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CSA Seeks Comments On Model Rules Related To Derivatives

On December 6, 2012, the Canadian Securities Administrators (“CSA”) published CSA Staff Consultation Paper 91-301, requesting comments regarding the following Model Provincial Rules: Derivatives: Product Determination (the “Scope Rule”) and Trade Repositories and Derivatives Data Reporting (the “TR Rule” and collectively, the “Model Rules”). The Model Rules are intended to implement the G-20 commitments regarding the regulation of trading derivatives in Canada. In Ontario, the Model Rules will apply only to derivatives that are traded over-the-counter.

In general, the intention of the Model Rules is to impose specific regulatory requirements tailored to address the unique characteristics of derivative products and to bring Canada’s regulation of derivatives in line with international standards. More specifically, the Model Rules look to regulate how derivatives are marketed and traded, the sophistication of the counterparties, existing regulation in other areas (such as the regulation of financial institutions) and the risks they present to the derivatives and financial markets.

The Scope Rule intends to answer which contracts or instruments are to be regulated as “derivatives” and which are to be regulated as “securities” as the current definitions of both in securities legislation are expansive and sometimes overlapping. The TR Rule focuses on the operation and ongoing regulation of designated or recognized trade repositories and the reporting of derivative transaction dates by market participants. In the current draft, there exists an exemption for reporting requirements by small market participants for derivatives transactions in the physical commodity market that have a less than $500,000 aggregate notional value. The intention of the TR Rule, generally, is to improve transparency and the proposed rule will impact the regulation of both trade repositories and derivatives market participants.

The current draft of the Model Rules is based on existing provisions of Ontario securities law. Once the Model Rules have been updated to reflect the commentary, each jurisdiction will publish its own rules, explanatory guidelines and appendices.

Comments on the Model Rules are being accepted until February 4, 2013.

CSA Seeks Comments On Model Rules Related To Derivatives

TSX Requests Comments on Majority Voting Policy – Proposed Amendments to Part IV of the Company Manual

On October 4, 2012, the Toronto Stock Exchange (“TSX”) released a request for comments on proposed amendments to Part IV of the TSX Company Manual (the “Proposed Amendments”). The Proposed Amendments would require issuers listed on the TSX to have majority voting when electing directors at uncontested security holder meetings. As currently proposed, issuers may adopt a majority voting policy to comply with the requirement.

Under mandatory majority voting, security holders vote “for” or “against” each individual board nominee and only those directors who receive a majority of votes in their favour remain on the board. Typically, a majority voting policy provides that a director who receives a majority of “against” votes must immediately tender his/her resignation to the board of directors. The Proposed Amendments would require the board of directors to issue a news release disclosing: (i) the detailed results of the votes received for the election of each director; and, where applicable, (ii) whether a resignation was accepted and the board’s reasons for the decision.

As indicated by the Canadian Coalition for Good Governance, 39% of the listed issuers in the S&P/TSX Composite Index do not have majority voting. The TSX asserts that the Proposed Amendments will improve corporate governance standards, strengthening Canada’s international reputation.

Comments on the Proposed Amendments are being accepted until November 5, 2012. The TSX anticipates that the Proposed Amendments could become effective as of December 31, 2013.

TSX Requests Comments on Majority Voting Policy – Proposed Amendments to Part IV of the Company Manual