United States: What’s Ahead? An Outline Of Key Developments In Canadian Securities Regulation

It’s Time. Wise Persons Committee to review the structure of securities regulation in Canada. Minister of Finance (Canada) December 2003.

Modernizing Securities Regulation in Canada Discussion paper of the Management Board Secretariat (Ontario) June 2004.

A Blueprint for a Canadian Securities Commission. The Crawford Panel on A Single Canadian Securities Regulator June 2006.

Blueprint for Uniform Securities Laws for Canada. CSA January 2003.

CSA Notice and Request for Comment 11-404 Consultation Drafts of the Uniform Securities Act and the Model Administration Act CSA December 2003.

CSA Notice 11-307 Responses to Comments Received on Consultation Drafts for a Uniform Securities Act and a Model Securities Administration Act CSA September 2004.

An Interprovincial Securities Framework. Provincial Ministers responsible for securities regulation (Steering Committee) June 2003.

Provincial/Territorial Memorandum of Understanding Regarding Securities Regulation and Action Plan Provincial/Territorial Securities Initiative Action Plan to Improve Canada’s Securities Regulatory Framework September 2004.

Multilateral Instrument 11-101 Principal Regulator System and Companion Policy 11-101CP Principal Regulator System CSA (other than OSC) August 2005 (published in final form).

CSA Notice 12-309 Impact of the MI 11-101 Principal Regulator System on the Mutual Reliance Review System for Exemptive Relief Applications CSA August 2005.

OSC Notice 11-754 Multilateral Instrument 11-101 Principal Regulator System (etc.) OSC August 2005.

News Release: IDA launches the Task Force to Modernize Securities Legislation in Canada June 2005.

News Release: Task Force to Modernize Securities Legislation to Release Report at October 4 News Conference. September 2006.

Five Year Review Committee Final Report: Reviewing the Securities Act (Ontario) March 2003.

Standing Committee on Finance and Economic Affairs Report on the Five Year Review of the Securities Act October 2004.

Securities regulation that works (four volume set) British Columbia Securities Commission April 2003.

Bill 38 British Columbia Securities Act passed by BC Government May 2004; proclamation deferred until December 31, 2007.

News Release 2006/05 Securities Laws to be Harmonized Across Canada BCSC February 2006.

The Fair Dealing Model Concept Paper of the Ontario Securities Commission January 2004.

CSA News Release: Canadian Securities Regulators launch Registration Reform Project Web site June 2005.

CSA Registration Reform Project Proposal on Registration Reform February 2006.

CSA Registration Reform Project Proposal on Registration Reform – Part II July 2006.

OSC Staff Notice 11-758 Review of Limited Market Dealers OSC June 2006.

2006 Report Compliance Team, Capital Markets Branch OSC September 2006.

Report on Mutual Fund Trading Practices Probe Ontario Securities Commission March 2005.

National Instrument 81-107 Independent Review Committee for Investment Funds CSA July 2006 (published in final form).

National Instrument 81-106 Investment Fund Continuous Disclosure CSA March 2005 (NI and CP, and consequential amendments to certain other NIs, published in final form).

Canadian Securities Administrators Staff Notice 81-315 Frequently Asked Questions on National Instrument 81-106 Investment Fund Continuous Disclosure November 2005.

Canadian Accounting Standard Change

Handbook of Canadian Institute of Chartered Accountants Section 3855 Financial instruments - recognition and measurement April 2005.

In the Matter of AGF Funds Inc. et al Decision Document of Canadian securities regulators dated September 28, 2006.

OSC News Release OSC Acts to Improve Scholarship Plan Dealers’ Business Practices July 2004.

Industry Report Scholarship Plan Dealers Compliance Team, Capital Markets, Ontario Securities Commission July 2004.

News Release (Ontario) Ontario Plans to End Tax Credit for Labour Sponsored Investment Funds Ministry of Finance August 2005.

Joint Forum of Financial Market Regulators Guidelines for Capital Accumulation Plans May 2004.

CSA Request for Comment Amendments to National Instrument 45-106 Prospectus and Registration Exemptions and Adoption of Local Prospectus and Registration Exemptions for Certain Capital Accumulation Plans CSA October 2005.

CSA Notice 81-311 Report on Consultation Paper 81-403 Rethinking Point of Sale Disclosure for Mutual Funds and Segregated Funds April 2004.

Canadian Securities Administrators Notice and Request for Comment on Proposed National Instrument 24-101 Institutional Trade Matching and Settlement and Proposed Companion Policy 24-101CP CSA March 2006.

Concept Paper 23-402 Best Execution and Soft Dollar Arrangements Ontario, British Columbia, Alberta and Manitoba Securities Commissions and the Autorité des marchés financiers du Québec February 2005.

CSA Notice 23-303 Update on Concept Paper 23-402 Best Execution and Soft Dollar Arrangements December 2005.

Proposed National Instrument 23-102 Use of Client Brokerage Commissions as Payment for Order Execution Services or Research ("Soft Dollar" Arrangements) CSA July 2006.

Hedge Funds Working Group Investment Dealers Association of Canada May 2005.

MFDA MR-0048 Know-Your-Product MFDA October 2005.

CSA Notice 46-303 Principal Protected Notes July 2006.

Regulation of Derivatives Markets in Quebec Autorité des marchés financiers May 2006.

