Ontario Securities Commission Bulletin
Issue 43/50 - December 10, 2020
Ont. Sec. Bull. Issue 43/50
• CSA Staff Notice 13-315 (Revised) Securities Regulatory Authority Closed Dates 2021
• CSA Staff Notice 55-317 -- Automatic Securities Disposition Plans
• BMO Nesbitt Burns Inc. et al.
• Royal Bank of Canada -- s. 38 of the CFA and s. 6.1 of Rule 91-502
• Temporary, Permanent & Rescinding Issuer Cease Trading Orders
• Temporary, Permanent & Rescinding Management Cease Trading Orders
• Amendments to National Instrument 81-105 Mutual Fund Sales Practices
• Changes to Companion Policy 81-105CP Mutual Fund Sales Practices
• Amendments to National Instrument 41-101 General Prospectus Requirements
• Amendments to National Instrument 81-101 Mutual Fund Prospectus Disclosure
• TSX Inc. and TSX Venture Exchange Inc. -- Notice of Proposed Amendments and Request for Comments
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CSA Staff Notice 13-315 (Revised) Securities Regulatory Authority Closed Dates 2021
December 10, 2020
We have a review system for prospectuses (including long form, short form and mutual fund prospectuses), prospectus amendments, pre-filings, and waiver applications. It is described in National Policy 11-202 Process for Prospectus Reviews in Multiple Jurisdictions (NP 11-202).
Under NP 11-202, a filer that receives a receipt from the principal regulator will be deemed to have a receipt in each passport jurisdiction where the prospectus was filed. However, the principal regulator's receipt will only evidence that the Ontario Securities Commission (OSC) has issued a receipt if the OSC is open on the date of the principal regulator's receipt and has indicated that it is "clear for final". If the OSC is not open on the date of the principal regulator's receipt, the principal regulator will issue a second receipt that evidences that the OSC has issued a receipt on the next day that the OSC is open.
The following is a list of the closed dates of the securities regulatory authorities for 2021 and January 2022. Bracketed information indicates those jurisdictions that are closed on the particular date. Issuers should note these dates in structuring their affairs.
1. Saturdays and Sundays (all)
2. Friday, January 1 (all)
3. Monday, January 4 (QC)
4. Monday, February 15 (BC, AB, SK, MB, ON, NB, PE, NS)
5. Friday, February 26 (YT)
6. Monday, March 15 (NL)
7. Friday, April 2 (all)
8. Monday, April 5 (all except AB, SK, NU, ON)
9. Monday, May 24 (all)
10. Monday, June 21 (NL, YT, NT)
11. Thursday, June 24 (QC)
12. Thursday, July 1 (all)
13. Friday, July 2 (SK)
14. Friday, July 9 (NU)
15. Monday, July 12 (NL)
16. Monday, August 2 (all except YT, QC, NL, PE)
17. Wednesday, August 4 (NL{*})
18. Monday, August 16 (YT)
19. Friday, August 20 (PE)
20. Monday, September 6 (all)
21. Monday, October 11 (all)
22. Thursday, November 11 (all except AB, ON, QC)
23. Thursday, December 23 (NT)
24. Friday, December 24 (NT, QC)
25. Friday, December 24 after 12:00 p.m. (NB, PE, NS), after 1:00 p.m. (YT, BC)
26. Monday, December 27 (all)
27. Tuesday, December 28 (all)
28. Wednesday, December 29 (NT)
29. Thursday, December 30 (NT)
30. Friday, December 31 (NT, QC)
31. Friday, December 31 after 12:00 p.m. (NB), after 1:00 p.m. (BC)
32. Monday, January 3, 2022 (all)
33. Tuesday, January 4, 2022 (QC)
{*} Weather permitting, otherwise observed on the first following acceptable weather day, such determination made on morning of holiday.
OSC Notice of Amendments to OSC Rule 45-501 Ontario Prospectus and Registration Exemptions relating to Syndicated Mortgages
December 7, 2020
The Ontario Securities Commission (the OSC or we) is making amendments to OSC Rule 45-501 Ontario Prospectus and Registration Exemptions (OSC Rule 45-501) relating to syndicated mortgages (the Amendments).
The Amendments were originally published for comment on March 15, 2019 (the 2019 Proposal) and revised proposals were published for a second comment period on August 6, 2020 (the 2020 Proposal).
In the same notice as the 2020 Proposal, the Canadian Securities Administrators (the CSA) published final amendments and changes (collectively, the CSA Amendments) to:
• National Instrument 45-106 Prospectus Exemptions (NI 45-106) and National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103); and
• Companion Policy 45-106CP Prospectus Exemptions (45-106CP) and Companion Policy 31-103CP Registration Requirements, Exemptions and Ongoing Registrant Obligations.
The OSC made the CSA Amendments on February 4, 2020 and the Amendments on November 3, 2020. The notice for the CSA Amendments indicated that we would deliver the CSA Amendments to the Minister of Finance at the same time as the Amendments.
The Amendments, the CSA Amendments and other required materials were delivered to the Minister of Finance today. The Minister may approve or reject the Amendments and the CSA Amendments or return them for further consideration. If the Minister approves the Amendments and the CSA Amendments or does not take any further action by February 5, 2021, the Amendments and the CSA Amendments will come into force on the later of March 1, 2021 and the date that the amendments to the Securities Act (Ontario) (the Act) that repeal subsections 35(4) and 73.2(3) are proclaimed in force.
The purpose of the Amendments and the CSA Amendments is to introduce additional investor protections related to the distribution of syndicated mortgages and to increase harmonization regarding the regulatory framework for syndicated mortgages across all CSA jurisdictions. In Ontario, this will result in the transfer of primary oversight of syndicated mortgages other than qualified syndicated mortgages and syndicated mortgages distributed to permitted clients from the Financial Services Regulatory Authority of Ontario (FSRA) to the OSC.
In response to comments received on the 2019 Proposal, the 2020 Proposal included proposed prospectus and registration exemptions for sales of syndicated mortgages to permitted clients and refined the definition of "qualified syndicated mortgage".
We received 9 comment letters from 8 commenters in response to the 2020 Proposal. A summary of the comments and our responses are included in Annex A. We did not make any changes to the 2020 Proposal as a result of the comments received.
With respect to the exemptions for qualified syndicated mortgages or syndicated mortgages sold to permitted clients, there will be no change from the current regime as a result of the Amendments. FRSA will continue to exercise primary oversight of the distribution of qualified syndicated mortgages and syndicated mortgage transactions that involve only institutional or high-net-worth investors that fall within the definition of a permitted client. Given this alternative regulatory regime, we believe that it is appropriate for them to continue to be exempt from the prospectus and dealer registration requirements under securities legislation.
The anticipated costs and benefits of the Amendments are expected to be substantially the same as described in the 2020 Proposal.
We considered adopting the 2020 Proposal in the original form as well as the alternatives suggested by the commenters as detailed in Annex A.
In adopting the Amendments, we have not relied on any significant unpublished study, report or other written materials.
The rule-making authority for the Amendments is as follows:
• prospectus exemption: paragraph 20 of subsection 143(1) of the Act.
• specifying that a trade in securities acquired under an exemption is a distribution: paragraph 48 of subsection 143(1) of the Act.
• registration exemption: paragraph 8 of subsection 143(1) of the Act.
Annex A -- Summary of Comments and Responses
Annex B -- Amendments to OSC Rule 45-501 Ontario Prospectus and Registration Exemptions
Please refer your questions to any of the following:
David SuratSenior Legal Counsel, Corporate Finance416.593.8052dsurat@osc.gov.on.caMatthew AuSenior Accountant, Corporate Finance416.593.8132mau@osc.gov.on.caMelissa TaylorLegal Counsel, Corporate Finance416.596.4295mtaylor@osc.gov.on.caPaul HaywardSenior Legal Counsel, Compliance and Registrant Regulation416.593.8288phayward@osc.gov.on.caAdam BraunLegal Counsel, Compliance and Registrant Regulation416.593.2348abraun@osc.gov.on.ca
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Commenters
New Haven Mortgage Corporation/Integrated-Equities Inc. (Arjun Sharaf)
Cosman Mortgage Capital Corporation (Jason Cosman)
Investor Advisory Panel (Neil Gross)
Vector Financial Services Limited (Mitchell Oelbaum)
AUM Law (Kevin Cohen)
Foremost Financial Corporation (Evan Cooperman and Ricky Dogon)
The Canadian Advocacy Council for Canadian CFA Institute Societies
Firm Capital Corporation (Eli Dadouch)
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General |
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1. |
Summarized Comment: Several commenters expressed their general support for the proposed changes to the regulation of syndication mortgage investment activity in Ontario. |
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Response: We thank the commenters for their support. |
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Summarized Comment: One commenter expressed their preference for one regulator, but in the absence of that outcome agreed and appreciated that FSRA and the OSC had taken a reasonable approach as it relates to regulatory burden reduction. |
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Response: We acknowledge the comment. |
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Summarized Comment: One commenter noted that they would generally prefer the exemptions were the same in each province and territory but did not object to the expansion of those exemptions in Ontario. The commenter encouraged the CSA to continue to seek harmonization of prospectus and registration exemptions, whenever possible, and reduce duplicative regulation to help ease the compliance burden on issuers and registrants and improve understanding of the syndicated mortgage amongst investors and other market participants. |
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Response: We acknowledge the importance of harmonization among the CSA. |
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4. |
Summarized Comment: One commenter expressed concern that threshold dangers posed by syndicated mortgages for retail investors were not being addressed in the regulatory measures currently under consideration. The commenter noted that wealth is not a valid indicator of investment understanding or sophistication, and perpetuating this simplistic and faulty concept is no longer appropriate in an era where regulatory policy is meant to be evidence based. |
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Response: The CSA Amendments are primarily intended to enhance investor protection for riskier types of syndicated mortgages marketed to retail investors through amendments to the offering memorandum prospectus exemption (the OM Exemption). The amendments to the OM Exemption are intended to enhance the ability of investors to understand the risks related to investing in syndicated mortgages and the extent to which the security interest in the property subject to the syndicated mortgage provides meaningful protection in the event of a default under the syndicated mortgage. The additional disclosure under the OM Exemption is also intended to assist registrants in discharging their obligations to their clients. |
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In Ontario, where syndicated mortgages were previously exempt from the dealer registration requirement, investors will also benefit from the protections associated with the involvement of a registrant in the distribution. |
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We also note that the permitted client exemptions are premised on the fact that FSRA will retain oversight of the syndicated mortgages. These exemptions specifically require the distribution or trade to be by a person or company registered or licensed under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA) and not a person or company relying upon an exemption from such registration or licensing. |
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5. |
Summarized Comment: One commenter urged the OSC and FSRA to make sure the dividing line between their responsibilities for overseeing syndicated mortgages is made, and kept, absolutely clear to not expose investors to potential harm from gaps in regulatory coverage as a result of oversight being split between two agencies. |
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Response: We acknowledge the importance of eliminating regulatory gaps. We expect that the definition of "qualified syndicated mortgage" under MBLAA will be revised to be substantially similar to that under OSC Rule 45-501 to create a clear dividing line. |
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Summarized Comment: One commenter suggested eliminating (or grandfathering) alternative prospectus exemptions for retail investors on loans that originated prior to March 1, 2021 but which have future advances after that date. |
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Response: Whether future advances would be subject to the prospectus or registration requirements under securities law would depend on whether such future advances are themselves additional distributions or trades. For example, if an investor is required to make such future advances as a condition of the initial distribution, the future advances may not be additional distributions or trades. Alternatively, the future advance may be in connection with a distribution in respect of which another prospectus exemption is available, such as the exemption for conversions, exchanges and exercises in subsection 2.42(1) of NI 45-106. However, this will depend on the specific facts of the initial distribution. |
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7. |
Summarized Comment: One commenter was still unclear about who the issuer of a syndicated mortgage would be. |
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Response: We recognize that there may be a variety of industry practices in terms of how syndicated mortgages are structured and offered to investors. |
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Where a borrower enters into a mortgage with two or more persons participating as lenders under the debt obligation secured by the mortgage or enters into a mortgage with a view to the subsequent syndication of that mortgage to two or more purchasers, lenders or investors, the borrower is the issuer of the syndicated mortgage. Consequently, the obligations to comply with the conditions of the exemption and reporting requirements (including the filing of a report of exempt distribution) would fall on the borrower. |
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There may be circumstances where a person other than the borrower may be an issuer of a syndicated mortgage. For example, where an existing or committed mortgage is syndicated among lenders by a party not acting on behalf of the borrower, that party will generally be an issuer of the syndicated mortgage. |
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The determination of the identity of the issuer, or issuers, of a syndicated mortgage will depend on the facts and circumstances of the transaction. If a market participant is having difficulty after considering the guidance in section 3.8 of 45-106CP, we recommend that they consult with OSC staff. |
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Qualified Syndicated Mortgage Exemption |
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8. |
Summarized Comment: One commenter submitted that the definition of qualified syndicated mortgage should be the same throughout the CSA rules as well as in the FSRA rules. Another commenter recommended that the OSC and FRSA use the same definition of "qualified syndicated mortgage" and was of the view that the OSC definition was preferable. |
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Response: The definitions are substantially harmonized across the CSA. We expect that the definition under MBLAA will be revised to be substantially similar to that in OSC Rule 45-501. |
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9. |
Summarized Comment: One commenter submitted that a loan-to-value threshold of 90% is too high as the fair market value of a property can be volatile and depends on a variety of factors and the total loss in value of the property as a result of these factors can often amount to greater than 10%, which could lead to a loss in principal for the lender, compounded further if the lender is subordinated to others. The commenter suggested lowering the loan-to-value threshold to 75%, which is the typical maximum level used by conventional (uninsured) mortgage lenders. The commenter also noted that Quebec, Alberta and New Brunswick had proposed loan-to-value thresholds of 80% in their proposed local qualified syndicated mortgage exemptions, which would still be 5% off what the commenter believed to be the mortgage lender standard. |
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Response: The loan-to-value restriction in the definition of "qualified syndicated mortgage" is not meant to indicate that qualified syndicated mortgages are safe investments but to address whether it is secured by property and not a mezzanine syndicated mortgage investment. We acknowledge that a qualified syndicated mortgage with loan-to-value of 90% may be riskier than one with a loan-to-value of 75% but this does not affect that both syndicated mortgages would be more like a conventional mortgage than an unsecured, equity-like investment. |
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10. |
Summarized Comment: One commenter suggested that project size should and/or the number of partners involved in the transaction be factors when determining whether a syndicated mortgage is subject to regulation by the OSC or by FSRA. The commenter supported the idea of stricter regulation around the industry but was of the view that people with less capital should be afforded an opportunity without the burden of dual regulation to deal in smaller projects. |
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Response: We have not made the suggested changes. Project size and the number of investors are not generally determinative as to whether investors require the protections provided by a registered firm or a prospectus. We also note that it would be easy for parties to structure investments to avoid limits on project size or number of investors so developing meaningful exemptions of this nature would introduce unnecessary complexity that would create a regulatory burden. |
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Permitted Client Exemption |
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11. |
Summarized Comment: One commenter recommended adding mortgage brokers and mortgage brokerages acting on their own behalf to the definition of permitted client. The commenter noted that persons or companies registered under securities legislation of a jurisdiction of Canada as an adviser or dealer are considered to be permitted clients and submitted that the same rationale would apply for mortgage brokers in respect of syndicated mortgages in that they should be sophisticated enough to make their own decision on investment and there is no effect on consumer protection when they want to invest themselves in opportunities. Another commenter recommended the definition of permitted client be expanded to include: |
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a mortgage brokerage, its officers and directors, and their associated and related companies and family; |
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mortgage brokers and mortgage agents registered with the brokerage and their associated and related companies and family; and |
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any entity, including a limited partnership, mutual fund trust or corporation whose officer and director is the same officer and director of the mortgage brokerage. |
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Response: Since non-qualified syndicated mortgages are more similar to equity securities than conventional mortgages, we believe the current categories of permitted clients are appropriate. |
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Summarized Comment: One commenter asked for clarification about whether a firm could choose to distribute syndicated mortgage to permitted clients under the OSC's regime. |
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Response: An issuer or dealer of syndicated mortgages does not need to rely upon the prospectus and dealer registration exemptions for permitted clients in OSC Rule 45-501. If an issuer chooses not to rely upon the prospectus exemption for permitted clients, it would likely rely upon the accredited investor prospectus exemption. If a person or company chooses not to rely upon the dealer registration exemption for permitted clients, it would need to be registered as a dealer or rely upon another available exemption, such as using a third-party registered dealer. There may be requirements under MBLAA that would also apply. |
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Accredited Investors |
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Summarized Comment: One commenter strongly suggested that the OSC should only have regulatory oversight for non-qualified syndicated mortgages whether the investor is a true retail consumer and FSRA should retain oversight of distributions to: |
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accredited investors, whereby no commission is being paid to secure such investors; |
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employees who are licensed as mortgage brokers and mortgage agents; and |
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close friends, family and business partners of the mortgage brokerage where such investors are not solicited from the general public. |
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The commenter was of the view that this would be consistent with the OSC regulating mortgage entities, such as mortgage trusts, limited partnerships and mortgage investment corporations who issue securities (shares, LP units, or trust units) to the public. |
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Another commenter agreed that accredited investors should be carved-out from OSC oversight as their investors were 95% permitted clients or accredited investors and they would be required to send different documentation to different lenders in the same loan and keep track of who gets what. |
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Response: We have not expanded the exemption as suggested by the commenter. We also note that the commenter was incorrect to suggest that exempting those classes of persons would be consistent with how mortgage trusts, limited partnerships and mortgage investment corporations are regulated. Even if such entities limit their distributions to the classes of persons described by the commenter, they are still subject to the prospectus and dealer registration requirements under securities legislation. We also would do not agree that some accredited investors are not retail investors. |
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The exemptions in OSC Rule 45-501 are intended for persons and companies that only deal with permitted clients. If persons or companies deal with both permitted clients and non-permitted clients, it can rely on the exemptions in OSC Rule 45-501 in respect of the permitted clients but would need to rely upon other available prospectus and registration exemptions for the non-permitted clients. |
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Summarized Comment: One commenter asked that we consider additional steps to further reduce the regulatory burden to the extent that syndications cover accredited investors and permitted clients but not retail investors. |
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Response: We have not made the suggested change. We do not agree that some accredited investors are not retail investors. We are always considering steps to reduce regulatory burden as part of our policy projects and general initiatives to reduce regulatory burden. |
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Audited Financial Statements |
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Summarized Comment: Two commenters submitted that the current requirement for audited financial statements for a borrower in a non-qualified syndicated mortgage investment is burdensome, not practical, and should be removed. |
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Response: Under securities law, audited financial statements of a borrower would only be required if the syndicated mortgage is distributed under the OM Exemption. This requirement applies to all issuers that rely on this exemption and since the exemption is targeted to retail investors we think this requirement is appropriate. |
