On April 4, 2017, the Canadian Securities Administrators (CSA) published for comment Proposed National Instrument 93-101 Derivatives: Business Conduct (“Proposed Instrument”) and a related proposed companion policy, 93-101 Derivatives: Business Conduct (“Proposed CP”). The comment period will last 150 days, closing on September 1, 2017, during which the CSA is inviting specific feedback from stakeholders.
The goal of the proposed Instrument and CP is to protect investors, improve transparency and accountability, and protect against market abuse. The proposed Instrument establishes an investor protection regime for over-the-counter (OTC) derivatives markets that is consistent with international standards and foreign requirements and is intended to create a uniform approach to derivatives business conduct regulation in Canada. It sets out fundamental obligations for OTC derivatives dealers and advisers. These include:
- a fair dealing model suitable for derivatives markets that contains obligations to identify and respond to conflicts of interest;
- know-your-derivatives party obligations; and,
- compliance and recordkeeping requirements.
For derivatives dealers and advisers working with non-institutional counterparties, the proposed instrument introduces further measures such as a derivatives-specific suitability standard, the requirement to identify derivatives party-specific needs, and disclosure regarding leverage.
While noting that a “significant proportion” of OTC derivatives trading is cross-border, the proposed Instrument includes exemptions for foreign derivatives dealers and advisers that are subject to and comply with comparable laws of certain foreign jurisdictions.
The CSA is also in the process of developing a registration regime for derivatives dealers and advisers. The CSA anticipates publishing proposed NI 93-102 Derivatives: Registration shortly. The CSA recommends that stakeholders consider the proposed registration regime in conjunction with the proposed Instrument and CP.
The proposed National Instrument 93-101 Derivatives: Business Conduct and the proposed Companion Policy, 93-101 Derivatives: Business Conduct, are available for download from the websites of CSA members.
For more information, please call Barbara Hendrickson at BAX Securities Law 416.601.1004.
This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.
