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Securities

Canadian securities regulators propose eight initiatives to reduce regulatory burden for investment funds

Sep 12, 2019

On September 12, 2019, the Canadian Securities Administrators (CSA) published for comment proposed rule amendments aimed at implementing eight initiatives that seek to eliminate duplicative requirements, streamline regulatory processes, codify frequently-granted exemptions from certain rules for investment funds, and eliminate the need for certain regulatory approvals. These proposed changes are part of the CSA’s ongoing work to reduce regulatory burden for investment funds. Comments are requested by December 11, 2019.

The proposals would reduce duplicative filing requirements by consolidating the Simplified Prospectus (SP) and Annual Information Form (AIF) for conventional mutual funds, as these contain overlapping disclosure in many places. The proposed rule amendments would also streamline regulatory processes by eliminating the filing of Personal Information Forms (PIFs) in connection with investment fund prospectus filings for individuals that are registered with securities regulators.

The proposals would eliminate the need for investment funds to apply for frequently granted exemptive relief to use the notice-and-access system, and from certain conflict of interest rules. The proposed amendments also introduce exemptions from the requirement to deliver a fund facts document for model portfolio products, portfolio rebalancing services and automatic switch programs, and would allow the use of a consolidated fund facts document under certain conditions. The proposals would repeal the need for regulatory approval for a change of manager or change of control of manager, given similar requirements in the registration system for investment fund managers. Furthermore, the proposed changes would broaden the pre-approval criteria for investment fund mergers.

In addition, the proposed rule amendments would formalize a common industry practice by mandating that investment funds have a designated website for posting regulatory disclosure. This change will allow the CSA to consider alternative methods for providing and delivering disclosure to investors.

Staff anticipate that these changes can be implemented in the near-term. Longer-term, the CSA will look for burden reduction opportunities in other areas, including, continuous disclosure obligations, securityholder meetings and information circular requirements, prescribed notices and reporting requirements and prospectus regime provisions.

Review the press release and notice and proposed rule amendments on the CSA's website.

Canadian securities regulators seek comment on proposed amendments to business acquisition report requirements

Sep 05, 2019

On September 5, 2019, the Canadian Securities Administrators (CSA) published for comment proposed amendments to the business acquisition report (BAR) requirements for reporting issuers that are not venture issuers. Comments are requested by December 4, 2019.

The proposed amendments aim to reduce regulatory burden and address certain concerns expressed by stakeholders by narrowing the circumstances under which a BAR must be filed.

Currently, a reporting issuer that is not a venture issuer must file a BAR after completing a significant acquisition if any one of the three significance tests set out in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) exceeds 20 per cent.

For reporting issuers that are not venture issuers, the proposed amendments will:

  • alter the determination of significance such that an acquisition of a business or related businesses is significant only if at least two of the three existing significance tests set out in NI 51-102 are triggered; and
  • increase the significance threshold from 20 per cent to 30 per cent.

Review the press release and Notice on the CSA's website.

Canadian Securities Regulators Issue Guidance on Climate Change-related Disclosure

Aug 01, 2019

On August 1, 2019, the Canadian Securities Administrators (CSA) announced the publication of CSA Staff Notice 51-358 "Reporting of Climate Change-related Risks", which is intended to assist companies in identifying and improving their disclosure of material risks posed by climate change.

The notice clarifies existing legal requirements and does not create any new ones. It reinforces and expands upon the guidance provided in CSA Staff Notice 51-333 Environmental Reporting Guidance and should be read in conjunction with that notice. CSA Staff Notice 51-333 continues to provide guidance to issuers on existing continuous disclosure requirements relating to a broad range of environmental matters, including climate change.

Review the press release and Staff Notice on the CSA's website.

Anti-money laundering rules for cryptocurrency dealers finalized by Canadian government

Jul 10, 2019

On July 10, 2019, the Canadian Department of Finance published amendments to regulations made under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act 2019 (PCMLTFA), which will apply to dealers in virtual currency and foreign money services businesses (MSBs) that service Canadian customers beginning June 1, 2020.

This update includes:

  • Background on the Regulation and definition of virtual currency
  • Dealers in virtual currency that offer services to Canadian clients will generally be considered MSBs under the PCMLTFA and therefore subject to similar customer due diligence, recordkeeping, monitoring and reporting requirements as other reporting entities
  • Regulation of foreign cryptocurrency exchanges as foreign MSBs
  • Reporting and recordkeeping requirements for virtual currency transactions

Review the regulation on the Canada Gazette's website and a summary on Osler LLP's website.

Corporate Reporting Dialogue publishes paper on transparency and accountability

Jul 02, 2019

On July 2, 2019, the Corporate Reporting Dialogue (CDP)—an initiative convened by the International Integrated Reporting Council (IIRC) bringing together the major international reporting frameworks—issued a position paper that sets out the seven key principles report preparers should follow for achieving transparency and accountability.

In the paper, entitled “Understanding the value of transparency and accountability”, CDP (consisting of the Climate Disclosure Standards Board, the Global Reporting Initiative, the International Accounting Standards Board, the International Integrated Reporting Council, the International Organization for Standardization and the Sustainability Accounting Standards Board) set out seven principles of transparency and accountability that they commonly believe are fundamental to corporate reporting: materiality, completeness, accuracy, balance, clarity, comparability and reliability.