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Appraisal |
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16. |
Summarized Comment: One commenter was of the view that a 6-month or 12-month updated appraisal requirement would not be practical on construction projects. The commenter noted that they typically obtain "as-is" and "as-complete" appraisals at the start of a project but to obtain an appraisal on a project in progress is costly and it is unlikely the borrower or investor would be willing to bear these costs. Furthermore, it is extraordinarily difficult to value a project during construction because the universe of potential buyers is reduced. The commenter requires appraisals on all properties prior to approving a loan, which they consider to be reasonable and responsible and no prudent lender should lend without an appraisal from an accredited provider, but noted it does not seem practicable to require further appraisals on construction projects in progress. |
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Another commenter raised similar concerns regarding appraisals for construction projects and recommended that the requirement revert to the initially proposed 12-month dating. |
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A third commenter suggested that there was a proposal that every transaction have an appraisal that is not older than 12 months. |
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Response: The appraisal requirement is only required when an issuer distributes a syndicated mortgage under the OM Exemption. We reduced the requirement for the date of the appraisal to be within 12 months preceding the date the appraisal is delivered to the purchaser to 6 months as a result of comments received that 12 months was too long. We would not expect that syndicated mortgages in respect of construction projects will be distributed to retail investors under the OM Exemption so the concerns expressed should not materialize. |
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Disclosure Documents and Marketing Materials |
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Summarized Comment: One commenter submitted that regulators should be mindful of the fact that syndicated mortgages can be misrepresented, and mistakenly viewed, as being safe and secure when they are aggressively market to the public as "secured" investments. The commenter suggested this can be mitigated only by prohibiting representations and statements that imply a syndicated mortgage is a safe or secure investment. In addition, marketing materials and presentations should be prohibited from containing statements that the investment is "mortgage-backed" or "secured by a mortgage registered on title" unless the materials and presentations immediately state, with equal prominence, that: (a) the mortgage does not make the investment secure or guarantee repayment because the value of the land may be insufficient to cover all debts, including those that may rank ahead of the syndicated mortgage lenders, and (b) a syndicated mortgage therefore is an inherently risky investment in which investors may lose some or all of the money they invest. |
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Response: We remind issuers that while some prospectus exemptions do not prescribe disclosure to be given to prospective investors, if an issuer chooses to provide information, including presentations and marketing materials, that would fall within the broad definition of "offering memorandum" in subsection 1(1) of the Securities Act (Ontario) (the Act) then the requirements of Part 5 of OSC Rule 45-501 and liability for misrepresentations under section 130.1 of the Act may apply. |
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In addition, Ontario securities law already contains a number of prohibitions on persons and companies making statements, in connection with a sale of securities, that are untrue or omit information necessary to prevent the statement from being false or misleading in the circumstances in which they are made. See, for example, subsection 44(2) of the Act. |
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Finally, we note that, as a result of the transition of regulatory oversight over non-qualifying syndicated mortgages to the OSC, the sale of such securities to retail investors will generally need to be made through a registered dealer. As the Commission has noted on a number of occasions, the registration requirement is a cornerstone of the securities regulatory framework. It is an important gate-keeping mechanism that protects investors and the capital markets by imposing obligations of proficiency, integrity and solvency on those who seek to be engaged in the business of trading in securities with or on behalf of the public. See <<Re Money Gate Mortgage Investment Corporation et al.>>, dated December 17, 2019 at 140. |
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Registered dealers are subject to important obligations under Ontario securities law, including obligations in relation to dealing fairly, honestly and in good faith with clients, know-your-client (KYC), know-your-product (KYP) and suitability obligations, conflicts of interest and client relationship disclosure. In accordance with these obligations, registered dealers are generally expected to review marketing materials used to distribute securities to ensure the materials are fair, balanced and not misleading. Registered firms are encouraged to review the guidance in CSA Staff Notice 31-325 <<Marketing Practices of Portfolio Managers>> and the guidance on "Unsubstantiated claims, unbalanced or misleading information and inadequate disclosure in marketing materials" at pages 24-26 of ASC Staff Notice 33-705 <<Exempt Market Dealer Sweep>>. |
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Reports of Exempt Distribution |
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Summarized Comment: One commenter was of the view that reports of exempt distribution should be required for distributions of qualified syndicated mortgages or distributions to permitted clients unless FSRA in fact required and collected equivalent reports of such trades. |
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Response: Regulatory oversight by FSRA is an important feature of the prospectus and registration exemptions for both qualified syndicated mortgages and permitted clients. Both exemptions require the distribution or trade to be by a person or company registered or licensed under MBLAA and not a person or company relying upon an exemption from such registration or licensing. Reporting requirements will be divided between the OSC and FSRA depending upon which will have primary oversight. |
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Summarized Comment: One commenter suggested eliminating the requirement for filing multiple reports of exempt distribution on loans with multiple advances over the course of the loan (i.e., construction). |
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Response: Whether subsequent advances would require another report of exempt distribution to be filed would depend on whether such subsequent advances are themselves additional distributions. For example, if an investor is required to make such subsequent advances as a condition of the initial distribution, the subsequent advances may not be additional distributions. Alternatively, the subsequent advance may be in connection with a distribution in respect of which another prospectus exemption is available that does not require a report of exempt distribution to be filed, such as the exemption for conversions, exchanges and exercises in subsection 2.42(1) of NI 45-106. However, this will depend on the specific facts of the initial distribution. |
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Summarized Comment: Several commenters encouraged a reduction in the frequency of filing reports of exempt distribution, the costs of filings or, ideally, both. One commenter noted that based on their current syndication volumes, they estimate the cost of filing reports of exempt distribution would increase by $10,000 to $20,000 per year. Another commenter estimated the incremental costs of being required to file reports of exempt distribution as $10,000 to $12,000 per year. |
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Response: As part of our burden reduction efforts, we are looking at our activity fees including the fee for reports of exempt distribution. |
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Summarized Comment: One commenter asked for clarification about whether a lender can file a report of exempt distribution that covers the distributions of multiple non-qualified syndicated mortgages made during a 10-day period. |
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Response: If an issuer has distributed multiple syndicated mortgages during a 10-day period, the issuer may file one report of exempt distribution for those distributions. |
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Registered Dealers |
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Summarized Comment: One commenter welcomed the migration to a principles-based regime that does not require prescribed forms for accredited investors. |
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Response: We thank the commenter for their submission. We also remind firms that they have an obligation to collect KYC information under section 13.2 of NI 31-103 and assess a client's suitability under section 13.3 of NI 31-103. These are among the most fundamental obligations owed by registrants to their clients. The OSC does not require prescribed forms, but firms may not meet this obligation by conducting a "check-the-box" exercise. We expect registrants to perform a meaningful suitability assessment and to appropriately document that assessment. |
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Summarized Comment: One commenter suggested that the OSC grant proficiency relief and EMD registration restrictions tied to real credit and equity investments to any mortgage brokerage who has been in the business for 20 years or longer, who has an administration licence for 20 years or longer, and who has never had investor complaints filed against them with FSRA (or the predecessor regulator). |
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Response: In limited circumstances, the OSC may consider granting relief from the proficiency requirements to be registered as a dealing representative of an EMD. These exemptive relief applications are reviewed on a case-by-case basis and will depend on the circumstances of the individual applying. The OSC may also impose terms and conditions on the individual or the registered firm sponsoring the individual in order to limit their specific activities. |
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Summarized Comment: One commenter asked for clarification about whether an OSC registrant engaging in the brokerage of mortgages would be subject to capital market participation fees on mortgage brokerage revenue (i.e., fees paid by borrowers to mortgage brokers). |
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Response: OSC staff have previously published guidance in relation to the calculation of participation fees paid by registrants in connection with mortgage brokerage activities in OSC Staff Notice 33-749 <<Compliance and Registrant Regulation -- Annual Summary Report for Dealers, Advisers and Investment Fund Managers>> . |
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As explained in that guidance, a registered firm is required to calculate and remit, by December 31 of each year, the participation fee shown in Appendix B to OSC Rule 13-502 Fees (the Fees Rule) opposite the firm's "specified Ontario revenues" for the previous financial year of the firm. |
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Although a registered firm is permitted to deduct certain revenues not attributable to "capital markets activities", as defined in the Fees Rule, firms are generally not permitted to deduct fees that come within the definition of "capital markets activities", such as origination fees and renewal fees paid to a registered firm in connection with mortgage financings. The term "capital markets activities", as defined in the Fees Rule, means "activities for which registration is required, or activities for which an exemption from registration is required under the Act...". |
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OSC staff are continuing to review various matters relating to the appropriate calculation of participation and activity fees under the Fees Rule in connection with the OSC's regulatory burden initiative. If a registrant firm identifies a situation whereby the imposition of a participation fee or activity fee would be duplicative or unduly burdensome, the firm is encouraged to contact staff. |
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25. |
Summarized Comment: One commenter noted that individuals who participate in sourcing both the opportunity and investors for a non-qualified syndicated mortgages as part of their business activities can currently receive income relating to all such efforts into a corporation that they own but exemptive relief or tailored terms and conditions would be required for this to be possible for an OSC registrant. The commenter recommended that OSC Staff provide comfort to the industry that if the right safeguards are in place, non-registered entities can receive payments that will be reported as business income. |
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Response: An individual who "participates in sourcing both the opportunity and investors for non-qualified syndicated mortgages as part of their business activities" will generally be considered to be "in the business of trading securities" and therefore required to register as a dealer (or a representative of a dealer) or rely on an exemption from registration to conduct such activities. |
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OSC staff generally take the view that the use of a directed commission structure (i.e., directing that an issuer or intermediary pay commissions to an unregistered holding company owned by the individual) may breach the requirements of Ontario securities law, particularly where payments are being made to an unregistered entity for the ostensible performance of registerable services by the unregistered entity. OSC staff take the view that directed commission arrangements cannot be used to shield assets from clients in the case of a client complaint or regulatory action and that regulators have full access to the books and records for any entity that receives directed commissions. |
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These issues are not unique to the distribution of syndicated mortgages and are therefore outside the scope of this initiative. |
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26. |
Summarized Comment: One commenter noted that the OSC has imposed terms and conditions on third-party EMDs so that some individuals originating non-qualified syndicated mortgages cannot become registered as dealing representatives on a third-party platform. These terms and conditions will require these individuals/small businesses either to: (1) pay additional fees to a third-party EMD to perform additional functions, or (2) dedicate or hire an additional resource internally to take this on this responsibility. The commenter was of the view that such terms and conditions no longer appear to be warranted and asked that OSC Staff provide comfort that a principal of a non-qualified syndicated mortgaged could be a dealing representative on a third-party platform if a proper compliance regime is in place (including clear insight into the flow of all funds associated with a transaction). |
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Response: The commenter appears to be referencing a business model that is not unique to syndicated mortgages and that is described in <<Re Waverley Corporate Financial Services Ltd.>>, dated March 1, 2017. OSC staff continue to be guided by the principles articulated by the Commission in that decision. If the commenter has any questions, we encourage the commenter to reach out to staff to discuss. |
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1. Ontario Securities Commission Rule 45-501 Ontario Prospectus and Registration Exemptions is amended by this Instrument.
2. Section 1.1 is amended by adding the following definitions:
"qualified syndicated mortgage" means a syndicated mortgage that satisfies all of the following:
(a) the syndicated mortgage secures a debt obligation on property that satisfies all of the following:
(i) it is used primarily for residential purposes;
(ii) it includes no more than four units;
(iii) it includes no more than one unit that is used for non-residential purposes;
(b) the syndicated mortgage does not secure a debt obligation incurred for the construction or development of property;
(c) at the time the syndicated mortgage is arranged, the amount of the debt it secures, together with all other debt secured by mortgages on the property that have priority over, or the same priority as, the syndicated mortgage, assuming in all cases that the maximum amounts of any such mortgages are fully drawn, does not exceed 90 per cent of the fair market value of the property relating to the mortgage, excluding any value that may be attributed to proposed or pending development of the property;
(d) the syndicated mortgage cannot be subordinated to future financing without the consent of each lender;
(e) there is no existing agreement that requires any lender of the syndicated mortgage to consent to future subordination of the syndicated mortgage;
(f) no person has the ability to consent to future subordination of the syndicated mortgage on behalf of the lenders of the syndicated mortgage without obtaining the consent of each lender;
"syndicated mortgage" means a mortgage in which two or more persons participate, directly or indirectly, as a lender in a debt obligation that is secured by the mortgage;.
3. Part 2 is amended by adding the following section:
2.10 Mortgages -
(1) The prospectus requirement does not apply to a distribution of
(a) a mortgage, other than a syndicated mortgage, on real property in a jurisdiction of Canada,
(b) a qualified syndicated mortgage on real property in a jurisdiction of Canada, or
(c) a syndicated mortgage on a real property in a jurisdiction of Canada to a permitted client,
by a person that is registered or licensed under the Mortgage Brokerages, Lenders and Administrators Act, 2006.
(2) The first trade in a security acquired under paragraph (1)(c) is a distribution..
4. Part 3 is amended by adding the following section:
3.5 Mortgages -- The dealer registration requirement does not apply in respect to a trade in
(a) a mortgage, other than a syndicated mortgage, on real property in a jurisdiction of Canada,
(b) a qualified syndicated mortgage on real property in a jurisdiction of Canada, or
(c) a syndicated mortgage on a real property in a jurisdiction of Canada with a permitted client,
by a person that is registered or licensed under theMortgage Brokerages, Lenders and Administrators Act, 2006..
5. This Instrument comes into force on the later of the following:
(a) March 1, 2021; and
(b) the day on which sections 4 and 5 of Schedule 37 to Bill 177, Stronger, Fairer Ontario Act (Budget Measures), 2017 are proclaimed into force.
CSA Staff Notice 55-317 -- Automatic Securities Disposition Plans
December 10, 2020
The purpose of this notice is to set out practices recommended by staff (Staff or we) of the Canadian Securities Administrators (CSA) for issuers and insiders in relation to the establishment, administration and disclosure of Automatic Securities Disposition Plans (ASDPs orplans). Typically, an ASDP is an arrangement between an insider and a dealer or a plan administrator that involves the sale of securities of an issuer over a predetermined period and in accordance with a predetermined set of instructions.
Important concerns with respect to ASDPs have recently been raised, both in terms of good corporate governance and public confidence in the fairness of our capital markets. Insiders generally control the timing of the adoption of ASDPs, which can raise questions about whether the plans are made in good faith and whether insiders are in possession of material non-public information (MNPI) at the time the plans are adopted. Insiders may also generally amend, suspend or terminate plans, which could make it possible to misuse plans.
Staff is providing guidance relating to ASDPs to reduce the potential for improper insider trades under these plans. This guidance can also assist issuers and insiders in managing market perception of insider trades under ASDPs.
This notice does not modify any existing legal requirements or create new ones. Staff notes that there is an insider trading defense or exemption available under securities legislation, where the trade in securities is made under an "automatic plan" entered into prior to the insider acquiring knowledge of MNPI (Legal Defense). Some of the recommended practices outlined in this guidance may be relevant for insiders when considering whether they can rely on the Legal Defense. In addition, in the view of Staff, the processes outlined in this guidance are consistent with the principles of good corporate governance and transparency in connection with the establishment and use of ASDPs and the reporting of trades under the plans.
Under securities legislation, insiders are generally prohibited from trading in an issuer's securities with knowledge of MNPI. However, insiders may rely on the Legal Defense when their trades are made under an "automatic plan" referred to in securities legislation. Insiders that are "reporting insiders" as defined in National Instrument 55-104 Insider Reporting Requirements and Exemptions (NI 55-104) are required to file an insider report each time there is a trade in securities of the issuer by or on behalf of the insider under an ASDP in accordance with NI 55-104.
We note that executive officers and directors are increasingly being encouraged to build and hold a significant level of securities ownership in the issuers that they manage or oversee in order to align their interests with other security holders. While the issuer's securities may form an important part of compensation, the insider trading prohibition under securities legislation and regular exposure to MNPI may limit the ability of insiders to sell the securities they receive as part of their compensation arrangements and often results in insiders being unable to trade securities for extended periods of time.
We recognize that a well-designed and well-administered ASDP can be a legitimate mechanism for trading by insiders. However, it is important to ensure that ASDPs contain meaningful conditions and restrictions to ensure that insiders are not able to benefit from MNPI with respect to the issuer and that ASDPs are automatic in substance.
We encourage issuers and insiders to consider the following guidance when establishing and using ASDPs and reporting trades under the plans. Following the recommendations presented in this notice is not a substitute for a legal determination regarding the availability of the Legal Defense to protect insiders from insider trading liability. As such, insiders should perform their own analysis to determine whether the Legal Defense has been satisfied.
3.1 Establishment of the plan
Entering into the plan by insider
To address concerns that a plan may be contrary to the public interest, ASDPs should be entered into by an insider in good faith, and not for the purpose of evading the insider trading prohibition. In addition, the Legal Defense will not be available if the plan is entered into when the insider is in possession of MNPI with respect to the issuer.
We note that many issuers have adopted an insider trading policy that imposes trading blackouts at certain times{1}. This is intended to prevent trading at times when there is a heightened risk that insiders have MNPI. Trading blackouts are also intended to prevent the appearance of questionable trading, and to protect the reputation of the issuer. Insiders should review and comply with the issuer's insider trading policy, including any stipulations on when plans may be entered into. In the absence of such stipulations, we recommend that issuers consider amending their insider trading policies to include a specific restriction against entering into ASDPs during trading blackouts.
Oversight by issuer
We recommend that the issuer oversee the establishment and use of ASDPs by its insiders to ensure that the plans and the insiders comply with securities legislation and any insider trading policy or other relevant internal policies that the issuer may have adopted{2}.