Interim Report Ontario Commodity Futures Act Advisory Committee May 2006.

Both the Ontario and federal governments confirmed their respective commitments to work towards a common securities regulator in their Spring 2006 Budgets.

Status and next steps unknown, although the CSA is working to harmonize various aspects of securities regulation through national instruments, such as prospectus and registration exemptions (NI 45-106), continuous disclosure obligations (NI 81-106), the fund governance rule (NI 81-107) and the proposed national registration rule (see CSA Registration Reform Project).

Principal regulator system in force since September 2005 in all provinces and territories, other than Ontario. Issuers and registrants deal only with their "principal regulator" with respect to many disclosure requirements (including NI 81-101 and NI 81-106), although disclosure documents and fees are still required to be filed and paid in all jurisdictions. MI 11-101 not adopted in Ontario. System has no practical effect for investment funds whose managers are located in Ontario. Investment funds whose managers are located outside Ontario deal with the OSC and their principal regulator under MI 11-101. OSC considering implementing similar "mobility registration exemption" to that contained in MI 11-101.

IDA created and funded the Task Force. The mandate, terms of reference and membership of the Task Force are posted at its Web site www.tfmsl.ca. Task Force received written submissions, carried out in-person consultations and commissioned research studies. Its final report is scheduled for October 4, 2006 and will be posted on its website.

Ontario provincial government committed to implement specified changes: single securities regulator (see above), civil liability for secondary market disclosure (implemented effective December 31, 2005), role of SROs and adjudicative function of the OSC.

OSC’s 2006/2007 fiscal year priorities include supporting the Ontario government’s initiative for a common securities regulator, a common set of securities laws and a single fee structure for Canadian markets.

BC government has deferred implementation of the new securities legislation in British Columbia until at least December 31, 2007 to allow provincial securities regulators to fully participate in the passport regulatory system.

CSA Registration Reform Project established in Fall 2004 as a follow-on project to the Fair Dealing Model. See www.rrp-info.ca.

The CSA Registration Reform Project includes implementing the CSA National Registration System (in force April 2005), implementing three "core principles" from the Fair Dealing Model and "harmonizing, streamlining and modernizing registration requirements (including categories of registration)."

The three "core principles" of the Fair Dealing Model being developed by the CSA in conjunction with the SROs are: clarity and transparency regarding relationships, transparency of costs and conflicts and transparency regarding performance and risks.

A national registration requirements rule being developed. Proposals for registration reform include registration of fund managers in a new registration category, removal of barriers to incorporation of sales representatives and streamlined categories of registration. A draft rule is expected to be published for comment Winter 2006/07.

National roll-out of limited market dealer regime being considered as part of CSA Registration Reform Project.

Common deficiencies and proposed regulatory action noted for entities registered as advisers: investment counsel and portfolio managers.

Canadian securities regulators are expected to propose that investment fund managers implement a compliance program. Proposed guidance on fair value pricing will also be provided. Draft rules to be incorporated with the proposed registration rules.

Expected to come into force November 1, 2006 (subject to government approvals). IRCs to be established within six months of effective date of National Instrument and fund managers and IRCs given a further six month period for complete compliance with the rules.

See Canadian Investment Fund Governance Becomes Reality: Final National Instrument 81-107 Released Investment Management Advisory August 2006 Borden Ladner Gervais LLP; and BLG’s ten-part series of Practice Bulletins entitled BLG’s Countdown to Governance: Getting Ready, June 2006 to September 2006.

In force June 1, 2005, with effect for investment funds with financial years ending on or after June 30, 2005. OSC to implement a continuous disclosure review program.

Decision document of Canadian securities regulators exempts all applicable investment funds from the application of section 14.2 of National Instrument 81-106 when calculating net asset value for the purposes of pricing securities for specified time period. New financial instrument accounting standard has effect for entities for their financial years commencing on and after October 1, 2006.

Continued monitoring of scholarship plan dealers by OSC (terms and conditions). Proposed National Instrument 46-102 to modernize the scholarship plan regime, including improved point of sale disclosure, a priority for the CSA. Proposed NI 46-102 is scheduled for publication for comment before March 31, 2007.

Ontario government 2006 Spring Budget contains several initiatives related to the phase-out of the tax credit (which will continue until year end 2010).

Guidelines are final, with implementation on or as of December 2005. All Canadian regulators, other than the OSC and the Quebec regulator, granted "blanket" prospectus and registration exemptions to allow mutual funds to be used as investment options for CAPs. Comment period on proposed amendments to NI 45-106 ended January 19, 2006. Comment letters, including comment letter of Borden Ladner Gervais LLP, being considered by CSA.

CSA response provided to comments on February 2003 consultation paper. CSA developing a fund summary document, a foundation document and new cooling off rights. CSA working on draft national instrument to propose new disclosure requirements and introduce new cooling-off requirements. To be published for first comment during 2006/07.

Comment period ended May 2, 2006. CSA considering comments received.

Comment period ends October 19, 2006.

OSC working with CSA to identify areas of concern arising out of its review of hedge funds and similar products. Regulatory responses may be proposed, although the OSC chair acknowledged in a speech presented in February 2006 that "hedge funds per se do not require their own separate regulatory regime".

Both reports were released for public comment and the comment periods for both reports ended in July 2006. Further consultations can be expected.