On July 13, the Canadian Investment Regulatory Organization (CIRO) released for the third time proposed amendments to modernize and simplify its derivatives related requirements. One of CIRO’s predecessor organizations, IIROC, initially published proposed amendments back in November, 2019. The purpose of the amendments is to ensure, to the extent appropriate, that there is consistent regulatory treatment between securities-related and derivatives-related activities. This particular consultation suggests some changes to the previous proposals in order to incorporate them into the most recent version of the Investment Dealer and Partially Consolidated Rules which came into effect in January, but also to address suggestions from the CSA and commenters, including to ensure consistency with the anticipated final version of CSA National Instrument 93-101 Derivatives: Business Conduct.
The proposed changes to the definition of “derivative” is meant to alleviate confusion and ensure CIRO can make a determination that a contract or instrument is not a derivative when the classification of a product is questioned. In addition, changes are proposed to the definition of a non-individual “hedger” to cover partial hedging of risks, and additional guidance has been added to assist investment dealer members in their assessment of whether a client qualifies as such. Of interest, CIRO is also now proposing to extend the product due diligence and KYP requirements to derivatives related activities, which it believes are needed to ensure consistent regulatory treatment. Comments on the consultation are due by August 14.
July 31, 2023