Oversight of ASDPs by an issuer contributes to their legitimacy and the issuer and its insiders would, in Staff's view, benefit from the involvement of the issuer. This involvement could reduce reputational exposure for the issuer and litigation risks potentially linked to the improper use of ASDPs by the insider. If the ASDP is not established by the issuer, then we encourage insiders to notify the issuer of their intent to enter into an ASDP in order to enable the issuer to provide guidance and oversight of the ASDP to the insider.
As part of its oversight and to minimize its risks, we recommend that the issuer review the terms and conditions of ASDPs to assess whether they are automatic in substance and contain protections against inappropriate trading activities by insiders. In addition, we recommend that the insider request that the issuer certify to the dealer that, to the best of the issuer's knowledge, the insider is not in possession of MNPI when entering into the ASDP and that the ASDP is entered into in accordance with any insider trading policy or other relevant internal policies of the issuer.
As part of its risk mitigation, we recommend that the issuer take reasonable steps to periodically confirm that the insider continues to comply with the terms and conditions of the ASDP and any insider trading policy or other relevant internal policies adopted by the issuer.
We also particularly recommend that the issuer monitor the use of the ASDP upon the occurrence of significant events in the life of the issuer before those significant events are publicly disclosed. Examples of significant events include transactions such as a merger, an acquisition or a divestiture, or a material change affecting an issuer's business, operations or capital. Staff is of the view that monitoring the use of the plan when a significant event occurs in this manner would also assist the issuer in considering whether any amendment, suspension or termination of the plan is appropriate during a period in which the insider may be in possession of MNPI.
3.2 Administration of the plan
Trading parameters and other instructions
We recommend that the insider provide clear trading parameters and other instructions in writing to the dealer or plan administrator at the time of entering into the ASDP. The plan should either include a formula or specify the number of securities to be sold, and set out any minimum trade price and any date or frequency of sales. Providing pre-determined trading parameters or other instructions when entering into the plan would reduce the risk of the insider attempting to make discrete investment decisions, such as influencing the timing of trades or the number of securities to be sold.
We also recommend that the plan prohibit the dealer from consulting with the insider regarding any sales under the plan and prohibit the insider from disclosing to the dealer any information concerning the issuer that might influence the execution of the plan.
Minimum term
While the term of an ASDP is generally set to meet the needs of the insider, we recommend that the term be sufficiently long to avoid any potential use of MNPI (for example, 12 months).
Although we recognize that it may be the result of legitimate trading parameters and other instructions, we recommend avoiding concentrating trades at the beginning of the term of a plan to help insiders manage the perception in the market that trades were timed to benefit from MNPI or that information was withheld to the market to benefit insiders.
Waiting period
We recommend that trades under an ASDP do not start before the issuer's next interim financial report or annual financial statements, as the case may be, have been filed.
We are of the view that the waiting period, which is the period between the establishment of an ASDP and the first transaction made under the plan, is key to the legitimacy of ASDPs. The longer the waiting period, the more likely any insider's MNPI will be obsolete or publicly disclosed prior to the commencement of trading under the plan.
Amendments, suspension and termination
We recommend that an ASDP contain meaningful restrictions on the ability of the insider to amend, suspend or terminate the plan that have the effect of ensuring that the insider cannot benefit from MNPI.
Amendments to the terms and conditions of an ASDP, such as its trading parameters and other instructions, as well as the suspension or termination of an ASDP by an insider, may give rise to a perception that the change to the plan is motivated by MNPI possessed by the insider and could call into question the automatic nature of the plan. However, we recognize that a plan may need to be amended, suspended or terminated for legitimate reasons in certain circumstances. In addition, we recognize that the ASDP may provide for pre-established automatic suspension or termination events (such as the death of the insider, the bankruptcy of the issuer, the entering into takeover bids, arrangements, mergers, acquisitions or other transactions affecting the securities of the issuer).
We therefore recommend imposing the following meaningful restrictions on an insider's ability to amend, suspend or terminate an ASDP, among other restrictions which may be considered appropriate:
• imposing a limit on the number or nature of permitted amendments;
• prohibiting any amendment, suspension or termination during trading blackouts under the issuer's insider trading policy;
• requiring that the insider represent to the dealer or plan administrator that the insider is not in possession of MNPI at the time of the amendment, suspension or termination;
• requiring the insider to request that the issuer certify to the dealer or plan administrator that, to the best of the issuer's knowledge, the insider is not in possession of MNPI when amending, suspending or terminating the ASDP;
• requiring the insider to request that the issuer certify to the dealer or plan administrator that the ASDP is amended, suspended or terminated in accordance with any insider trading policy or other relevant internal policies of the issuer;
• imposing the waiting period recommended above after any amendment or suspension;
• requiring that the issuer or the insider disclose in a news release filed on SEDAR{3} the circumstances that led to the amendment, suspension or termination and, where applicable, the nature of the amendment, together with a representation by the insider that the insider was not in possession of any MNPI at the time of such amendment, suspension or termination;
• obtaining the approval of the board of directors of the issuer for any amendment, suspension or termination.
To help manage perception in the market, we also recommend that an insider consider whether changing the number of the issuer's securities sold under the plan through discrete investment decisions to sell the securities outside the ASDP, or establishing overlapping plans, could be considered an indirect amendment to the plan.
Disclosure regarding the ASDP
In order to enhance transparency of trading by insiders in the market, we recommend that the issuer or the insider disclose relevant information regarding the ASDP by way of a news release filed on SEDAR.
Specifically, we recommend that the issuer or the insider publicly disclose the establishment of the plan and the plan's principal terms and conditions, such as the parties to the plan, its term, the waiting period before the trades can start under the plan and the restrictions on the ability of the insider to amend, suspend or terminate the plan. Such disclosure would also benefit issuers as it would help them manage market perception of the sale of securities by insiders.
In addition, we recommend that the news release indicate the number of securities to be sold under the ASDP and the minimum price at which these securities can be sold, if such a minimum price is specified in the trading parameters provided in the ASDP. This disclosure could provide valuable information for the market as to the insider's views of the issuer's prospects.
As already discussed in this notice, we also recommend that the market be made aware by way of a news release of any special circumstances occurring in connection with the plan, such as its amendment, suspension or termination.
Disclosure in insider reports
When filing insider reports, we recommend that an insider specify in the comment section that the trades were made under an ASDP.
This disclosure would enable the market to understand that the information provided under each subsequent report does not reflect discrete investment decisions made by the insider but is instead related to a previously announced ASDP. We also remind insiders that the transfer of an insider's securities to the dealer or plan administrator for the purpose of an ASDP is a transfer that should be reported in accordance with section 3.3 of NI 55-104, which requires an insider to file a report disclosing all transfers of control over the securities they hold in the issuer.
Please refer your questions to any of the following:
{1} We note that section 6.10 of National Policy 51-201 Disclosure Standards contains guidance as to insider trading policies and trading blackout periods.
{2} In Quebec, contrary to what is provided under securities legislation in other provinces and territories, an automatic plan must be established by an issuer in order to be used for the purposes of the Legal Defense.
{3} References to SEDAR in this notice mean the System for Electronic Document Analysis and Retrieval as at the date of this notice, and also include any successor to that system.
OSC Staff Notice 45-717 Ontario's Exempt Market
OSC Staff Notice 45-717 Ontario's Exempt Market is reproduced on the following separately numbered pages. Bulletin pagination resumes at the end of the Notice.
December 2020
In 2019, approxmately 3,200 corporate (non-investment fund) issues reported $88.6 billion in capita report{1} highlights the key drivers of Ontario's private or "exempt market" activity since 2017{2}, including the types of issuers that raised capital and the investors they raised it from.
Since 2017, there has been a marginal decline in the amount of capital raised each year. However, the number of issuers raising capital in Ontario's exempt market{3} has remained relatively stable and investor participation, primarily among individuals{4}, has increased considerably over the same period.
Our findings in this report include:
Issuer and Investor Trends
• Institutional investors were the predominant source of capital in Ontario's exempt market.
• The accredited investor exemption accounted for the majority of capital raised by Canadian and foreign issuers.
• There has been notable year-over-year growth in the number of individual investors, with a large and increasing proportion investing in financial issuers{5}.
Newer Prospectus Exemptions
• From 2017 to 2019, the offering memorandum; family, friends and business associates; and existing securities holder exemptions have been used by over 1,300 issuers to raise just over $1 billion.
• The offering memorandum exemption continues to be predominantly used by mortgage and real estate issuers to raise capital from individual investors.
Ontario Issuers
• Since 2017, exempt market activity by Ontario-based non-financial issuers has declined, whereas activity by financial issuers has increased.
• Ontario non-financial issuers with less than $5 million in total assets accounted for over a third of all Ontario issuers that accessed Ontario's exempt market but less than 3% of the capital raised in 2019.
The high-level breakdown of capital raising activity in 2019, below, demonstrates that while Ontario's exempt market is comprised of a diverse set of participants, a small number of institutional investors and foreign issuers account for a disproportionately larger share of capital raised. The exempt market also serves as an additional source of capital for both public (reporting) and private (non-reporting) issuers.
While annual gross proceeds raised from Ontario investors declined slightly from their 2017 levels, investor participation, primarily by individual investors, has increased over the last two years. This growth is mainly concentrated in financial issuers as shown below.
Investments by individual investors in all financial issuers continues to grow.
Aggregate capital raised by Canadian non-financial issuers from Ontario investors has declined since 2017.
Ontario investors (mostly institutional) continue to allocate a large amount of capital to foreign, especially U.S. based, issuers.
From 2017 to 2019, the offering memorandum (OM), family, friends and business associates (FFBA) exemption and existing securities holder (ESH) exemptions have been used by over 1,300 issuers to raise just over $1 billion in aggregate.{8}
Among these exemptions, the OM exemption was used to raise the most capital and from a greater number of investors, while the FFBA exemption was used by the most number of issuers. The ESH has been used by a very limited number of issuers to raise a small amount of capital over the last three years. There has been no reported use of the crowd funding exemption to raise capital from Ontario investors since it came into effect.{9}
The OM exemption has been predominantly used by mortgage and real estate issuers.
The FFBA exemption has been capital under the exemption than issuers in other sectors.
Where did investors allocate capital in 2019?
Issuer HQ
Individual investors allocated capital primarily to Ontario-based and other Canadian issuers, whereas institutional investors allocated more capital to foreign-based entities, predominantly based in the U.S.
Individual investors allocated a larger portion of their capital (37%) to mortgage and real estate sectors than institutional investors (15%).
Reporting issuers received 22% of the total invested in the exempt market by individual investors ($0.7B) and 17% of the total invested by institutional investors ($14.3B).
For individual investors, investments in reporting issuers were concentrated in the mining (37%) and finance (30%) sectors.
Individuals allocated a greater proportion of their investments to non-debt securities whereas institutional investors allocated the majority of their investments to debt securities.
Since 2017, there has been a steady increase in mortgage and real estate investments by individual investors.
Similar to past years, individuals made investments in these issuers predominantly through non-debt/equity securities.
In contrast, over half of institutional investments in these issuers have been through debt securities.
Similar to previous years, the majority of capital raised from both individual (88%) and institutional (95%) investors was through the AI exemption.
After the AI exemption, the OM exemption was the second most relied on prospectus exemption for individual investors.
Over the last three years, there has been an increase in the number of individual investors using the AI and OM exemptions.
Since 2017, the amount of capital raised from Ontario investors by Canadian issuers has remained relatively unchanged and Ontario-based issuers still account for the bulk of the gross proceeds raised by Canadian issuers.
Financial issuers continue to comprise a large portion of capital raised among Ontario-based issuers.
Comprised of various securitization vehicles, business financing platforms and private equity/venture capital funds
Over half of all mining and other non-financial issuers reported less than $5 million in total assets in 2019.
Approximately 64% of mining issuers and 40% of other non-financial issuers raised $1 million or less in 2019.
Ontario non-financial issuers predominantly relied on the AI exemption to raise capital.
Contacts
Please refer your questions to the following OSC staff:
Samreen BegLegal Counsel, Corporate FinanceOntario Securities Commission416-597-7817sbeg@osc.gov.on.caRobert DrydenResearch Analyst, Regulatory Strategy and ResearchBranch Ontario Securities Commission416-263-7661rdryden@osc.gov.on.caJo-Anne MatearManager, Corporate FinanceOntario Securities Commission416-593-2323jmatear@osc.gov.on.caKevin YangManage, Regutory Strategy and ResearchOntario Securities Commission416-204-8983kyang@osc.gov.on.ca
{1} This report is based on data obtained from the Form 45-106F1 Report of Exempt Distribution ("the F1 Report") filed with the OSC by corporate issuers that raised capital from Ontario investors under reportable prospectus exemptions. Only certain prospectus exemptions trigger a requirement to file an F1 Report and so the information gathered from the filings does not represent all exempt market activity. For more information on which exemptions require the filing of an F1 Report in Ontario, see Part 6: Reporting Requirements of National Instrument 45-106 Prospectus Exemptions. The data in this report was collected at a point in time and may not incorporate the latest filer amendments or late filings. In addition, "data cleaning" methods were applied to exclude erroneous or identifiable duplicate records that were filed.
{2} For more information on the OSC Exempt Market Report 2018, see OSC Staff Notice 45-716. Figures for 2017 cited in this report may differ slightly from those provided in the 2018 report as a result of amendments, re-filings and late filings.
{3} For more information about the exempt market, please see: "The Exempt Market at <http://www.osc.gov.on.c a/en/exempt-market htm> and "The Exempt Market Explained" at <https://www.getsmarteraboutmoney.ca>.
{4} For the purpose of this report, "individual investor" (or "individuals") refers to investors that were identified by their full legal name and not a corporation name or legal entity name. In some cases, individual investors may also include named individuals that were purchasing on behalf of a beneficial owner. "Institutional" refers to institutional investors and other non-individuals such as companies, trusts or managed accounts purchasing on behalf of a beneficiary or group of beneficiaries.
{5} For the purpose of this report, "financial issuers" include issuers identified in the finance, real estate and mortgage sectors. Issuer sector categories were based on their reported NAICS (North American Industry Classification System) code with the exception of mortgage issuers, which were identified based on additional OSC staff research.
{6} Non-debt securities includes all classes of shares, preferred shares, flow-through shares, partnership units, depository receipts, subscription receipts and other securities that are not convertibles, rights, bundled units or debt related securities.
{7} See definition of "accredited investor" in Part 1: Definitions and Interpretation of National Instrument 45-106 Prospectus Exemptions.
{8} Most issuers relying on the OM and FFBA exemptions raised larger sums of capital under other prospectus-exemptions, most notably the AI exemption.
{9} On February 27, 2020 the CSA published Proposed National Instrument 45-110 Start-up Crowd funding Registration and Prospectus Exemptions to improve the harmonization of the regulatory framework for securities crowd funding by start-ups and early stage issuers and create a streamlined system to allow start-ups and other small businesses to raise money. The OSC also made an interim local order on July 30, 2020, in light of COVID-19 and related challenges to small businesses seeking to raise capital, which provides prospectus and registration exemptions for start-up crowd funding that are substantially similar to the local exemptions in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick and Nova Scotia. The interim local order will remain in effect until the Proposed National Instrument is adopted or 18 months from the effective date of the order. The crowd funding regime in Multilateral Instrument 45-108 Crowd funding continues to apply in Ontario.
Notice of Ministerial Approval of Amendments to National Instrument 81-105 Mutual Fund Sales Practices and Related Consequential Amendments Prohibition of Mutual Fund Trailing Commissions Where No Suitability Determination Was Required
On July 21, 2020, the Ontario Securities Commission (the Commission) made amendments to National Instrument 81-105 Mutual Fund Sales Practices and related consequential amendments to National Instrument 41-101 General Prospectus Requirements and National Instrument 81-101 Mutual Fund Prospectus Disclosure (the Rule Amendments). On the same date, the Commission also adopted changes to Companion Policy 81-101CP to National Instrument 81-101 Mutual Fund Prospectus Disclosure (the Policy Changes).
The above material was published on September 17, 2020 in the Bulletin. See (2020), 43 OSCB 7299.
On October 4, 2020, the Commission by way of quorum approved Annex F -- Local Matters, which was omitted from the September 17, 2020 publication in the Bulletin. On October 8, 2020, Annex F -- Local Matters was published in the Bulletin. See (2020), 43 OSCB 7831.
The Rule Amendments and the Policy Changes have an effective date of June 1, 2022, except for:
(i) the definition of "suitability determination" which has an effective date of December 31, 2020;
(ii) the exemption for the delivery of fund facts documents for no-trailing-commission switches, which has an effective date of December 31, 2020; and
(iii) the exemption for the delivery of ETF facts documents for no-trailing-commission ETF switches, which has an effective date of December 31, 2020.
On December 1, 2020, the Minister of Finance approved the Rule Amendments.
The text of the Rule Amendments is published in Chapter 5 of this Bulletin.
FOR IMMEDIATE RELEASE
December 2, 2020
TORONTO - The Commission issued an Order in the above named matter.
A copy of the Order dated December 2, 2020 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
December 3, 2020
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated December 3, 2020 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
December 3, 2020
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated December 3, 2020 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
December 4, 2020
TORONTO -- Take notice that the hearing in the above named matter scheduled to be heard on January 14, 2021 at 10:00 a.m. will be heard on January 14, 2021 at 9:30 a.m.
For Media Inquiries:
For General Inquiries:
FOR IMMEDIATE RELEASE
December 7, 2020
TORONTO -- The Commission issued an Order in the above named matter.
A copy of the Order dated December 7, 2020 is available at www.osc.gov.on.ca.
For Media Inquiries:
For General Inquiries:
Under paragraph 4.1(1)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations a registered firm must not permit an individual to act as a dealing, advising or associate advising representative of the registered firm if the individual acts as an officer, partner or director of another registered firm that is not an affiliate of the first-mentioned firm. The Filers have sought relief from that prohibition. The firm employing the individual as a registered representative is an owner of the second registered firm and entitled to appoint a director to its board. The individual will have sufficient time to adequately serve both firms. The potential for conflicts of interest is significantly reduced compared to other similar arrangements because the second firm operates as an alternative trading system under National Instrument 21-101 Marketplace Operation. The firm also has policies in place to handle potential conflicts of interest. Relief from the prohibition has been granted.