Participants of the Dialogue have committed to promoting the application of these principles for the wider reporting landscape in future interactions or partnerships, as part of their commitment to providing greater clarity to the reporting landscape on how to use the individual frameworks of Dialogue participants to achieve effective, holistic reporting.

The paper can be accessed by visiting the Corporate Reporting Dialogue website.

SEC issues new and amended requirements for security-based swap dealers and broker-dealers

Jun 21, 2019

On June 21, 2019, the Securities Exchange Commission (SEC) issued a final rule, “Capital, Margin, and Segregation Requirements for Security-Based Swap Dealers and Major Security-Based Swap Participants and Capital and Segregation Requirements for Broker-Dealers.”

According to the SEC’s press release, the final rule:

  • Establishes “minimum capital requirements for security-based swap dealers [SBSDs] and major security-based swap participants [MSBSPs] for which there is not a prudential regulator (nonbank SBSDs and MSBSPs). They also increase the minimum net capital requirements for broker-dealers that use internal models to compute net capital (ANC broker-dealers).  In addition, they establish capital requirements tailored to security-based swaps and swaps for broker-dealers that are not registered as an SBSD or MSBSP to the extent they trade these instruments.” 
  • Establishes “margin requirements for nonbank SBSDs and MSBSPs with respect to non-cleared security-based swaps.”
  • Establishes “segregation requirements for SBSDs and stand-alone broker-dealers for cleared and non-cleared security-based swaps.”
  • Amends “the Commission’s existing cross-border rule to provide a means to request substituted compliance with respect to the capital and margin requirements for foreign SBSDs and MSBSPs, and provide guidance discussing how the Commission will evaluate requests for substituted compliance.” 

For more information, see the press release and final rule on the SEC’s Web site.

Chair of the IFRS Foundation Trustees speaks on digitalization

Jun 19, 2019

On June 19, 2019, Erkki Liikanen, Chair of the Trustees of the IFRS Foundation, gave a speech discussing whether digitaliztion will deliver increased productivity to the global economy and how the IFRS Foundation is undertaking its own digital transformation.

In his more general remarks on the global economy, Mr Liikanen noted that the economic growth cycle is now maturing, with various factors that may impede its longevity. In fact, he noted, globalization itself faces some challenges around the world.

Mr Liikanen then turned to the academic debate on whether digitalization, the process of leveraging technology and digitization to improve business performance can take up the slack in productivity. He described two schools of thought that have emerged and concluded that technology is an important enabler, but it needs to work itself through and the real benefits will only come once the procedures can be fully implemented.

Turning then to financial reporting, Mr Liikanen noted that investors seek diversification and investment opportunities. The digitization of financial information can help them to achieve these goals if it facilitates cross-border transactions and supports transparent, accountable and efficient financial markets in a digital world.

At this point, Mr Liikanen pointed to the IFRS Taxonomy and its increasing adoption around the world - most recently in Europe. He promised that the IFRS Foundation will continue to explore how technological developments affect the way financial information is consumed and what this means for the Foundation's Taxonomy strategy, as well as how technology-related innovations affect the standard-setting process.

Concluding, Mr Liikanen noted that the IFRS Foundation is about to embark on its own digital transformation. He pointed at a long-term plan for the IFRS Foundation to completely overhaul its technology systems that was signed off at the last meeting of the Trustees (the report from the meeting offers little detail but notes that plan will be discussed again at the next meeting of the Trustees, which will take place on June 25-27, 2019 in Munich).

Please click to access the full text of Mr Liikanen's speech on the IASB website.

EC publishes guidelines on reporting climate-related information

Jun 19, 2019

On June 19, 2019, the Eu­ro­pean Com­mis­sion (EC) published new guidelines on reporting climate-related information, which supplement its non-binding guidelines on non-financial reporting published July 2017.

The new guidelines on reporting climate-related information integrate the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board (FSB). 

In short, the new guidelines:

The new guidelines can be downloaded from the EC website, which also offers a press release, a short summary of the guidelines, and frequently asked questions.

In addition, the Commission welcomes three important expert reports published by the TEG on sustainable finance (all links to the EC website):

SEC issues concept release on harmonizing securities offering exemptions

Jun 18, 2019

On June 18, 2019, the Securities Exchange Commission (SEC) issued for comment “Concept Release on Harmonization of Securities Offering Exemptions.”

The concept release seeks public comment on “several exemptions from registration under the Securities Act of 1933 that facilitate capital raising.” As a result of significant changes over the years to the overall framework for exempt offerings, the SEC is asking for feedback on “possible ways to simplify, harmonize, and improve [that] framework to promote capital formation and expand investment opportunities while maintaining appropriate investor protections.”

Comments on the concept release should be submitted no later than 90 days after the document’s publication in the Federal Register. For more information, see the press release and concept release on the SEC’s Web site.

SEC amends auditor independence rules related to loan provisions

Jun 18, 2019

On June 18, 2019, the Securities Exchange Commission (SEC) issued a final rule, “Auditor Independence with respect to Certain Loans or Debtor-Creditor Relationships.”

The final rule amends the auditor independence rules by refocusing “the analysis that must be conducted to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of an audit client at any time during an audit or professional engagement period.”

The final rule is effective 90 days after its publication in the Federal Register. For more information, see the press release and final rule on the SEC’s Web site.

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