The Canadian Securities Administrators (CSA) is alerting all market participants to economic sanctions imposed recently by the Government of Canada under amendments to the Special Economic Measures (Russia) Regulations (the Regulations).
The Regulations, which were amended due to Russia’s invasion of Ukraine, impose broad categories of sanctions on named Russian nationals and Russian entities. Market participants may be directly affected if they intersect with any of the “designated persons” (listed in Schedule 1, 2, or 3 of the Regulations) and their assets or property. While the sanctions apply beyond the scope of Canadian securities law, all market participants are potentially impacted, including issuers, marketplaces, clearing agencies, custodians, all categories of registrants, including crypto asset trading platforms, and pension, investment, and mutual funds and their managers. Additionally, other entities such as banks and accounting firms that facilitate relevant transactions, or provide financial or audit services concerning relevant transactions or designated persons, may be impacted.
All market participants are encouraged to do their due diligence and consider obtaining expert advice to understand, follow and continually monitor their obligations under the Regulations.
The Regulations impose wide-ranging restrictions in several areas. It is prohibited for any person in Canada and any Canadian outside Canada to:
- Deal in any property, wherever situated, held by or on behalf of a designated person whose name is listed in Schedule 1 of the Regulations.
- Enter into or facilitate, directly or indirectly, any transaction related to such a dealing.
- Provide any financial or other related services in respect of such a dealing.
- Make any goods, wherever situated, available to a designated person listed in Schedule 1.
- Provide any financial or related service to, or for the benefit of, a designated person listed in Schedule 1.
In addition, certain entities must determine continuingly whether they are in possession or control of property owned or controlled by or on behalf of a designated person. There are also requirements to report any such situation, or any proposed transaction involving such property, to the Commissioner of the RCMP.
Market participants should also note that facilitating or assisting in prohibited activities is also prohibited.
The regulator notes that the restrictions will impact some sectors of the economy. This includes the financial sector, where the Regulations will affect the rules regarding new debt or equity financing connected to designated persons in Schedules 2 and 3. It also expects the Regulations will affect the energy sector, including an expansive list of goods and services related to oil exploration or production (as outlined in Schedule 4 of the Regulations).
CSA staff strongly recommend that, due to the shifting nature of events, market participants should review the Regulations to keep apprised of any ongoing changes.
The amended Special Economic Measures (Russia) Regulations are available for review on the website of the Government of Canada.
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.