Multilateral Instrument 11-102 Passport System, s. 4.7.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, ss. 4.1, 13.4 and 15.1.
November 30, 2020
The principal regulator in the Jurisdiction has received an application from BMO NB and CanDeal (together, the Filers) for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) for relief from the restrictions in paragraph 4.1(1)(a) of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), pursuant to section 15.1 of NI 31-103 to permit Fotios (Fred) Nastos (the Representative) to be registered as a dealing representative of BMO NB while also acting as a director of CanDeal (the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filers have provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island, Québec, Saskatchewan, and Yukon (with Ontario, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filers:
1. BMO NB is a wholly owned subsidiary of the Bank of Montreal.
2. BMO NB is a corporation existing under the laws of Canada and is registered under the Legislation as an investment dealer and is a dealer member of the Investment Industry Regulatory Organization of Canada (IIROC).
3. The principal regulator of BMO NB is the Ontario Securities Commission (OSC) because BMO NB's head office is located in Toronto, Ontario.
4. CanDeal is an Ontario corporation and is registered under the Legislation as an investment dealer and is a member of IIROC. CanDeal is regulated as an alternative trading system under National Instrument 21-101 Marketplace Operation (NI 21-101). The principal regulator of CanDeal is the OSC because CanDeal's head office is located in Toronto, Ontario.
5. CanDeal operates an institutional multi-dealer to customer electronic trading platform and market data communications network (the CanDeal System or System). The CanDeal System is a vehicle through which institutional clients (Clients) access information, request bids and offers, and effect transactions with liquidity providing dealers (Dealers). CanDeal also offers market data, post-trade straight-through processing, trade reporting, and other support to its Dealers and Clients.
6. CanDeal Dealers and Clients currently effect transactions using the CanDeal System in Canadian fixed-income securities and interest rate swaps.
7. The CanDeal System employs request-for-quote (RFQ) electronic trading functionality for the execution of trades. The System displays indicative quotes on fixed-income products that are made available on the System. Transactions on the System are initiated by RFQ disseminated by a Client to between one and four Dealers. A Dealer to whom an RFQ is disseminated knows the number but not the identity of the Dealers to whom the RFQ is disseminated.
8. The CanDeal System permits a Dealer to view data relating to its own executed trades and certain aggregate data relating to all trades executed on the System.
9. The aggregate data available to a Dealer permits the Dealer to know its share of total volume executed on the platform and its rank in terms of total volume executed by Dealers, but does not permit the Dealer to know the rank of or the volume executed by another Dealer on the platform. A Dealer may also access data as to the total volume inquired of by Clients in the aggregate under the RFQs and executed by Clients in the aggregate, in each case by each category of product made available on the System.
10. The data that a Dealer may view relating to its own executed trades includes the total volume inquired of by the Dealer under RFQs received by it, the total and percentage of inquired volume represented by executed trades by that Dealer, the volume inquired of that was not quoted and the average time to respond to a quote. The Dealer may view such data for each Client with whom it has executed trades and may view the volume executed with each Client by product category and maturity range.
11. CanDeal is owned by TSX Inc. and six bank-owned investment dealers (each, a Shareholder-Dealer), which include BMO NB, CIBC World Markets Inc., RBC Dominion Securities Inc., TD Securities Inc., National Bank Finance Inc., and Scotia Capital Inc.
12. Each Shareholder-Dealer is also a Dealer.
13. No functionality exists on the CanDeal System that could enable a Shareholder-Dealer to influence the actions of a Client to the benefit of that Shareholder-Dealer in relation to a trade.
14. No shareholder of CanDeal controls (as such term is interpreted in subsection 1.3(2) of NI 21-101) of CanDeal.
15. CanDeal has no affiliates and is not affiliated with BMO NB, nor is BMO NB a related company of CanDeal within the meaning of the IIROC Dealer Member Rules.
16. CanDeal is governed by an executive management team, and a board of directors (Board) consisting of representatives from TSX Inc., each Shareholder-Dealer, CanDeal's Chief Executive Officer, and one independent member. The Board meets on a quarterly basis.
17. The Representative is registered as a dealing representative of BMO NB. The Representative is Managing Director of BMO NB's Debt Product trading group, the activities of which include (i) buying and selling debt securities for institutional investors based on the study of varying market trends and (ii) analysis of current market conditions.
18. As a dealing representative of BMO NB, the Representative may access the data referred to in paragraphs 8 to 10 above, as well as data pertaining to those of BMO NB's trades or pending trades on the System for which the Representative is responsible.
19. Neither a Dealer, nor a dealing representative, has access to any data relating to (i) the activity of any other identifiable Dealer on the System or (ii) any identifiable Client other than in respect of the Dealer's or dealing representative's own trading activity with such Client.
20. In his role as dealing representative, the Representative has acquired comprehensive knowledge of the fixed-income trading environment and business, and, as such, is qualified to provide competent business counsel on issues relating to the institutional trading of fixed-income products and the institutional fixed-income markets generally
21. The Representative has been nominated as a director of CanDeal.
22. It is anticipated that the Representative will spend four to six hours per quarter on CanDeal directorship duties. Accordingly, the Representative will have sufficient time and resources to adequately meet his obligations to both BMO NB and CanDeal. The Chief Compliance Officer and Ultimate Designated Person of each Filer will ensure that the Representative has sufficient time and resources to adequately serve each Filer and the clients of BMO NB.
23. The Representative is the most suitable candidate at BMO NB having the requisite fixed-income markets experience required to serve as BMO NB's representative on the CanDeal Board.
24. BMO NB has appropriate compliance and supervisory policies and procedures to deal with any conflicts of interest that may arise as a result of the Representative being a director of CanDeal. The Representative is subject to these policies and procedures.
25. The Filers will be able to deal with any conflicts of interest that arise out of the Representative being a dealing representative of one firm and a director of the other firm including supervising how the Representative will deal with these conflicts.
26. The potential for conflicts of interest or client confusion is mitigated by the following:
(a) None of the Shareholder-Dealers, including BMO NB, is a competitor of CanDeal;
(b) Members of the Board serve without remuneration;
(c) The Representative will not be involved in the day-to-day operations of CanDeal;
(d) No functionality exists on the CanDeal System that could enable a Shareholder -Dealer to influence the actions of a Client to the benefit of that Shareholder-Dealer in relation to a trade; and
(e) At no time will CanDeal favour the interest of NBI as a result of the Representative being a member of its Board.
27. The directors of CanDeal are subject to a comprehensive policy governing conflicts of interest (the Policy). The Policy specifically addresses the situation where a "nominee director", that is a director appointed by a Shareholder-Dealer, has a conflict of interest or duty arising from the concurrent fiduciary duties he or she owes to CanDeal and to the Shareholder-Dealer.
28. The Policy proceeds from the principle that a nominee director of CanDeal owes an unqualified fiduciary duty to CanDeal. The Policy enforces the principle by providing that, where the Board determines that a director has a conflict of duty, the Board will adopt a protocol for managing the conflict which must include provisions relating to:
(a) whether the conflicted director must withdraw from Board meetings for the duration of any discussion on a relevant matter, and whether the Board may waive such a requirement;
(b) whether, in light of applicable law or other relevant circumstances, the conflicted director may vote in connection with any Board decision on that matter; and
(c) whether, subject to such restrictions as the Board may impose, the conflicted director may receive Board papers or other information which relates in any way to the subject-matter that gives rise to the conflict (Information). Where the Board decides under the protocol that the director may not receive Information, and the Board further decides that the conflict of duty is of such nature or sensitivity that it is not appropriate for the conflicted director to be made aware of the nature of the Information, the director will not be notified of the nature of the Information.
29. To further protect CanDeal, the Policy requires that clear guidelines be established relating to:
(a) the circumstances in which Information may be passed on by a director to the Shareholder-Dealer who nominated him or her;
(b) the right of CanDeal to place an embargo on Information which must not be passed on because of its sensitivity; and
(c) acceptance by each Shareholder-Dealer of obligations of confidentiality in relation to any Information received.
30. Neither BMO NB nor CanDeal is in default of securities, commodities or derivatives legislation in any Jurisdiction.
31. In the absence of the Exemption Sought, BMO NB would be prohibited under paragraph 4.1(1)(a) of NI 31-103 from permitting the Representative to act as a dealing representative of BMO NB and be a director of CanDeal.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the circumstances described above remain in place.
E-L Financial Corporation Limited
Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Exemption from the extension take up requirements in subsection 2.32(4) of National Instrument 62-104 Take-Over Bids and Issuer Bids -- an issuer conducting an issuer bid requires relief from the requirement not to extend its issuer bid if all terms and conditions are met unless the issuer first takes up all securities validly deposited and not withdrawn under the issuer bid -- the issuer will comply with the U.S. regime in connection with the issuer bid -- requested relief granted, subject to conditions.
National Instrument 62-104 Take-Over Bids and Issuer Bids, ss. 2.32(4) and 6.1.
December 1, 2020
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the "Legislation") that, in connection with the proposed purchase by the Filer of a portion of its issued and outstanding common shares (the "Shares") pursuant to a formal issuer bid commenced on November 11, 2020 (the "Offer"), the Filer be exempt from the requirement set out in subsection 2.32(4) of National Instrument 62-104 Take Over Bids and Issuer Bids ("NI 62-104") that the Offer not be extended if all of the terms and conditions of the Offer have been complied with or waived, unless the Filer first takes up all Shares deposited under the Offer and not withdrawn (the "Exemption Sought").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Filer has given notice that subsection 4.7(1)(c) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined herein.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation validly existing under the Business Corporations Act (Ontario) and is in good standing.
2. The head office of the Filer is located at 165 University Avenue, 10th Floor, Toronto, Ontario, M5H 3B8.
3. The Filer is a reporting issuer in each of the provinces of Canada and the Shares are listed for trading on the Toronto Stock Exchange (the "TSX") under the symbol "ELF". The Filer is not in default of any requirement of the securities legislation in any of the jurisdictions in which it is a reporting issuer.
4. The authorized share capital of the Filer consists of (a) an unlimited number of Shares, (b) 402,733 Preference Shares, issuable in series, and (c) an unlimited number of First Preference Shares, issuable in series. As at November 6, 2020, there were: (i) 3,818,439 Shares; (ii) 258 Series A Preference Shares; (iii) 4,000,000 First Preference Shares, Series 1; (iv) 4,000,000 First Preference Shares, Series 2; and (v) 4,000,000 First Preference Shares, Series 3, issued and outstanding.
5. On November 6, 2020, the last full trading day prior to the date of the announcement of the Offer, the closing price of the Shares on the TSX was $658.00. Based on such closing price, the Shares had an aggregate market value of approximately $2,512,532,862 on such date.
6. On November 11, 2020, the Filer commenced the Offer. The issuer bid circular dated November 9, 2020 prepared and sent by the Filer in connection with the Offer (the "Circular") specifies that the Filer proposes to purchase, by way of a modified "Dutch auction" procedure in the manner described, up to $100,000,000 of the issued and outstanding Shares at a purchase price of not less than $650.00 and not more than $750.00 per Share (the "Price Range of Shares").
7. The Filer will fund the purchase of Shares pursuant to the Offer, together with all related fees and expenses of the Offer, from available cash on hand or cash available to be drawn under the Filer's existing margin loan facility provided by RBC Dominion Securities Inc. The Filer has sufficient cash on hand to fund the entirety of the Purchase Price under the Offer, if fully subscribed.
8. Holders of Shares (collectively, the "Shareholders") wishing to tender to the Offer will be able to do so in two ways (i.e. the modified "Dutch auction" procedure):
(a) by making auction tenders pursuant to which they agree to sell a specified number of Shares (subject to proration) to the Filer at a specified price per Share (an "Auction Price") within the Price Range of Shares in increments of $5.00 per Share (each, an "Auction Tender"); or
(b) by making purchase price tenders in which the tendering Shareholders do not specify a price per Share, but rather agree to have a specified number of Shares (subject to proration) purchased at the purchase price per Share to be determined by the Auction Tenders (each, a "Purchase Price Tender").
9. Shareholders may make multiple Auction Tenders but not in respect of the same Shares (i.e. Shareholders may tender different Shares at different prices, but cannot tender the same Shares at different prices). Shareholders may make both an Auction Tender and a Purchase Price Tender, but not in respect of the same Shares. In both the case of Auction Tenders and Purchase Price Tenders, Shareholders may tender less than all of their Shares.
10. The Filer will determine the purchase price payable per Share (the "Purchase Price") by taking into account the number of Shares deposited pursuant to Auction Tenders and Purchase Price Tenders and the Auction Prices specified by Shareholders depositing Shares pursuant to Auction Tenders. For the purpose of determining the Purchase Price, Shares deposited pursuant to a Purchase Price Tender will be deemed to have been deposited at a price of $650.00 per Share (which is the minimum price per Share under the Offer). The Purchase Price will be the lowest price per Share that enables the Filer to purchase the maximum number of Shares validly deposited and not withdrawn pursuant to the Offer having an aggregate Purchase Price not to exceed $100,000,000.
11. Any Shareholder that owns fewer than 100 Shares (an "Odd-Lot Holder") who tenders all of their Shares pursuant to an Auction Tender at or below the Purchase Price, or makes a Purchase Price Tender, will be considered to have made an "Odd-Lot Tender".
12. If the aggregate Purchase Price for Shares validly deposited and not withdrawn pursuant to Auction Tenders at Auction Prices at or below the Purchase Price and Purchase Price Tenders would result in an aggregate Purchase Price in excess of $100,000,000, then such deposited shares will be purchased as follows:
(a) first, the Filer will purchase all Shares tendered at or below the Purchase Price by Odd-Lot Holders at the Purchase Price; and
(b) second, the Filer will purchase Shares at the Purchase Price on a pro rata basis according to the number of Shares deposited or deemed to be deposited at a price equal to or less than the Purchase Price by the depositing Shareholders, less the number of Shares purchased from Odd-Lot Holders. All Auction Tenders and Purchase Price Tenders will be subject to adjustment to avoid the purchase of fractional Shares.
13. As of November 9, 2020, no director or officer of the Filer, and to the knowledge of the Filer and its directors and officers after reasonable inquiry, no insider of the Filer (other than a director or officer), no associate or affiliate of the Filer or of an insider of the Filer, and no person or company acting jointly or in concert with the Filer, has indicated any present intention to deposit any of such person's or company's Shares pursuant to the Offer.
14. All Shares purchased by the Filer pursuant to the Offer (including Shares tendered at Auction Prices below the Purchase Price) will be purchased at the Purchase Price and payable in cash. All payments to Shareholders will be subject to deduction of applicable withholding taxes.
15. All Shares tendered to the Offer and not taken up will be returned to the appropriate Shareholders.
16. Assuming the Offer is fully subscribed:
(a) if the Purchase Price is determined to be $650.00, being the minimum Purchase Price under the Offer, the number of Shares that will be purchased by the Filer is 153,846, representing approximately 4.0% of the Filer's issued and outstanding Shares as at November 6, 2020; and
(b) if the Purchase Price is determined to be $750.00, being the maximum Purchase Price under the Offer, the number of Shares that will be purchased by the Filer is 133,333, representing approximately 3.5% of the Filer's issued and outstanding Shares as at November 6, 2020.
17. Shareholders who do not accept the Offer will continue to hold the same number of Shares held before the Offer and their proportionate Share ownership will increase following completion of the Offer.
18. The Offer is subject to the provisions of the United States regulation entitled Regulation 14E adopted under the Securities Exchange Act of 1934, as amended ("Regulation 14E").
19. The Offer is scheduled to expire at 11:59 p.m. (Toronto time) on December 16, 2020 (the "Expiration Date").
20. The Filer may wish to extend the Offer without first taking up all the Shares deposited and not withdrawn under the Offer if all the terms and conditions of the Offer have been complied with or waived by the Filer by the Expiration Date but the aggregate Purchase Price for Shares validly tendered pursuant to Auction Tenders and Purchase Price Tenders is less than $100,000,000.
21. Pursuant to subsection 2.32(4) of NI 62-104, an issuer may not extend an issuer bid if all the terms and conditions of the issuer bid have been complied with or waived unless the issuer first takes up all the securities deposited and not withdrawn under the issuer bid.
22. Under Regulation 14E, the Filer must promptly pay for all Shares deposited pursuant to the Offer at the time of expiry of the Offer. Regulation 14E does not provide for extensions of the Offer in the manner required by subsection 2.32(4) of NI 62-104.
23. The Filer is relying on the exemption from the formal valuation requirements applicable to issuer bids under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions ("MI 61-101") set out in subsection 3.4(b) of MI 61-101 (the "Liquid Market Exemption").
24. There is a "liquid market" for the Shares, as such term is defined in MI 61-101, as of the date the Offer was publicly announced because:
(a) there is a published market for the Shares (i.e. the TSX); and
(b) Cormark Securities Inc. ("Cormark"), a person qualified and independent of all interested parties to the Offer, provided an opinion to the Filer in accordance with section 1.2 of MI 61-101 that there is a liquid market for the Shares as of the date the Offer was publicly announced (the "Liquidity Opinion") and a copy of the Liquidity Opinion was included in the Circular.
25. Cormark also indicated in the Liquidity Opinion that it concluded that, following the completion of the Offer, there will be a market for holders of Shares who do not tender to the Offer that is not materially less liquid than the market that existed at the time of the making of the Offer.
26. Based on the maximum number of Shares that may be purchased under the Offer and the Liquidity Opinion, the board of directors of the Filer determined that it is reasonable to conclude that, following the completion of the Offer in accordance with its terms, there will be a market for holders of the Shares who do not tender to the Offer that is not materially less liquid than the market that existed at the time of the making of the Offer.
27. The board of directors of the Filer has determined that the Offer is in the best interests of the Filer and believes that the Offer is an advisable use of the Filer's financial resources given its cash requirements and borrowing costs.
