regulatory Organization of Canada (New SRO) and approve the Canadian Investor Protection Fund (CIPF) both as of January 1, 2023. As set out in our May 2022 bulletin, the CSA released CSA Staff Notice and Request for Comment 25-304 Application for Recognition of New Self-Regulatory Organization and CSA Staff Notice and Request for Comment 25-305 Application for Approval of the New Investor Protection Fund seeking comment on a number of operational aspects relating to the New SRO and investor protection fund. The press release announcing the notices also indicated that the Autorité des marches financiers intends to publish a transition plan for mutual fund dealers registered in the Province of Québec before the end of the year.
The New SRO will be temporarily known as the “New Self-Regulatory Organization of Canada” until a new name is determined at a later date, and as noted above the combined contingency fund will be known as the “Canadian Investor Protection Fund”. The interim rules for the New SRO provide for the continued jurisdiction over persons subject to the current IIROC and MFDA rules and contain numerous transitional provisions. With respect to the registration of firms and individuals, the powers of the New SRO remain the same as the current powers of IIROC unless changed by the regulators. In response to public comments on the May consultations, a number of clarifications were made, including that there would be no changes to the current delegation of registration authority to IIROC (which applies to investment dealers only).
Firms and individuals currently regulated by IIROC or the MFDA may wish to consult the FAQs relating to the Interim Rules and the Integration Cost Recovery Fee Model Guideline, now found on the New SRO website.
November 30, 2022
Nov 30, 2022 | Regulatory Compliance
A few impending filing deadlines that we thought would be helpful to note from past bulletins for your reference:
- December 1 (yes, December 1) is the deadline for registrants in Ontario and foreign firms that rely on certain exemptions from the registration requirements to file their fee calculation forms (Form 13-502F4 Capital Markets Participation Fee Calculation under OSC Rule 13-502 Fees and Form 13-503F1 (Commodity Futures Act) Participation Fee Calculation under OSC Rule 13-503 (Commodity Futures Act) Fees).
- January 30, 2023, is the deadline for filing exempt trade reports for issuers that are investment funds and that relied on specific prospectus exemptions under National Instrument 45-106 Prospectus Exemptions, namely the accredited investor exemption, the minimum investment of $150,000 (for non-individuals), and the exemption for additional investment in investment funds. Based on past experience, the processes of completing the forms and submitting the fees across the country can be time consuming and should be started as soon as possible to avoid a “filing crunch” in late January. Contact us and we can help you!
- June 6, 2023, is when an individual registrant’s Form 33-109F4 must be filed to update their “other activities”, as required by amendments to National Instrument 33-109 Registration Information. While this seems eons away, as the whole form should be reviewed, updated and filed within the deadline, and if older forms were used, the new forms may require new information to be inputted, we continue to recommend that clients speak with us sooner rather than later to work through the forms in a systematic fashion to avoid filing delays.
Finally, we wanted to note in case you have not yet had an opportunity to visit the page, the Ontario Securities Commission has set up a number of helpful materials that can be used to assist with a registrant’s obligations regarding older and vulnerable investors. Resources include educational material, and some starter template forms. We would be pleased to discuss your strategies for addressing the needs of these investors in greater detail.
November 30, 2022
Nov 30, 2022 | Investment Funds, Mortgage and Real Estate Investment Vehicles, News, Regulatory Compliance
Our colleagues at BLG have provided the following insights we thought might interest our readers:
For more information, please visit the BLG website.
November 30, 2022
Nov 30, 2022 | Events, News
AUM Law is proud to sponsor the Q Wealth Partners National Conference held at the St. Regis Hotel in Toronto on December 7-9. AUM’s very own William (Bill) Donegan will participate as a speaker on December 9, to discuss the topic of SRO Consolidation.
November 30, 2022
Nov 30, 2022 | Events, News, Regulatory Compliance
AUM Law’s Chris Tooley will be participating as a speaker for the second year in a row at the Anti-Money Laundering and Anti-Terrorist Financing Training Session hosted by PMAC. Chris will be covering core concepts around money laundering and terrorist financing, client identification, what information you must collect from clients, record keeping, and suspicious transactions. To register for the event, please click here, or contact our communications team here for more details.
November 30, 2022
Nov 30, 2022 | Featured
In this bulletin:
- OSC Seeks Feedback on 2023-24 Statement of Priorities; It’s Good to Have Goals
- CSA Consults on Access to Real-Time Market Data; No Pain, No Gain
In Brief: Keep Calm and Soccer On; OSC Announces New Fee Rules as of April 2023 (or you Really Do Have to Pay to Play) ▪ Shooting for the Stars – FSRA Proposes to Eliminate DSCs for Segregated Funds ▪ CSA Formally Recognize New SRO and Approve New CIPF; One Team, One Dream
Important Reminders: Upcoming Deadlines and Resources – Fast and Furious
BLG’s Resource Corner
News
Click the link to access a PDF of our full, monthly bulletin summarizing these recent developments. >> AUM Law Bulletin | FIFA World Cup Edition | November 2022
