Canadian Structured Finance Law : Canadian Structured Finance Law: Securitization/OTC Derivatives Blog by Stikeman Elliot Lawyers & Attorneys

The Investment Industry Regulatory Organization of Canada (IIROC) recently released its Strategic Plan for 2010-2012. The plan describes IIROC's vision and values and sets out the challenges it faces in fulfilling its mandate. Specifically, the plan discusses the following goals:

1. Promoting a culture of compliance and high standards among those subject to IIROC's jurisdiction. This will include a reorganization of IIROC's rules to enhance comprehension, providing compliance examination findings and recommendations to members and undertaking periodic industry-wide compliance audits.
2. Delivering effective, efficient and expert regulation. Projects that IIROC will undertake in pursuit of this goal include the implementation of a risk-based methodology for registration and completing its framework approach to IFRS.
3. Maintaining market integrity by actively monitoring market structure developments and market-related events. IIROC states that it will reduce timelines to complete enforcement investigations and bring proceedings, clarify roles and relationships in order to strengthen the client/adviser relationship and continue to develop its policies respecting OTC and debt markets.
4. Ensuring that it discharges its responsibilities in a cost-effective manner, which will include the implementation of an equitable Dealer and Marketplace Member fee model.
5. Maintaining a confident and well-trained staff.

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The International Monetary Fund (IMF) recently released a chapter of its semiannual Global Financial Stability Report dealing with over-the-counter derivatives. Specifically, the chapter considers the role of central counterparties in making OTC derivatives markets "safer and sounder" and reducing counterparty risk.

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The New Brunswick Securities Commission (NBSC) yesterday published a proposed amendment to Local Rule 91-501 Derivatives. LR 91-501, which came into force on September 28, 2009, imposes registration and risk disclosure requirements in respect of trades in "derivatives"as defined in the Rule, other than trades among qualified parties.

The proposed amendment published yesterday would modify the language respecting the exemption to state that the registration requirement does not apply "where each party to the trade is a qualified party acting as principal". The change is being proposed in light of inquiries from industry and should clarify the NBSC's intention that the exemption only applies where both parties are qualified parties acting as principal.

The NBSC is accepting comments on the proposed amendment until June 7, 2010. For more information on LR 91-501, see our post of March 25 respecting a derivatives FAQ published by the NBSC.

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Margaret Grottenthaler

Background

In March 2009, Canada’s federal Parliament passed amendments to the financial institution restructuring provisions of the Canada Deposit Insurance Corporation Act (CDIC Act) to allow CDIC as receiver of a federal member institution to assign assets and liabilities of the institution, including financial contracts, to a solvent bridge institution.

A bridge institution is a financial institution that would be established when CDIC is appointed receiver of an institution to take over some or all of the assets and liabilities of the institution for a temporary period, presumably to effect a sale of the business. These provisions came into force, except for one specific provision that qualified the safe-harbour from stays on termination, set-off and collateral enforcement for eligible financial contracts (the “EFC safe-harbour”). In the Budget Bill, 2010 (Bill C-9), the government has introduced a further clarification to this exemption from the EFC safe-harbour which will clear the way for bringing the section into effect. This Bill received first reading in the House of Commons on March 29, 2010.

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