28. The Circular:
(a) discloses the mechanics for the take-up of, and payment for, Shares as described herein;
(b) explains that, by tendering Shares at the lowest price in the Price Range of Shares under an Auction Tender or by making a Purchase Price Tender, a Shareholder can reasonably expect that the Shares so tendered will be purchased at the Purchase Price, subject to proration and other terms of the Offer as specified herein;
(c) discloses that the Filer has applied for the Exemption Sought;
(d) discloses the manner in which an extension of the Offer will be communicated to Shareholders;
(e) discloses that Shares deposited pursuant to the Offer may be withdrawn at any time prior to the expiry of the Offer;
(f) discloses the facts supporting the Filer's reliance on the Liquid Market Exemption, including the Liquidity Opinion; and
(g) includes the disclosure prescribed by applicable securities laws with respect to issuer bids.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:
(a) the Filer takes up and pays for Shares deposited pursuant to the Offer and not withdrawn, in each case, in the manner described above and as set out in the Circular;
(b) the Filer is eligible to rely on the Liquid Market Exemption; and
(c) the Filer complies with the requirements of Regulation 14E in respect of the Offer.
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- Application for relief from the prospectus and registration requirements for certain trades made in connection with an employee share offering by a French issuer -- offerings will involve the use of collective employee shareholding vehicles, each a fonds communs de placement d'entreprise (FCPE) -- the issuer cannot rely on the employee exemption in section 2.24 of National Instrument 45-106 Prospectus Exemptions as the securities are not being offered to Canadian employees directly by the issuer but rather through special purpose entities -- the management company is unable to rely on the plan administrator exemption in section 8.16 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations as the shares are not being offered to Canadian employees directly by the issuer but through an FCPE -- Canadian participants will receive disclosure documents -- the special purpose entities are subject to the supervision of the local securities regulator -- Canadian employees will not be induced to participate in the offering by expectation of employment or continued employment -- there is no market for the securities of the issuer in Canada -- the number of Canadian participants and their share ownership are de minimis -- relief granted, subject to conditions.
National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations.
National Instrument 45-106 Prospectus Exemptions.
National Instrument 45-102 Resale of Securities.
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 25, 53 and 74(1).
October 27, 2020
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) for:
1. an exemption from the prospectus requirement (the Prospectus Relief) so that such requirement does not apply to
(a) trades of:
(i) units (the 2020 Classic Units) of a temporary fonds commun de placement d'entreprise or "FCPE", a form of collective shareholding vehicle commonly used in France for the conservation of shares held by employee-investors, named "Worldline Relais 2020" (the 2020 Classic Fund); and
(ii) units (together with the 2020 Classic Units, the Temporary Classic Units, and together with the 2020 Classic Units and the Principal Classic Units (as defined below), the Units) of future temporary FCPEs organized in the same manner as the 2020 Classic Fund (together with the 2020 Classic Fund, the Temporary Classic Funds),
made pursuant to an Employee Offering (as defined below) to or with Qualifying Employees (as defined below) resident in the Jurisdiction and in the province of Québec (collectively, the Canadian Employees, and Canadian Employees who subscribe for Temporary Classic Units, the Canadian Participants);
(b) trades of ordinary shares of the Filer (the Shares) by the Classic Fund to or with Canadian Participants upon the redemption of Units as requested by Canadian Participants (the term "Classic Fund" used herein means, prior to the Merger (as defined below), a Temporary Classic Fund and following the Merger, the permanent FCPE named "Worldline Stock Plan" (the Principal Classic Fund); and
2. an exemption from the dealer registration requirement (the Registration Relief, and together with the Prospectus Relief, the Offering Relief) so that such requirement does not apply to the Filer and its Local Related Entities (as defined below), the Classic Fund and Société Générale Gestion (the Management Company) in respect of:
(a) trades in Units made pursuant to an Employee Offering to or with Canadian Employees; and
(b) trades in Shares by the Classic Fund to or with Canadian Participants upon the redemption of Units as requested by Canadian Participants.
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in Québec.
Terms defined in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
"Related entity" has the same meaning given to such term in section 2.22 of National Instrument -- 45-106 Prospectus Exemptions (NI 45-106).
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation formed under the laws of France. It is not, and has no current intention of becoming, a reporting issuer under the Legislation or the securities legislation of any other jurisdiction of Canada. The head office of the Filer is located in France and the Shares are listed on Euronext Paris.
2. The Filer carries on business in Canada through certain related entities and has established a global employee share offering (the 2020 Employee Offering) and expects to establish subsequent global employee share offerings of the Filer following 2020 for the next four years that are substantially similar (Subsequent Employee Offerings, and together with the 2020 Employee Offering, the Employee Offerings) for Qualifying Employees and its participating related entities, including related entities that employ Canadian Employees (Local Related Entities, and together with the Filer and other related entities of the Filer, the Worldline Group). Each of the Local Related Entities is a direct or indirect controlled subsidiary of the Filer and no Local Related Entity has any current intention of becoming a reporting issuer under the Legislation or the securities legislation of any other jurisdiction of Canada. The principal office of the Worldline Group in Canada is located in Ontario, and the greatest number of employees of Local Related Entities is employed in Ontario as compared to any other jurisdiction in Canada.
3. As of the date hereof, "Local Related Entities" only includes Bambora Inc., Ingenico Canada Ltd., and Retail Enterprise Canada Ltd. For any Subsequent Employee Offering, the list of "Local Related Entities" may change.
4. Each Employee Offering will be made under the terms as set out herein and for greater certainty, all of the representations will be true for each Employee Offering other than paragraphs 3, 11, 22 and 28 which may change (save for references to the 2020 Classic Fund and the 2020 Employee Offering which will be varied such that they are read as references to the relevant Temporary Classic Fund and Subsequent Employee Offering, respectively).
5. As of the date hereof and after giving effect to any Employee Offering, the Filer is and will be a "foreign issuer" as such term is defined in section 2.15(1) of National Instrument 45-102 -- Resale of Securities (NI 45-102) and the Filer is not and will not be a reporting issuer in any jurisdiction of Canada.
6. Each Employee Offering involves an offering of Shares to be acquired through a Temporary Classic Fund, which will be merged with the Principal Classic Fund following completion of the Employee Offering (the Classic Plan), subject to the decision of the supervisory boards of the FCPEs and the approval of the French AMF (as defined below).
7. Only persons who are employees of an entity forming part of the Worldline Group during the subscription period for an Employee Offering and who meet other employment criteria (the Qualifying Employees) will be allowed to participate in the relevant Employee Offering.
8. The 2020 Classic Fund was established for the purpose of implementing the 2020 Employee Offering. The Principal Classic Fund was established for the purpose of implementing the Employee Offering generally. There is no current intention for any of the 2020 Classic Fund or the Principal Classic Fund to become a reporting issuer under the securities legislation of any jurisdiction of Canada. There is no intention for any Temporary Classic Fund that will be established for the purpose of implementing Subsequent Employee Offerings to become a reporting issuer under the securities legislation of any jurisdiction of Canada.
9. The 2020 Classic Fund and the Principal Classic Fund are registered with the French Autorité des marchés financiers (the French AMF). It is expected that each Temporary Classic Fund established for Subsequent Employee Offerings will be a French FCPE and registered with, and approved by, the French AMF.
10. Under the Classic Plan, each Employee Offering will be made as follows:
(a) Canadian Participants will subscribe for the relevant Temporary Classic Units, and the relevant Temporary Classic Fund will then subscribe for Shares on behalf of Canadian Participants at a subscription price that is the Canadian dollar equivalent of the average opening price of the Shares (expressed in Euros) on Euronext Paris for the 20 trading days preceding the date of the, fixing of the subscription price (the Reference Price) by the Board of Directors of the Filer, less a specified discount to the Reference Price.
(b) Canadian Participants will make a contribution to the Classic Plan (the Employee Contribution), and the Local Related Entities that employ the Canadian Participants will also contribute on behalf of such Canadian Participants an amount into the Classic Plan (the Employer Contributions). The Temporary Classic Fund will apply the cash received from the Employee Contributions and the Employer Contributions to subscribe for Shares from the Filer.
(c) Initially, the Shares subscribed for will be held in the relevant Temporary Classic Fund and the Canadian Participants will receive Units of the relevant Temporary Classic Fund.
(d) After completion of an Employee Offering, the relevant Temporary Classic Fund will be merged with the Principal Classic Fund (subject to the approval of the supervisory board of the FCPEs and the French AMF). The Temporary Classic Units held by Canadian Participants will be replaced with units of the Principal Classic Fund (the Principal Classic Units) on a pro rata basis and the Shares will be held in the Principal Classic Fund (such transaction being referred to as the Merger). The Filer is relying on the exemption from the prospectus requirement pursuant to section 2.11 of NI 45-106 in respect of the issuance of Units of the Principal Classic Fund to Canadian Participants in connection with the Merger.
(e) The Units will be subject to a hold period of approximately five years (the Lock-Up Period), subject to certain exceptions provided for under French law (such as a release on death or termination of employment).
(f) Any dividends paid with respect to Shares represented by Units held by the Canadian Participants will be automatically reinvested into the Classic Fund and used to purchase additional Shares, in which case new Units (or fractions thereof) of the Classic Fund will be issued to such Canadian Participants.
(g) At the end of the relevant Lock-Up Period, a Canadian Participant may (i) request the redemption of Units in the Classic Fund in consideration for a cash payment equal to the then market value of the Shares, or (ii) continue to hold Units in the Classic Fund and request the redemption of those Units at a later date in consideration for a cash payment equal to the then market value of the Shares.
(h) In the event of an early exit resulting from a Canadian Participant exercising one of the exceptions to the Lock-Up Period and meeting the applicable criteria, the Canadian Participant may request the redemption of Units in the Classic Fund in consideration for a cash payment equal to the then market value of the underlying Shares.
(i) As indicated in paragraph 10(b) above, the Local Related Entity employing a Canadian Participant will also contribute on behalf of such Canadian Participant an amount into the Classic Plan based on predetermined matching contribution rules.
11. For the 2020 Employee Offering, for each subscription of Shares that a Canadian Participant makes into the Classic Plan, the Local Related Entity employing such Canadian Participant will contribute an amount sufficient to acquire one additional Share (Matching Share) into the Classic Plan, for the benefit of, and at no cost to, such Canadian Participant, up to a maximum of six (6) Matching Shares. For clarity, the maximum number of Matching Shares that Worldline Group can contribute in respect of a Canadian Participant is six (6) additional Shares. For each Subsequent Employee Offering, the matching contribution rules may change.
12. The subscription price for an Employee Offering will not be known to Canadian Employees until after the end of the applicable subscription period. However, this information will be provided to Canadian Employees prior to the start of the revocation period, during which Canadian Participants may choose to revoke all (but not part) of their subscription under the Classic Plan and thereby not participate in the relevant Employee Offering.
13. Under French law, an FCPE is a limited liability entity. The portfolio of the Classic Fund will consist almost entirely of Shares and may also include cash in respect of dividends paid on the Shares which may be reinvested in Shares as discussed above and cash or cash equivalents pending investments in the Shares and for the purposes of Unit redemptions.
14. The Management Company is a portfolio management company governed by the laws of France. The Management Company is registered with the French AMF as an investment manager and complies with the rules of the French AMF. To the best of the Filer's knowledge, the Management Company is not, and has no current intention of becoming, a reporting issuer under the Legislation or the securities legislation of any other jurisdiction of Canada.
15. Only Qualifying Employees will be allowed to hold Units issued pursuant to an Employee Offering.
16. The Management Company's portfolio management activities in connection with an Employee Offering and the Classic Fund are limited to purchasing Shares from the Filer, selling such Shares as necessary in order to fund redemption requests and investing available cash in cash equivalents.
17. The Management Company is also responsible for preparing accounting documents and publishing periodic informational documents as provided by the rules of the Classic Fund. The Management Company's activities do not affect the underlying value of the Shares.
18. None of the Filer or its Local Related Entities or the Management Company or any of their employees, directors, officers, agents or representatives will provide investment advice to the Canadian Employees with respect to an investment in the Shares or Units.
19. Shares issued pursuant to an Employee Offering will be deposited in the Classic Fund through Société Générale (the Depositary), a large French commercial bank subject to French banking legislation. The Depositary carries out orders to purchase, trade and sell securities in the portfolio and takes all necessary action to allow the Classic Fund to exercise the rights relating to the securities held in its portfolio.
20. The Management Company and the Depositary are obliged to act exclusively in the best interests of the unitholders (including Canadian Participants) and are jointly and severally liable to them for any violation of the rules and regulations governing FCPEs, any violation of the rules of the FCPE, or for any self-dealing or negligence.
21. Participation in an Employee Offering is voluntary, and the Canadian Employees will not be induced to participate in an Employee Offering by expectation of employment or continued employment.
22. The total amount invested by a Canadian Employee pursuant to an Employee Offering cannot exceed 25% of his or her gross annual compensation for 2020. The Employer Contribution will not be factored into the maximum amount that a Canadian Employee may contribute.
23. For the 2020 Employee Offering, annual compensation includes the employee's gross base salary, bonus and/or overtime paid between January 1, 2020 and December 31, 2020.
24. The Shares and the Units are not currently listed for trading on any stock exchange in Canada and there is no intention to have the Shares or the Units so listed. As there is no market for Shares in Canada, and none is expected to develop, any first trades of Shares by Canadian Participants will be effected through the facilities of, and in accordance with the rules and regulations of, a foreign stock exchange outside of Canada.
25. Neither the Filer nor its Local Related Entities are in default of securities legislation of any jurisdiction of Canada. The Management Company is not currently in default of securities legislation of any jurisdiction of Canada.
26. The Unit value of the Principal Classic Fund will be calculated and reported to the French AMF on a regular basis.
27. All management charges relating to the Principal Classic Fund will be paid from the assets of the Principal Classic Fund or by the Filer, as provided in the regulations of the Principal Classic Fund.
28. Canadian Employees will receive an information package which will include a summary of the terms of the relevant Employee Offering and a description of Canadian income tax consequences of subscribing for and holding the Units of the Principal Classic Fund and the redemption of such Units at the end of the applicable Lock-Up Period. Canadian Employees will have access to or may request a copy of the Filer's French Document de Reference filed with the French AMF in respect of the Shares and a copy of the rules of the relevant Temporary Classic Fund and the Principal Classic Fund. Canadian Employees will also have access to the continuous disclosure materials relating to the Filer that are furnished to holders of the Shares. Canadian Participants will receive an initial statement of their holdings under the Classic Plan, together with an updated statement, at least once per year.
29. For the 2020 Employee Offering, there are approximately 233 Canadian Employees resident in Canada, with the greatest number resident in Ontario (124), and the remainder in Québec and British Columbia, who represent, in the aggregate, less than 0.01% of the number of employees in the Worldline Group worldwide.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the Offering Relief is granted provided that:
(a) for the 2020 Employee Offering, the prospectus requirement will apply to the first trade in any Units or Shares acquired by Canadian Participants pursuant to this decision unless all of the following conditions are met:
(i) the issuer of the security was a foreign issuer on the distribution date, as such term is defined in section 2.15(1) of NI 45-102 and section 2.8(1) of OSC Rule 72-503 Distributions Outside Canada;
(ii) the issuer of the security
(A) was not a reporting issuer in any jurisdiction of Canada on the distribution date, or
(B) is not a reporting issuer in any jurisdiction of Canada on the date of the trade; and
(iii) the first trade is made:
(A) through an exchange, or a market, outside of Canada, or
(B) to a person or company outside of Canada;
(b) for any Subsequent Employee Offering under this decision completed within five years from the date of this decision, provided that the following conditions are met:
(i) the representations other than those in paragraphs 3, 11, 22 and 28 remain true and correct in respect of that Subsequent Employee Offering, and
(ii) the conditions set out in paragraph (a) apply, with the necessary adaptations, to any such Subsequent Employee Offering; and
(c) in Ontario, the prospectus exemption above, for the first trade in any Units or Shares acquired by Canadian Participants pursuant to this decision, is not available with respect to any transaction or series of transactions that is part of a plan or scheme to avoid the prospectus requirements in connection with a trade to a person or company in Canada.
File No. 2019-16
December 2, 2020
WHEREAS the Ontario Securities Commission (the Commission) held a hearing in writing to consider a motion brought by Staff of the Investment Industry Regulatory Organization of Canada (IIROC) for an order declining to admit evidence proposed to be introduced by Joseph Debus (Debus) at the hearing of his application for hearing and review, which was not included in the record of the original proceeding;
ON READING the written materials filed by IIROC Staff and Staff of the Commission, no responding materials being filed by Debus;
IT IS ORDERED, for reasons to follow, that:
1. Debus shall not be permitted to examine the five individuals named in his witness list filed with the Commission on October 15, 2020, at the hearing and review in this matter; and
2. the proposed documentary evidence set out by Debus in his correspondence dated October 15, 2020 shall not be admitted at the hearing and review in this matter.
File No. 2020-14
December 3, 2020
WHEREAS on December 3, 2020, the Ontario Securities Commission held a hearing by teleconference with respect to an attendance in this proceeding;
ON HEARING the submissions of Staff of the Commission, and the representatives for each of David Cartu and Joshua Cartu, and no one appearing for Jonathan Cartu, although properly served;
IT IS ORDERED THAT an attendance in this proceeding is scheduled for January 7, 2021 at 10:00 a.m., by teleconference, or on such other date and time as may be agreed to by the parties and set by the Office of the Secretary.
File No. 2020-33
December 3, 2020
WHEREAS on December 3, 2020, the Ontario Securities Commission held a hearing by teleconference;
ON HEARING the submissions of the representatives for Staff of the Commission (Staff), for Trevor Rosborough and for Taylor Carr, and of Dmitri Graham appearing on his own behalf;
IT IS ORDERED THAT:
1. Any motion regarding Staff's disclosure or seeking disclosure of additional documents shall be served and filed by no later than March 23, 2021;
2. Staff shall serve and file a witness list and serve a summary of each witness's anticipated evidence on each respondent, and indicate any intention to call an expert witness, including the expert's name and the issues on which the expert will give evidence, by no later than March 26, 2021;
3. An attendance in this proceeding is scheduled for April 1, 2021, at 9:00 a.m., by teleconference, or on such other date and time as may be agreed to by the parties and set by the Office of the Secretary.
National Policy 11-206 Process for Cease to be a Reporting Issuer Applications -- The issuer ceased to be a reporting issuer under securities legislation.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 1(10)(a)(ii).
November 30, 2020
The principal regulator in the Jurisdiction has received an application from the Filer for an order under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) that the Filer has ceased to be a reporting issuer in all jurisdictions of Canada in which it is a reporting issuer (the Order Sought).
