Faithful bulletin readers will recall our prior articles regarding the proposed derivatives business conduct rules, most recently released in January for the third round of comments in Proposed National Instrument 93-101 Derivatives: Business Conduct and Proposed Companion Policy 93-101CP Derivatives: Business Conduct (collectively, the Proposed Derivatives Rules). The Proposed Derivatives Rules sets out a business conduct regime for over-the-counter (OTC) derivatives. They are intended to apply to persons and companies that meet the definition of a “derivatives adviser” or “derivatives dealer”, and a business trigger test (similar to what is already in use for securities advisers and dealers) will be used to determine which provisions of the Proposed Derivatives Rules will apply. The rules set out a business conduct regime for the OTC derivatives market and include provisions relating to conflicts, know-your-derivatives-party, senior management duties and suitability. Even if an entity is subject to the requirements and no exemption is available, it is proposed that certain eligible derivatives parties would still be able to waive certain of the requirements.
A transition period had been proposed to allow certain derivatives firms to treat existing permitted clients as “eligible derivative parties” for up to five years, along with a delayed effective date of one year from the final publication of the Proposed Derivatives Rules.
These rules may have a significant impact on the market. The Canadian Securities Administrators (CSA) will hold a virtual roundtable on the Proposed Derivatives Rules on September 28, 2022. A panel will discuss a number of implementation and compliance issues relating to the CSA’s plan to adopt a final rule in the next year. A status update on other OTC derivatives rules (including we assume the initially proposed derivatives registration rule) will also be provided. The information to be discussed in the roundtable will be very important for any adviser or dealer in the OTC derivatives space and we will be following the event with interest.
August 17, 2022