4 upcoming regulatory proposals

Firms across Canada are struggling to keep up with regulatory changes.

And that burden won’t let up soon, which is why Advisor.ca’s been discussing IIAC’s compilation of the current proposals weighing on advisors. We outlined 10 of those proposals over the summer:

• 5 regulatory changes you need to know

• 5 more regulatory proposals to follow

In this segment, we outline CSA proposals that were recently or are yet to be released. Here’s information on each one:

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1. Consultation paper 91-408 Exchange and Platform Trading (OTC Derivatives)

Release date: No date announced, but the preceding paper, 91-407 on Derivatives Registration, was released in April 2013. CSA had said all derivatives papers would be out by end of 2012.

Will likely focus on: Changes to help increase derivatives market transparency, mitigate systemic risk and protect against market abuse. So far, the regulator has released papers 91-401 through 91-407, with papers 91-408 and 91-409 being the final installments.

For more, read:

Compliance roundup: June (section 1)

Derivatives can clear outside Canada, say regulators

More credit for credit derivatives

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2. Proposal for ETF fund facts

Release date: An ETF industry source has predicted more guidance would be released last month. So far, the OSC and CSA have only released documents detailing the exemptive relief measures and requirements adopted for a number of major fund providers. You can find a list of the OSC’s exemptive decision documents here.

Will likely focus on: Mutual funds are required to issue Fund Facts, according to current point of sale disclosure framework. CSA says it will consider whether ETFs should issue similar documents. It adds, “We’re considering applications from ETF providers and a group of dealers for exemptive relief from the existing prospectus delivery requirements under securities legislation, in order to permit the delivery of a summary disclosure document” instead.

Industry comment: Pat Dunwoody of CEFTA told Advisor.ca, “We’re in agreement with the proposal and with investors getting more information. It will improve the marketability of [ETFs] and requires no additional work for advisors since the process will be built into the back end.”

She adds, “The ETF industry is worth $60 billion, so we’re now a real industry. We have to act like the others out there [and ] we support the move in the same direction.”

For more, read:

Vanguard supports CSA’s mutual fund fee proposals

CSA to scrutinize mutual fund fees

OSC roundtable participants predict fees could double

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3. 54-401 Review of the proxy voting system

Release date: August 15, 2013

Will likely focus on: In the OSC’s 2012-2013 statement of priorities, the regulator said it planned to improve the current proxy voting system in Canada by:

• Reviewing concerns about the accountability, transparency and efficiency of the voting system
• Facilitating discussions amongst market participants on improving the functioning of the proxy system
• Working with the CSA and market participants by reviewing the role of proxy advisers in capital markets

In mid-August, a paper was released that outlines the complexity of the proxy voting system in Canada. It also looks at how the system will be further reviewed. The comment period for the paper ends on November 13, 2013.

Industry comment: In a letter dated June 3, 2013, the Ontario Teachers’ pension plan said, “Improvements to the proxy voting system are long overdue and are critical to the credibility of shareholders’ votes.”

The Securities Transfer Association of Canada also commented in a May 2013 comment letter to the OSC, saying, “There have been some recent, high-profile meetings resulting in litigation in the past year, which reflect that some of the issues surrounding the voting system still need to be resolved…We can expect more shareholder activism to bring more attention to the voting process.”

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4. 24-503 Clearing Agency Recognition Requirements

Release date: December 2013

Will likely focus on: On March 1, 2011, rules came into force that prohibited clearing agencies from carrying on business in Ontario unless they’re recognized as such, or are exempt from being recognized. Now, the CSA will be looking at what is required for agencies to be recognized.

For more on clearing and settlement systems in Canada, read the BoC’s summary. Also, read more on Bill C-45, which amended the Payment Clearing and Settlement Act and Canada Deposit Insurance Corporation Act to support central clearing of OTC derivatives, among other measures, in December 2012.