Under the Process for Cease to be a Reporting Issuer Applications (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that subsection 4C.5(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia and Alberta.
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this order, unless otherwise defined.
This order is based on the following facts represented by the Filer:
1. the Filer is not an OTC reporting issuer under Multilateral Instrument 51-105 Issuers Quoted in the U.S. Over-the-Counter Markets;
2. the outstanding securities of the Filer, including debt securities, are beneficially owned, directly or indirectly, by fewer than 15 securityholders in each of the jurisdictions of Canada and fewer than 51 securityholders in total worldwide;
3. no securities of the Filer, including debt securities, are traded in Canada or another country on a marketplace as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported;
4. the Filer is applying for an order that the Filer has ceased to be a reporting issuer in all of the jurisdictions of Canada in which it is a reporting issuer; and
5. the Filer is not in default of securities legislation in any jurisdiction.
The principal regulator is satisfied that the order meets the test set out in the Legislation for the principal regulator to make the order.
The decision of the principal regulator under the Legislation is that the Order Sought is granted.
File No. 2018-70
December 7, 2020
WHEREAS on December 7, 2020, the Ontario Securities Commission (the Commission) held a hearing by videoconference;
ON HEARING the submissions of the representatives for Staff of the Commission (Staff) and for each of Majd Kitmitto, Steven Vannatta, Christopher Candusso and Claudio Candusso, Donald Alexander (Sandy) Goss, John Fielding and Frank Fakhry (the Respondents);
IT IS ORDERED THAT:
1. the hearing dates of December 9, 10, and 11, 2020 are vacated;
2. Staff shall serve and file written submissions regarding the hearing on the merits on or before 4:30 p.m. on January 29, 2021;
3. the Respondents shall serve and file written submissions regarding the hearing on the merits, if any, on or before 4:30 p.m. on February 12, 2021;
4. Closing submissions on the merits shall be heard by video conference on February 24, 25, and 26, 2021 commencing at 10:00 a.m, or such other dates and times as provided by the Office of the Secretary and agreed to by the parties.
Pivot Technology Solutions, Inc. -- s. 1(6) of the OBCA
Applicant deemed to have ceased to be offering securities to the public under the Business Corporations Act (Ontario).
Business Corporations Act, R.S.O. 1990, c. B. 16 as am., s. 1(6).
UPON the application of the Applicant to the Ontario Securities Commission (the Commission) for an order pursuant to subsection 1(6) of the OBCA to be deemed to have ceased to be offering its securities to the public;
AND UPON the Applicant representing to the Commission that:
1. The Applicant is an "offering corporation" as defined in subsection 1(1) of the OBCA.
2. The Applicant has no intention to seek public financing by way of an offering of securities.
3. On November 10, 2020, the Applicant was granted an order (the Reporting Issuer Order) pursuant to subclause 1(10)(a)(ii) of the Securities Act (Ontario) that it is not a reporting issuer in Ontario and is not a reporting issuer or the equivalent in any other jurisdiction of Canada in accordance with the simplified procedure set out in National Policy 11-206 Process for Cease to be a Reporting Issuer Applications. The representations set out in the Reporting Issuer Order continue to be true.
AND UPON the Commission being satisfied that to do so would not be prejudicial to the public interest;
IT IS HEREBY ORDERED by the Commission pursuant to subsection 1(6) of the OBCA, that the Applicant is deemed to have ceased to be offering its securities to the public.
DATED at Toronto, Ontario this 7th day of December 2020.
"Craig Hayman" |
"Cecilia Williams" |
Commissioner |
Commissioner |
Ontario Securities Commission |
Ontario Securities Commission |
Royal Bank of Canada -- s. 38 of the CFA and s. 6.1 of Rule 91-502
Application for a ruling pursuant to section 38 of the Commodity Futures Act granting relief from the dealer registration requirement set out in section 22 of the CFA and the trading restrictions in section 33 of the CFA in connection with certain trades in Exchange-Traded Futures on Non-Canadian Exchanges where the Applicant is acting as principal or agent in such trades to, from or on behalf of a Canadian affiliate -- relief subject to sunset clause.
Application to the Director for an exemption, pursuant to section 6.1 of OSC Rule 91-502 Trades in Recognized Options (Rule 91-502), exempting the Applicant and its Representatives from the proficiency requirements in section 3.1 of Rule 91-502 for trades in commodity futures options on exchanges located outside Canada.
Commodity Futures Act, R.S.O. 1990, c. C.20 as am., ss. 22 and 38.
OSC Rule 91-502 Trades in Recognized Options, ss. 3.1 and 6.1.
UPON the application (the Application) of Royal Bank of Canada (the Applicant) to the Ontario Securities Commission (the Commission) for:
(a) a ruling of the Commission, pursuant to section 38 of the CFA, that the Applicant is not subject to the dealer registration requirements in the CFA (as defined below) or the trading restrictions in the CFA (as defined below) in connection with trades in Exchange-Traded Futures (as defined below) on exchanges located outside of Canada (Non-Canadian Exchanges) where the Applicant is acting as principal or agent in such trades to, from or on behalf of RBCDS (as defined below) and where RBCDS is entering into such trade as principal and for its own account only;
(b) a ruling of the Commission, pursuant to section 38 of the CFA, that RBCDS is not subject to the trading restrictions in the CFA in connection with trades in Exchange-Traded Futures on Non-Canadian Exchanges, where the Applicant acts in respect of the trades in Exchange-Traded Futures on behalf of RBCDS pursuant to the above ruling; and
(c) a decision of the Director, pursuant to section 6.1 of Rule 91-502, exempting the Applicant and its salespersons, directors, officers and employees (the Representatives) from section 3.1 of Rule 91-502 in connection with trades in Exchange-Traded Futures (collectively, the Requested Relief);
AND WHEREAS for the purposes of this ruling and exemption (collectively, the Decision):
(i) "CFTC" means the U.S. Commodity Futures Trading Commission;
"dealer registration requirements in the CFA" means the provisions of section 22 of the CFA that prohibit a person or company from trading in Exchange-Traded Futures unless the person or company satisfies the applicable provisions of section 22 of the CFA;
"Exchange-Traded Futures" means a commodity futures contract or a commodity futures option that trades on one or more organized exchanges located outside of Canada and that is cleared through one or more clearing corporations located outside of Canada;
"FCA" means the Financial Conduct Authority in the U.K.;
"NFA" means the National Futures Association in the U.S.;
"PRA" means the Prudential Regulation Authority in the U.K.;
"RBCDS" means RBC Dominion Securities Inc.;
"RBCEL" means RBC Europe Limited;
"SEC" means the U.S. Securities and Exchange Commission;
"specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information;
"trading restrictions in the CFA" means the provisions of section 33 of the CFA that prohibit a person or company from trading in Exchange-Traded Futures unless the person or company satisfies the applicable provisions of section 33 of the CFA;
"U.K." means the United Kingdom;
"U.S." means the United States of America; and
(ii) terms used in this Decision that are defined in the OSA, and not otherwise defined in the Decision or in the CFA, shall have the same meaning as in the OSA, unless the context otherwise requires;
AND UPON considering the Application and the recommendation of staff of the Commission;
AND UPON the Applicant having represented to the Commission and the Director as follows:
1. The Applicant is a Schedule I bank under the Bank Act (Canada). The principal executive offices of the Applicant are located at Royal Bank Plaza, 200 Bay Street, Toronto, Ontario, M5J 2W7. The Applicant's head office is located at 1 Place Ville Marie, Montreal, Québec, H3B 4R8.
2. The Applicant is not registered in any capacity under the CFA or the OSA and relies on the exemption from registration for financial institutions under section 35.1 of the OSA. However, there is no corresponding exemption from registration for financial institutions in the CFA.
3. The Applicant is authorized by the FCA to carry on a range of regulated activities within the U.K. and is subject to regulation by the FCA and PRA. The Applicant is currently licensed in the U.K. to deal with eligible counterparties and professional clients with respect to its permitted activities. The Applicant is currently authorized to carry on certain regulated activities in the U.K. in relation to certain specified investments, including the following: (a) advising on investments (except on pension transfers and pension opt outs) in relation to futures, options and over-the-counter derivatives; (b) advising on P2P agreements; (c) arranging (bringing about) deals in investments in relation to futures, options and over-the-counter derivatives; (d) arranging safeguarding and administration of assets in relation to futures, options and over-the-counter derivatives; (e) dealing in investments in relation to futures, options and over-the-counter derivatives as agent and principal; (f) making arrangements with a view to transactions in investments in relation to futures, options and over-the-counter derivatives; and (g) safeguarding and administration of assets (without arranging) in relation to futures, options and over-the-counter derivatives. As is the case with all firms authorized in the U.K., the Applicant's current U.K. regulatory status remains subject to variation and the possible imposition of regulatory limitations or requirements and is described as at the date of the Application.
4. The Applicant is an approved member of the NFA (NFA ID: 0361733) and is provisionally registered as a swap dealer with the CFTC.
5. The Applicant is not in default of securities legislation in any jurisdiction in Canada or under the CFA, subject to the matter to which this Decision relates. The Applicant is in compliance in all material respects with U.K. and U.S. securities and commodity futures laws, as applicable.
6. RBCDS, an affiliate of the Applicant, is registered as a dealer in the category of investment dealer in each of the provinces and territories of Canada, and in the category of futures commission merchant in Ontario and derivatives dealer in Quebec. RBCDS is also a dealer member of the Investment Industry Regulatory Organization of Canada (IIROC) and has its head office in Ontario. RBCDS is an indirect wholly-owned subsidiary of the Applicant.
7. The Applicant is a "market participant" as defined under subsection 1(1) of the CFA. As a market participant, among other requirements, the Applicant is required to comply with the record keeping and provision of information provisions under section 14 of the CFA, which include the requirement to keep such books, records and other documents: (a) as are necessary for the proper recording of business transactions and financial affairs, and the transactions executed on behalf of others, (b) as may otherwise be required under Ontario commodity futures law, and (c) as may reasonably be required to demonstrate compliance with Ontario commodity futures laws, and to deliver such records to the Commission if required.
8. Section 22 of the CFA prohibits a person or company from trading in Exchange-Traded Futures unless the person or company satisfies the applicable provisions in section 22 of the CFA.
9. Pursuant to its authorizations and approvals, the Applicant is authorized to act as a swaps dealer in the U.S. and to trade in securities and Exchange-Traded Futures in the U.K. Rules of the CFTC, NFA, FCA and PRA require the Applicant to maintain adequate capital levels, make and keep specified types of records relating to customer accounts and transactions, and comply with other forms of customer protection rules, including rules respecting: know-your-customer obligations, account-opening requirements, anti-money laundering checks, credit checks, delivery of confirmation statements, clearing deposits and initial and maintenance margins. These rules require the Applicant to treat RBCDS materially the same as the Applicant's U.K. and U.S. customers with respect to transactions made on exchanges in the U.K. In order to protect customers in the event of insolvency or financial instability of the Applicant, the Applicant is required to ensure that customer securities and monies be separately accounted for and segregated from the securities and monies of the Applicant. The Applicant is subject to the FCA's Client Asset Rules, which impose a general duty to segregate client assets and require the Applicant to place client money exclusively with counterparties selected and approved in compliance with the criteria set out in the FCA's Client Asset Rules.
10. RBCDS is a regulated entity in Canada and an affiliate of the Applicant and thus does not require the protections of the CFA.
11. The Applicant's Exchange-Traded Futures trading and clearing operations are currently conducted by its affiliate, RBCEL, a company incorporated under the laws of England and Wales with its head office located in London in the U.K. RBCEL is an indirect wholly-owned subsidiary of the Applicant. The primary purpose of requesting that the Applicant be permitted to trade Exchange-Traded Futures with RBCDS is because the Applicant intends to reorganize its Exchange-Traded Futures trading and clearing operations by moving those operations from RBCEL to its London-based foreign bank branch, Royal Bank of Canada, London Branch (RBC London Branch).
12. The Applicant will not maintain an office, sales force or physical place of business in Ontario with respect to the Exchange Traded Futures trading and clearing operations of RBC London Branch.
13. The Exchange-Traded Futures to be traded by RBCDS will include, but will not be limited to, Exchange-Traded Futures for equity index and single name stocks, interest rate, foreign exchange, bond, energy, agricultural and other commodity products.
14. The trading restrictions in the CFA apply unless, among other things, an Exchange-Traded Future is traded on a recognized or registered commodity futures exchange and the form of the contract is approved by the Director. To date, no Non-Canadian Exchanges have been recognized or registered under the CFA.
15. If the Applicant was registered under the CFA as a "futures commission merchant", it could rely upon certain exemptions from the trading restrictions in the CFA to effect trades in Exchange-Traded Futures to be entered into on certain Non-Canadian Exchanges.
16. Section 3.1 of Rule 91-502 provides that no person shall trade as agent in, or give advice in respect of, a recognized option, as defined in section 1.1 of Rule 91-502, unless he or she has successfully completed the Canadian Options Course (which has been replaced by the Derivatives Fundamentals Course and the Options Licensing Course).
17. All Representatives of the Applicant who trade futures and options in the U.K. need to have attained and maintain a level of skills, knowledge and expertise to discharge their responsibilities in accordance with the FCA's Training and Competence Handbook.
18. Representatives who trade futures and options will have passed examinations in U.K. Financial Regulation and Securities and/or Derivatives administered by the Chartered Institute for Securities & Investment (CISI) under its Capital Markets Programme.
19. Under the U.K. Senior Managers & Certification Regime, these Representatives who trade futures and options will be classified by the Applicant as certified individuals. Although these Representatives will not be subject to direct approval by the FCA or the PRA, the Applicant must take reasonable care to ensure that a Representative does not perform a certification function without having first been certified as fit and proper to do so. This certification must be renewed on an annual basis.
AND UPON the Commission and Director being satisfied that it would not be prejudicial to the public interest to grant the exemptions requested;
IT IS RULED, pursuant to section 38 of the CFA, that the Applicant is not subject to the dealer registration requirements set out in the CFA or the trading restrictions in the CFA in connection with trades in Exchange-Traded Futures where the Applicant is acting as principal or agent in such trades to, from or on behalf of RBCDS provided that:
(a) at the time trading activity is engaged, the Applicant:
(i) maintains RBC London Branch's principal place of business in the U.K.;
(ii) is authorised and regulated by the FCA;
(iii) is approved by the NFA as a member firm; and
(iv) engages in the business of an authorized firm in Exchange-Traded Futures in the U.K.;
(b) the Applicant has submitted to the Commission a completed Submission to Jurisdiction and Appointment of Agent for Service in the form attached as Appendix "A" hereto;
(c) the Applicant notifies the Commission of any regulatory action after the date of this Decision in respect of the Applicant, or any predecessors or specified affiliates of the Applicant, by completing and filing with the Commission Appendix "B" hereto within ten days of the commencement of such action; provided that the Applicant may also satisfy this condition by filing with the Commission within ten days of the date of this Decision a notice making reference to and incorporating by reference the disclosure made relating to the Applicant pursuant to U.S. federal securities laws, and any updates to such disclosure that may be made from time to time, and by providing a copy, in a manner reasonably acceptable to the Director, of any Form BD "Regulatory Action Disclosure Reporting Page" relating to the Applicant;
(d) if the Applicant does not rely on the international dealer exemption (IDE) in section 8.18 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations, by December 31st of each year, the Applicant pays a participation fee based on its specified Ontario revenues for its previous financial year in compliance with the requirements of Part 3 and section 6.4 of OSC Rule 13-502 Fees, as if the Applicant relied on the IDE;
(e) the Applicant only executes and clears trades in Exchange-Traded Futures pursuant to this Decision for RBCDS;
(f) by December 1st of each year, the Applicant notifies the Commission of its continued reliance on the exemption from the dealer registration requirement granted pursuant to this Decision by filing Form 13-502F4 Capital Markets Participation Fee Calculation; and
(g) this Decision will terminate on the earliest of:
(i) the expiry of any such transition period as may be provided by law, after the effective date of the repeal of the CFA;
(ii) six months, or such other transition period as may be provided by law, after the coming into force of any amendment to Ontario commodity futures law (as defined in the CFA) or Ontario securities law (as defined in the OSA) that affects the dealer registration requirements in the CFA or the trading restrictions in the CFA; and
(iii) five years after the date of this Decision.
AND IT IS FURTHER RULED, pursuant to section 38 of the CFA, that RBCDS is not subject to the trading restrictions in the CFA in connection with trades in Exchange-Traded Futures on Non-Canadian Exchanges where the Applicant acts in connection with trades in Exchange-Traded Futures on behalf of RBCDS pursuant to the above ruling.
Date: December 1, 2020
IT IS THE DECISION of the Director, pursuant to section 6.1 of Rule 91-502, that section 3.1 of Rule 91-502 does not apply to the Applicant or its Representatives in respect of trades in Exchange-Traded Futures, provided that:
(a) the Applicant and its Representatives maintain their respective authorizations and approvals with the FCA and the NFA which permit them to trade commodity futures options in the U.K., and remain subject to regulation by the FCA; and
(b) this Decision will terminate on the earliest of:
(i) the expiry of any transition period as may be provided by law, after the effective date of the repeal of the CFA
(ii) six months, or such other transition period as may be provided by law, after the coming into force of any amendment to Ontario commodity futures law (as defined in the CFA) or Ontario securities law (as defined in the OSA) that affects the dealer registration requirements in the CFA or the trading restrictions in the CFA; and
(iii) five years after the date of this Decision.
Date: November 27, 2020
1. Name of person or company ("International Firm"):
2. If the International Firm was previously assigned an NRD number as a registered firm or an unregistered exempt international firm, provide the NRD number of the firm:
3. Jurisdiction of incorporation of the International Firm:
4. Head office address of the International Firm:
5. The name, e-mail address, phone number and fax number of the International Firm's individual(s) responsible for the supervisory procedure of the International Firm, its chief compliance officer, or equivalent.
Name:
E-mail address:
Phone:
Fax:
6. The International Firm is relying on an exemption order under section 38 or section 80 of the Commodity Futures Act (Ontario) that is similar to the following exemption in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (the "Relief Order"):
[ ] Section 8.18 [international dealer]
[ ] Section 8.26 [international adviser]
[ ] Other [specify]:
7. Name of agent for service of process (the "Agent for Service"):
8. Address for service of process on the Agent for Service:
9. The International Firm designates and appoints the Agent for Service at the address stated above as its agent upon whom may be served a notice, pleading, subpoena, summons or other process in any action, investigation or administrative, criminal, quasi-criminal or other proceeding (a "Proceeding") arising out of or relating to or concerning the International Firm's activities in the local jurisdiction and irrevocably waives any right to raise as a defence in any such proceeding any alleged lack of jurisdiction to bring such Proceeding.
10. The International Firm irrevocably and unconditionally submits to the non-exclusive jurisdiction of the judicial, quasi-judicial and administrative tribunals of the local jurisdiction in any Proceeding arising out of or related to or concerning the International Firm's activities in the local jurisdiction.
11. Until 6 years after the International Firm ceases to rely on the Relief Order, the International Firm must submit to the regulator
a. a new Submission to Jurisdiction and Appointment of Agent for Service in this form no later than the 30th day before the date this Submission to Jurisdiction and Appointment of Agent for Service is terminated;
b. an amended Submission to Jurisdiction and Appointment of Agent for Service no later than the 30th day before any change in the name or above address of the Agent for Service; and
c. a notice detailing a change to any information submitted in this form, other than the name or above address of the Agent for Service, no later than the 30th day after the change.
12. This Submission to Jurisdiction and Appointment of Agent for Service is governed by and construed in accordance with the laws of the local jurisdiction.
Dated: ____________________
______________________________
(Signature of the International Firm or authorized signatory)
______________________________
(Name of signatory)
______________________________
(Title of signatory)
The undersigned accepts the appointment as Agent for Service of ____________________________________
[Insert name of International Firm] under the terms and conditions of the foregoing Submission to Jurisdiction and Appointment of Agent for Service.
Dated: ____________________
______________________________
(Signature of the Agent for Service or authorized signatory)
______________________________
(Name of signatory)
______________________________
(Title of signatory)
This form, and notice of a change to any information submitted in this form, is to be submitted through the Ontario Securities Commission's Electronic Filing Portal:
https://www.osc.gov.on.ca/filings
1. Has the firm, or any predecessors or specified affiliates{2} of the firm entered into a settlement agreement with any financial services regulator, securities or derivatives exchange, SRO or similar agreement with any financial services regulator, securities or derivatives exchange, SRO or similar organization?
Yes _____ |
No _____ |
If yes, provide the following information for each settlement agreement:
- - - - - - - - - - - - - - - - - - - -
Name of entity
Regulator/organization
Date of settlement (yyyy/mm/dd)
Details of settlement
Jurisdiction
- - - - - - - - - - - - - - - - - - - -
2. Has any financial services regulator, securities or derivatives exchange, SRO or similar organization:
Yes
No
(a) Determined that the firm, or any predecessors or specified affiliates of the firm violated any securities regulations or any rules of a securities or derivatives exchange, SRO or similar organization?
_____
_____
(b) Determined that the firm, or any predecessors or specified affiliates of the firm made a false statement or omission?
_____
_____
(c) Issued a warning or requested an undertaking by the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(d) Suspended or terminated any registration, licensing or membership of the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(e) Imposed terms or conditions on any registration or membership of the firm, or predecessors or specified affiliates of the firm?
_____
_____
(f) Conducted a proceeding or investigation involving the firm, or any predecessors or specified affiliates of the firm?
_____
_____
(g) Issued an order (other than an exemption order) or a sanction to the firm, or any predecessors or specified affiliates of the firm for securities or derivatives-related activity (e.g. cease trade order)?
_____
_____
If yes, provide the following information for each action:
Name of Entity
Type of Action
Regulator/organization
Date of action (yyyy/mm/dd)
Reason for action
Jurisdiction
3. Is the firm aware of any ongoing investigation of which the firm or any of its specified affiliate is the subject?
Yes _____ |
No _____ |
If yes, provide the following information for each investigation:
- - - - - - - - - - - - - - - - - - - -
Name of entity
Reason or purpose of investigation
Regulator/organization
Date investigation commenced (yyyy/mm/dd)
Jurisdiction
- - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
Name of firm
Name of firm's authorized signing officer or partner
Title of firm's authorized signing officer or partner
Signature
Date (yyyy/mm/dd)
- - - - - - - - - - - - - - - - - - - -
Witness
The witness must be a lawyer, notary public or commissioner of oaths.
- - - - - - - - - - - - - - - - - - - -
Name of witness
Title of witness
Signature
Date (yyyy/mm/dd)
- - - - - - - - - - - - - - - - - - - -
This form is to be submitted through the Ontario Securities Commission's Electronic Filing Portal:
https://www.osc.gov.on.ca/filings
{1} Terms defined for the purposes of Form 33-506F6 Firm Registration to Ontario Securities Commission Rule 33-506 (Commodity Futures Act) Registration Information have the same meaning if used in this Appendix except that any reference to "firm" means the person or company relying on relief from the requirement to register as an adviser or dealer under the Commodity Futures Act (Ontario).
{2} In this Appendix, the term "specified affiliate" has the meaning ascribed to that term in Form 33-109F6 to National Instrument 33-109 Registration Information.
Temporary, Permanent & Rescinding Issuer Cease Trading Orders
Company Name |
Date of Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/Revoke |
|
||||
THERE IS NOTHING TO REPORT THIS WEEK. |
||||
Company Name |
Date of Order |
Date of Revocation |
|
||
ACGT DNA Technologies Corporation |
September 18, 2020 |
December 7, 2020 |
|
||
Primo Nutraceuticals Inc. |
December 4, 2020 |
__________ |
|
||
Victory Capital Corp. |
December 4, 2020 |
__________ |
Temporary, Permanent & Rescinding Management Cease Trading Orders
Company Name |
Date of Order |
Date of Lapse |
|
||
Greenbank Capital Inc. |
December 1, 2020 |
__________ |
|
||
Nutritional High International Inc. |
December 1, 2020 |
__________ |
Outstanding Management & Insider Cease Trading Orders
Company Name |
Date of Order or Temporary Order |
Date of Hearing |
Date of Permanent Order |
Date of Lapse/ Expire |
Date of Issuer Temporary Order |
|
|||||
Performance Sports Group Ltd. |
19 October 2016 |
31 October 2016 |
31 October 2016 |
__________ |
__________ |
Company Name |
Date of Order |
Date of Lapse |
|
||
Agrios Global Holdings Ltd. |
September 17, 2020 |
__________ |
|
||
Greenbank Capital Inc. |
December 1, 2020 |
__________ |
|
||
Nutritional High International Inc. |
December 1, 2020 |
__________ |
Amendments to National Instrument 81-105 Mutual Fund Sales Practices
1. National Instrument 81-105 Mutual Fund Sales Practices is amended by this Instrument.
2. Section 1.1 is amended by adding the following definition:
"suitability determination" means a determination or other assessment required to be made under any of the following:
(a) section 13.3 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;
(b) the rules of the Investment Industry Regulatory Organization of Canada named in Appendix G of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations that are in effect, as amended from time to time, and that correspond to section 13.3 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations;
(c) a rule or policy of the Mutual Fund Dealers Association of Canada named in Appendix H of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations that are in effect, as amended from time to time, and that correspond to section 13.3 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations..
3. Section 2.2 is amended by adding the following subsection:
(3) Despite subsection (2), a participating dealer may not solicit or accept a payment of a trailing commission from a member of the organization of the mutual fund, in connection with securities of the mutual fund held in an account of a client of the participating dealer, if the participating dealer was not required to make a suitability determination in respect of the client in connection with those securities..
4. Section 3.2 is amended
(a) in subsection (1) by deleting "in money that is based upon the aggregate value of securities of the mutual fund held in accounts of clients of the participating dealer as at a particular time or during a particular period,",
(b) in paragraph 3.2(1)(a) by replacing "the trade" with "a trade in securities of the mutual fund by a client of the participating dealer",
(c) by adding the following paragraph to subsection (1):
(a.1) the amount of the trailing commission is based on the value of securities of the mutual fund held in an account of the client as at a particular time or during a particular period;, and
(d) by adding the following subsection:
(4) Despite subsection (1), no member of the organization of a mutual fund may pay a trailing commission to a participating dealer in connection with securities of the mutual fund held in an account of a client of the participating dealer if the member knows or ought reasonably to know that the participating dealer was not required to make a suitability determination in respect of the client in connection with those securities..
5.
(1) The provisions of this Instrument listed in column 1 of the following table come into force on the date set out in column 2 of the table:
Column 1 Provision of this Instrument
Column 2 Date
1, 2
December 31, 2020
3, 4
June 1, 2022
(2) In Saskatchewan, despite subsection (1), if these regulations are filed with the Registrar of Regulations after the effective dates indicated in column 2, these regulations come into force on the day on which they are filed with the Registrar of Regulations.
CHANGES TO COMPANION POLICY 81-105CP MUTUAL FUND SALES PRACTICES
1. Companion Policy 81-105CP Mutual Fund Sales Practices is changed by this Document.
2. Part 5 of the Companion Policy is changed by adding the following section:
5.4 Restriction on payment and acceptance of trailing commissions where no suitability determination made -- Subsection 3.2(4) of the Instrument prohibits members of the organization of a mutual fund from paying trailing commissions to participating dealers who were not required to make a suitability determination for a client in connection with securities of the mutual fund held in an account of the client. Correspondingly, subsection 2.2(3) of the Instrument prohibits participating dealers from soliciting or accepting payment of trailing commissions from a member of the organization of the mutual fund when they were not required to make a suitability determination for a client in connection with securities of a mutual fund held in an account of the client. Consequently, participating dealers who are not subject to the obligation to make a suitability determination under National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations or corresponding SRO rules may not solicit or accept such payments. In addition, members of the organization of a mutual fund should make available to participating dealers who are not required to make a suitability determination in respect of a client, a class or series of securities of a mutual fund that does not pay trailing commissions, which the dealer should offer to the client.
We remind members of the organization of a mutual fund and participating dealers of their duty under section 11.1 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations to establish, maintain and apply policies and procedures that establish a system of controls and supervision sufficient to provide reasonable assurance that the firm and each individual acting on its behalf complies with securities legislation, including the prohibitions in subsections 2.2(3) and 3.2(4).
We expect members of the organization of a mutual fund and participating dealers to be diligent in complying with subsections 2.2(3) and 3.2(4). Participating dealers should be operating in a manner that enables members of the organization of a mutual fund to ascertain whether a suitability determination was required to be made in connection with the securities of the mutual fund held in an account of the dealers' clients and members of the organization of a mutual fund should be aware of the information that a participating dealer makes available to them regarding whether a suitability determination was required to be made..
3. These changes come into effect on June 1, 2022.
AMENDMENTS TO NATIONAL INSTRUMENT 41-101 GENERAL PROSPECTUS REQUIREMENTS
1. National Instrument 41-101 General Prospectus Requirements is amended by this Instrument.
2. Part 3C is amended by adding the following section:
3C.2.1 Delivery of ETF facts documents for no-trailing-commission ETF switches
(1) In this section,
"no-trailing-commission ETF switch" means, in respect of a client of a participating dealer, a purchase of securities of a class or series of an ETF in respect of which an investment fund manager does not pay the participating dealer a trailing commission immediately following a redemption of securities of another class or series of the ETF in respect of which the investment fund manager pays the participating dealer a trailing commission, if all of the following apply:
(a) the aggregate value of the securities purchased is the same as the aggregate value of the securities redeemed;
(b) there are no material differences between the class or series of securities purchased and the class or series of securities redeemed other than the rate of management fees charged in respect of the two classes or series;
(c) the participating dealer, who executed the purchase and redemption of the securities, was not required by securities legislation or the rules of an SRO applicable to the dealer to make a suitability determination in respect of the client in connection with those securities;
"suitability determination" has the same meaning as in section 1.1 of National Instrument 81-105 Mutual Fund Sales Practices.
(2) Despite subsection 3C.2(2), a dealer is not required to deliver or send to the purchaser of a security of an ETF the most recently filed ETF facts document for the applicable class or series of securities of the ETF in connection with a no-trailing-commission ETF switch..
3.
(1) This Instrument comes into force on December 31, 2020.
(2) In Saskatchewan, despite subsection (1), if these regulations are filed with the Registrar of Regulations after December 31, 2020, these regulations come into force on the day on which they are filed with the Registrar of Regulations.
AMENDMENTS TO NATIONAL INSTRUMENT 81-101 MUTUAL FUND PROSPECTUS DISCLOSURE
1. National Instrument 81-101 Mutual Fund Prospectus Disclosure is amended by this Instrument.
2. Section 3.2.01 is amended
(a) by deleting "or" in subparagraph (4)(a)(ii),
(b) by replacing "." with ", or" in paragraph (4)(b), and
(c) by adding the following after paragraph (4)(b):
(c) section 3.2.04.1 applies..
3. The following section is added:
3.2.04.1 Delivery of Fund Facts Documents for No-Trailing-Commission Switches
(1) In this section,
"no-trailing-commission switch" means, in respect of a client of a participating dealer, a purchase of securities of a class or series of a mutual fund in respect of which an investment fund manager does not pay the participating dealer a trailing commission immediately following a redemption of securities of another class or series of the mutual fund in respect of which the investment fund manager pays the participating dealer a trailing commission, if all of the following apply:
(a) the aggregate value of the securities purchased is the same as the aggregate value of the securities redeemed;
(b) there are no material differences between the class or series of securities purchased and the class or series of securities redeemed other than the rate of management fees charged in respect of the two classes or series;
(c) the participating dealer, who executed the purchase and redemption of the securities, was not required by securities legislation or the rules of an SRO applicable to the dealer to make a suitability determination in respect of the client in connection with those securities;
"suitability determination" has the same meaning as in section 1.1 of National Instrument 81-105 Mutual Fund Sales Practices.
(2) Despite subsection 3.2.01(1), a dealer is not required to deliver to the purchaser of a security of a mutual fund the most recently filed fund facts document for the applicable class or series of securities of the mutual fund in connection with a no-trailing-commission switch..
4.
(1) This Instrument comes into force on December 31, 2020.
(2) In Saskatchewan, despite subsection (1), if these regulations are filed with the Registrar of Regulations after December 31, 2020, these regulations come into force on the day on which they are filed with the Registrar of Regulations.
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3135996
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3086427
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3148097
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3023452
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #2974074
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3047227
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3053465
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3042622
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3146912
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3148234
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3145533
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147576
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147574
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147572
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147575
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147571
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3145712
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147134
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147745
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3146671
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3148573
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3146961
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147432
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147335
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3146660
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147452
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147502
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147012
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3144959
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3090191
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3142659
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3136707
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Issuer Name:
Type and Date:
Offering Price and Description:
Underwriter(s) or Distributor(s):
Promoter(s):
Project #3147452
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Type |
Company |
Category of Registration |
Effective Date |
|
|||
New Registration |
GloRes Securities Inc. |
Exempt Market Dealer |
December 2, 2020 |
|
|||
Name Change |
From: Richardson GMP Limited / Richardson GMP Limitée |
Investment Dealer |
November 10, 2020 |
|
|||
To: Richardson Wealth Limited / Patrimoine Richardson Limitée |
|||
|
|||
New Registration |
Sentinel Financial Management Corp. |
Mutual Fund Dealer |
December 3, 2020 |
|
|||
Change in Registration Category |
Regulus Capital Management Inc. |
From: Portfolio Manager |
December 4, 2020 |
|
|||
To: Investment Fund Manager and Portfolio Manager |
|||
|
|||
Voluntary Surrender |
Return on Innovation Advisors Ltd. |
Investment Fund Manager, Exempt Market Dealer and Portfolio Manager |
December 4, 2020 |
|
|||
Consent to Suspension (Pending Surrender) |
Pillarfour Securities Inc. |
Exempt Market Dealer |
December 1, 2020 |
|
|||
Consent to Suspension (Pending Surrender) |
GMO Canada LLC |
Exempt Market Dealer |
December 1, 2020 |
|
|||
Change in Registration Category |
Highstreet Asset Management Inc. |
From: Exempt Market Dealer, Portfolio Manager, Investment Fund Manager and Commodity Trading Manager |
December 7, 2020 |
|
|||
To: Exempt Market Dealer, Portfolio Manager and Commodity Trading Manager |
|||
|
|||
Consent to Suspension (Pending Surrender) |
Silver Maple Ventures Inc. |
Exempt Market Dealer |
December 1, 2020 |
Investment Industry Regulatory Organization of Canada (IIROC) -- Amendments to Dealer Member Rules to Early Adopt Certain IIROC Rules -- Notice of Commission Approval
The Ontario Securities Commission has approved IIROC's proposed amendments to its Dealer Member Rules to align with their parallel provisions in the IIROC Dealer Member Plain Language Rule Book (IIROC Rules) that were approved by the CSA in mid-2019{1} (the Amendments).
IIROC published the proposed amendments for comment on July 23, 2020 and two comment letters were received. A summary of the public comments and IIROC's responses, as well as the IIROC Notice including the Amendments, can be found at http://www.osc.gov.on.ca.
The Amendments will be effective on January 1, 2021 or as otherwise determined by IIROC.
In addition, the Alberta Securities Commission, the Autorité des marchés financiers, the British Columbia Securities Commission, the Financial and Consumer Affairs Authority of Saskatchewan, the Financial and Consumer Services Commission of New Brunswick, the Manitoba Securities Commission, the Northwest Territories Office of the Superintendent of Securities, the Nova Scotia Securities Commission, the Nunavut Securities Office, the Office of the Superintendent of Securities, Service Newfoundland and Labrador, the Office of the Yukon Superintendent of Securities, and the Prince Edward Island Office of the Superintendent of Securities have approved or not objected to the Amendments.
{1} See OSC Notice of Commission Approval published on August 22, 2019 at https://www.osc.gov.on.ca/en/Marketplaces_iiroc_20190822_dealer-member-plain-language-rule-book.htm
TSX Inc. and TSX Venture Exchange Inc. -- Notice of Proposed Amendments and Request for Comments
TSX Inc. ("TSX") is publishing this Notice of Proposed Amendments and Request for Comments in accordance with the "Process for the Review and Approval of Rules and the Information Contained in Form 21-101F1 and the Exhibits Thereto".
TSX Venture Exchange Inc. ("TSXV", and together with TSX, the "Exchanges") is publishing this Notice of Proposed Amendments and Request for Comments.
Market participants are invited to provide comments on the Proposed Amendments. Comments should be in writing and delivered by January 29, 2021 to:
Denno ChenDirector, Regulatory AffairsTMX Group100 Adelaide Street West, Suite 300Toronto, Ontario M5H 1S3Email: tsxrequestforcomments@tsx.com
A copy should also be provided to:
Market Regulation BranchOntario Securities Commission20 Queen Street WestToronto, Ontario M5H 3S8Email: marketregulation@osc.gov.on.ca
Comments will be made publicly available unless confidentiality is requested. Upon completion of the review by staff at the Ontario Securities Commission ("OSC"), British Columbia Securities Commission (the "BCSC") and Alberta Securities Commissions (the "ASC"), and in the absence of any regulatory concerns, a notice will be published to confirm the approval by each of the OSC, BCSC and ASC.
The Exchanges strive to maintain and operate resilient trading systems. However, technology may fail as a result of unforeseen circumstances. The Exchanges have in place detailed Incident Management Guidelines (the "Incident Guidelines") that represent the key operational protocols in the event of a critical incident impacting the operations and availability of the Exchanges. An incident is generally considered to be a significant service interruption to trading as a result of a system failure related to either the access or proper functioning of the trading systems or the respective market data feeds (an "Incident"). The Incident Guidelines can be found here: https://www.tsx.com/trading/toronto-stock-exchange/member-notices/incident-management
Although the operational protocols followed during an Incident may vary depending on the nature and complexity of an Incident, the Incident Guidelines are intended to provide pertinent information, transparency and a level of certainty to participants around how the Exchanges will be managed during an Incident.
Currently, in the event of an Incident where the Exchanges' Market-on-Close functionality ("MOC") cannot be facilitated through our contingency process, the last board lot sale price on the applicable Exchange will be the closing price for the day. Similarly, in the event of an Incident, non MOC eligible securities will use the last board lot sale price on the applicable Exchange as their closing price for the day.
The Exchanges conducted extensive discussions and consultations with key stakeholders, and received feedback that an alternative closing price was required to provide clients with a more accurate closing price than our current contingency plan (i.e., the last known board lot price) in the event of an Incident. The Exchanges developed the Alternative Closing Price (as defined below) in response to such feedback.
The Alternative Closing Price will be calculated as follows:
• using the volume-weighted average price ("VWAP") of the consolidated last-sale eligible prices of the last five minutes of trading during regular trading hours (the "5 Minute Window"), including any closing transactions on an exchange and any trade breaks or corrections up to the time the VWAP is processed.
• If there is no VWAP during the 5 Minute Window, the Alternative Closing Price will be calculated using the last known market-wide last sale eligible trade that day.
• If there are no trades on that day for a particular security, the Alternative Closing Price will be the closing price for such security on the last day in which it traded on the applicable Exchange.
The Alternative Closing Price will apply to all securities trading on the Exchanges and replace the last board lot sale price as the contingency plan as outlined in the Incident Guidelines. If either of the Exchanges are unable to recover trading functionality for the day, the applicable Exchange will utilize the Alternative Closing Price.
Other than as indicated in the third bullet, the Alternative Closing Price will be calculated using the last sale price of the applicable Exchanges' securities trading on all other Canadian marketplaces.
The Alternative Closing Price is expected to be implemented following receipt of regulatory approval, and is anticipated to be implemented in Q2, 2021.
There will be no impact on market structure or issuers. The Exchanges do not anticipate that any market participant will be negatively impacted by the Alternative Closing Price. The Alternative Closing Price is anticipated to provide market participants with a more accurate closing price in the event of an Incident.
The Alternative Closing Price is in compliance with applicable securities laws and does not impact fair access to markets or the maintenance of fair and orderly markets.
We intend to disseminate the Alternative Closing Price in the same manner as we currently disseminate the last known board lot price contingency plan. We anticipate that the communication of the Alternative Closing Price will be made through a Production Alert email and posted on the TMX website at: https://www.tsx.com/trading/toronto-stock-exchange/member-notices/ equities-trading-notices.
TSX does not anticipate that market participants need to make any changes to accommodate the Alternative Closing Price.
The Exchanges are not aware of any other market or jurisdiction utilizing a similar alternative closing price to the Alternative Closing Price.
Canadian Securities Exchange -- Significant Change Subject to Public Comment -- Amendments to Trading System Functionality & Features -- Notice and Request for Comment
CNSX Markets Inc., ("CSE") is filing this Notice in accordance with the process for the Review and Approval of Rules and Information Contained in Form 21-101F1 and the Exhibits Thereto attached as Appendices to the Exchange's recognition orders (the "Protocol"). The CSE intends to implement enhancements to its trading system in response to customer feedback. The proposed changes are described below.
The CSE is proposing the addition of new features that enhance dark trading opportunities on the CSE.
The features being proposed are already present in Canadian market structure and will be familiar to many participants who have used them on other market venues.
The enhancements are 1) non-display order execution at the protected Best Bid or Offer (also referred to as At-the-touch), 2) an enhancement to the Seek Dark Liquidity Only order type to take advantage of execution at-the-touch, and 3) a non-display order type where participants can rest their hidden liquidity on the CSE without using a dark peg.
Following is a detailed description of the proposed features.
1) At-the-touch (ATT) non-display execution
• Execution will be governed by UMIR rule 6.6 -- Provision of Price Improvement by a Dark Order, which requires that the active order be greater than 50 board lots and $30,000 in value, or $100,000 in value. If either of these criteria are met, the CSE will match the incoming order against any resting non-display order types at-the-touch.
• Visible orders at the protected NBBO will be traded ahead of any dark orders at-the-touch.
• At-the-touch will apply only to non-display orders.
• In Notice 2018-006 the CSE filed for a CSE At the Touch Pegged Order type. It should be noted that this order is based on the same execution principles and it was approved by the OSC, but never implemented.
2) Enhance the Seek Dark Liquidity Only Order type
Seek Dark Liquidity orders are active IOC orders that will trade against dark resting orders only.
• Seek Dark orders will trade at prices up to and including Protected NBBO (or at the order's limit price if less aggressive).
• Seek Dark orders may trade against existing odd lots or odd lot portions of mixed lot tradable contra dark orders at or between the NBBO including automated odd lot fills by the CSE market maker where one is assigned.
• Any volume that is not immediately traded will be cancelled.
• Orders can be marked as "Trade with price improvement only" or "Trade with price improvement or dark at-the-touch".
3) Non-display Order type
Additional support for non-display orders:
• Non-display orders only trade during the continuous trading session.
• Non-display orders are accepted in the pre-open.
• They are not eligible for execution during the opening auction, or during the last sale session.
• During a trading session, a symbol may become ineligible to trade non-display orders due to locked, crossed, or threshold market conditions.
• Non-display orders generally offer price improvement but may trade at the National Best Bid or Offer if the active contra order meets ATT requirements.
• Non-display orders can be entered with a MKT price, a full tick limit or a fractional tick limit price.
• The CSE will assign a trading price based on the original limit or the existing bid/ask tick limits.
• Time-in-force can be Good-till-Date (GTD), Good-till-Cancel (GTC), immediate-or-cancel (IOC), fill-or-kill (FOK), and DAY.
• Non-display orders will support min quantity.
• Non-display orders will support 'post-only' instructions.
• Aggressive non-display orders will be prevented from causing a trade-through, trading with visible orders where allowed and booking the remaining volume as non-displayed.
• Non-display orders will be submitted using the disclosed volume FIX tag (MaxFloor <111> = 0).
Trading functionality of non-display orders
• If an order is entered as non-display with a price instruction of MKT or an aggressive limit price, and the order is not marked as post-only, this order will be treated like a regular order insofar as it is immediately executable against lit or dark resting orders. Any untraded volume will be booked as a non-display order at the allowable executable price.
• If a non-display order is post-only, and the order is priced as MKT or has an aggressive limit price, the full volume will be booked as a non-display order at the allowable executable price.
• If a non-display order is entered with a price that is not immediately executable, the full volume will be booked as a non-display order with price/time priority.
• In all cases, the CSE will prevent unintentional trade-throughs by non-display orders only executing these orders at or inside the National Best Bid/Offer.
Execution considerations for non-display orders at the National Best Bid or Ask (NBBO)
• Resting non-display orders interact with incoming (active) orders, lit or dark, through an allocation sequence that ensures the priority of resting displayed orders over non-display orders. To be explicit, displayed orders resting at the NBBO will be filled ahead of non-display orders resting at the same price.
• There is full post-trade transparency of non-display order execution prices which will update the last sale price.
• Non-display orders will trade at the NBBO if the contra active order is >50 board lots in volume and $30 000 in value, or $100 000 in value. They will not trade at the NBBO if the contra order is marked Seek Dark with price-improved-only.
Examples of non-display order behaviour:
1. A non-display buy order is entered with a MKT price.
Best Bid/Offer:
9.00/9.01
Bid Vol
Bid Price
Offer Price
Offer Vol
CSE -- Non-display
200
MKT
9.01
100
100
9.00
100
8.99
A trade occurs at 9.01 for 100 shares and the remaining 100 volume is booked as a non-display order at the maximum allowable price limit.
Best Bid/Offer:
9.00/
Bid Vol
Bid Price
Offer Price
Offer Vol
CSE -- Non-display
100
9.51
100
9.00
C
100
8.99
Should there be an offer entered on another protected trading venue at a price less than 9.51 which 'sets' the National Best Offer, any incoming sell order to the CSE would execute against the resting non-display order 1 tick inside the National Best Offer.
Said more generally, regardless of the booked price execution is subject to visible liquidity on other markets.
2. A non-display buy order for 300 shares is entered with an aggressive limit price of 9.02.
Best Bid/Offer:
8.99/9.01
Bid Vol
Bid Price
Offer Price
Offer Vol
CSE -- Non-display (active)
300
9.02
9.01
100
100
8.99
9.02
100
100
8.98
9.03
100
A trade would occur for 100 shares at 9.01, 100 shares at 9.02, with the remaining 100 shares being booked as a non-display order at 9.02.
Best Bid/Offer:
8.99/9.03
Bid Vol
Bid Price
Offer Price
Offer Vol
CSE -- Non-display (passive)
100
9.02
9.03
100
100
8.99
9.04
100
100
8.98
9.05
100
3. A non-display buy order for 300 shares is entered with an aggressive limit price of 9.02 and post-only instructions. The allowable executable price is restricted 1 tick inside the best offer, up to the limit of 9.02
Best Bid/Offer:
8.95/9.01
Bid Vol
Bid Price
Offer Price
Offer Vol
CSE -- Non-display (passive)
300
(limit price) 9.02 (allowable executable price) 9.00
9.01
100
100
8.95
9.02
100
100
8.94
9.03
100
If an aggressive incoming sell order for 100 shares were to be sent to the market an execution against the Non-display order would occur at 9.00, removing 100 shares from the non-display order balance.
Best Bid/Offer:
8.95/9.01
Bid Vol
Bid Price
Offer Price
Offer Vol
CSE -- Non-display (passive)
200
(limit price) 9.02 (allowable executable price) 9.00
9.01
100
100
8.95
9.02
100
100
8.94
9.03
100
4. A non-display buy order for 300 shares is entered with an aggressive limit price of 9.02 and post-only instructions. The allowable execution price is restricted to 1 tick inside the best offer up to the limit of 9.02, which in this case is the mid-point between the bid and offer.
Best Bid/Offer:
9.00/9.01
Bid Vol
Bid Price
Offer Price
Offer Vol
CSE -- Non-display
300
(limit price) 9.02 (allowable executable price) 9.005
9.01
100
100
9.00
9.02
100
100
8.99
9.03
100
If an aggressive incoming sell order for 100 shares were to be sent to the market an execution against the Non-display order would occur at the mid-point 9.005, removing 100 volume from the order.
Best Bid/Offer:
9.00/9.01
Bid Vol
Bid Price
Offer Price
Offer Vol
CSE -- Non-display (passive)
200
(Limit price) 9.02 (allowable executable price) 9.005
9.01
100
100
9.00
9.02
100
100
8.99
9.03
100
So long as the NBBO is less than (or equal) to the limit price of 9.02 then executions would occur within the spread if the incoming contra order does not meet the size/value requirements of UMIR rule 6.6, or at the NBBO if it does.
The proposed Significant Change is expected to be implemented in Q2, 2021.
The CSE is expanding its non-display (dark) execution functionality to match the features already present on other marketplaces in Canada.
At-the-touch execution for dark/non-display orders, enhancement of the Seek Dark order, as well as the non-display order type, have been requested by clients and will improve the CSE execution facilities for this segment.
The expected impact of the Significant Change on:
• Market Structure: The proposed changes are currently used on other Canadian exchanges (TSX, Nasdaq Canada). There may be a marginal increase in dark trading on the CSE. The impact is expected to be relatively insignificant.
• Members: A number of CSE Dealers have asked for the proposed order type. The order type is optional.
• Investors, Issuers, and the Capital Markets: There is a possibility of price improvement if there is an increase in dark trading.
There is no expected impact on the CSE's compliance with Ontario or British Columbia securities laws. The changes will not affect fair access or the maintenance of fair and orderly markets. The changes are consistent with the fair access requirements set out in section 5.1 of NI21-101 as they are not confined to a limited number of marketplace participants and all marketplace participants will remain subject to the same rules and conditions.
Clients already support similar features (to the ones proposed) on other Canadian marketplaces. The CSE does not anticipate there will be any need for material technology changes.
The table below identifies where the proposed functionality is new or currently available.
FUNCTIONALITY |
MARKETS AVAILABLE |
|
|
Execution at-the-touch for non-display order types |
TSX, Nasdaq Canada |
|
|
Seek dark enhancement |
TSX |
|
|
Non-display order type |
TSX, Nasdaq Canada |
Please submit comments on the proposed amendments no later than January 25, 2021 to:
Canadian Securities Exchange -- Significant Change Subject to Public Comment -- Amendments to Trading System Functionality & Features -- Notice and Request for Comment
CNSX Markets Inc., ("CSE") is filing this Notice in accordance with the process for the Review and Approval of Rules and Information Contained in Form 21-101F1 and the Exhibits Thereto attached as Appendices to the Exchange's recognition orders (the "Protocol"). The CSE intends to implement enhancements to its trading system in response to customer feedback. The proposed changes are described below.
Immediate-or-cancel (IOC) instruction for peg order types
The addition of IOC pricing instructions is available to all peg order types.
• The addition of the IOC option allows peg orders to support IOC time in force.
• If an IOC peg order is sent to the CSE, any volume that is not filled upon receipt will be cancelled.
Examples
1. No fill IOC peg
The market is at 9.00/9.01. A bid @9.01 with a midpoint peg, and pricing instruction IOC, is sent to the market.
Best Bid/Offer: |
9.00/9.01 |
|||
|
||||
Comment |
Vol |
Price |
Price |
Vol |
|
||||
CSE -- Peg (midpoint) IOC |
300 |
9.01 |
9.01 |
100 |
|
||||
100 |
9.00 |
9.02 |
100 |
|
|
||||
100 |
8.99 |
9.03 |
100 |
|
There is no hidden liquidity resting at the midpoint or better and the order is cancelled upon receipt.
Best Bid/Offer: |
9.00/9.01 |
||
|
|||
Vol |
Price |
Price |
Vol |
|
|||
100 |
9.00 |
9.01 |
100 |
|
|||
100 |
8.99 |
9.02 |
100 |
|
|||
9.03 |
100 |
||
2. Partial fill IOC peg
The market is at is at 9.00/9.01. There is a CSE midpoint peg resting on the offer for 100 volume which is set to execute against any aggressive incoming bids.
Best Bid/Offer: |
9.00/9.01 |
||||
|
|||||
Comment |
Vol |
Price |
Price |
Vol |
Comment |
|
|||||
100 |
9.00 |
9.00 |
100 |
Resting CSE -- Peg(midpoint) |
|
|
|||||
100 |
8.99 |
9.01 |
100 |
||
|
|||||
9.02 |
100 |
||||
A bid @9.01 for 300 volume, with a midpoint peg, and pricing instruction IOC, is sent to the market.
Best Bid/Offer: |
9.00/9.01 |
||||
|
|||||
Comment |
Vol |
Price |
Price |
Vol |
Comment |
|
|||||
CSE -- Peg (midpoint) IOC |
300 |
9.01 |
9.00 |
100 |
Resting CSE -- Peg(midpoint) |
|
|||||
100 |
9.00 |
9.01 |
100 |
||
|
|||||
100 |
8.99 |
9.02 |
100 |
||
100 shares will execute at 9.005 (the midpoint price), with the outstanding unfilled volume (200 shares) on the midpoint IOC bid being cancelled as this portion of volume did not receive an immediate fill.
After these order interactions there is no hidden liquidity resting at the midpoint or better.
Best Bid/Offer: |
9.00/9.01 |
||
|
|||
Vol |
Price |
Price |
Vol |
|
|||
100 |
9.00 |
9.01 |
100 |
|
|||
100 |
8.99 |
9.02 |
100 |
The proposed Significant Change is expected to be implemented in Q2, 2021.
This feature will allow clients to use the currently available dark order types (pegs) to send an IOC ping to the CSE, targeting hidden liquidity within the National Best Bid or Offer, and having the order cancel should it not receive an immediate fill.
This would enhance our dark peg offering to include features that already exist on other marketplaces in Canada.
There is no expected impact on market structure as this feature is already present on other marketplaces in Canada. This pricing instruction is optional and will have minimal impact on market participants.
There is no expected impact on the CSE's compliance with Ontario or British Columbia securities laws. The changes will not affect fair access or the maintenance of fair and orderly markets. The changes are consistent with the fair access requirements set out in section 5.1 of NI21-101 as they are not confined to a limited number of marketplace participants and all marketplace participants will remain subject to the same rules and conditions.
Clients already support similar features (to the ones proposed) on other Canadian marketplaces. The CSE does not anticipate there will be any need for material technology changes.
The table below identifies where the proposed functionality is new or currently available.
ORDER TYPE |
MARKETS AVAILABLE |
|
|
IOC on Dark pegs |
TSX |
Please submit comments on the proposed amendments no later than January 25, 2021 to:
