The effort to bring Canada’s over-the-counter (OTC) derivatives markets under greater oversight in the wake of the global financial crisis, and the subsequent LIBOR market manipulation scandal, took a major step forward on Tuesday with the Canadian Securities Administrators’ (CSA) publication of proposed new conduct rules for derivatives dealers and advisors.<\/p>\n
The CSA’s proposals, which are now out for an extended 150-day comment period, would introduce a comprehensive regulatory regime for derivatives market participants. Specifically, the proposals establish requirements that are similar to existing conduct rules for dealers in equities markets, but with measures tailored to the OTC derivatives market.<\/p>\n
The proposals include a basic requirement for fair dealing and include measures for dealing with conflicts of interest, establishing suitability and know-your-client obligations, setting disclosure requirements and detailing senior management duties, among other things.<\/p>\n
In the notice detailing the proposed rule, the CSA says the requirements “will help to protect participants in the OTC derivatives markets from unfair, improper or fraudulent practices.<\/p>\n
“During the financial crisis of 2008, the inappropriate sale of financial investments led to major losses for retail and institutional investors,” the CSA’s notice adds. “Since the financial crisis, there have been numerous cases of serious market misconduct in the global derivatives market including, for example, misconduct relating to the manipulation of benchmarks and alleged front-running of customer orders.”<\/p>\n
The CSA notes that regulators developed the proposals to “help protect investors, reduce risk, improve transparency and accountability and promote responsible business conduct” in the OTC derivatives markets.<\/p>\n
The proposed regulatory regime is designed to be consistent with international standards in OTC derivatives markets while also creating a uniform approach to conduct regulation within Canada. It also sets out exemptions for foreign derivatives dealers and advisors that comply with comparable laws in foreign jurisdictions.<\/p>\n
The CSA intends to collaborate with the Bank of Canada, the Office of the Superintendent of Financial Institutions (OSFI) and the federal Department of Finance in developing the final rules.<\/p>\n
The CSA is also developing a proposed registration regime for derivatives dealers, advisors and, potentially, other market participants, which regulators intend to publish shortly so that both sets of proposals can be considered together.<\/p>\n
“This is an important milestone for Canada in the regulation of over-the-counter derivatives,” says Louis Morisset, chairman of the CSA and president and CEO of the Autorit\u00e9 des march\u00e9s financiers (AMF), in a statement. “The proposed business conduct regime will protect investors, improve transparency and accountability, and protect against market abuse.” <\/p>\n","protected":false},"excerpt":{"rendered":"
The new regulatory regime would establish conduct rules similar to those for dealers in equities markets, but with unique measures<\/p>\n","protected":false},"author":38954,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2312,2324],"tags":[2534],"yst_prominent_words":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/267057"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/38954"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=267057"}],"version-history":[{"count":1,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/267057\/revisions"}],"predecessor-version":[{"id":360949,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/267057\/revisions\/360949"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=267057"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=267057"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=267057"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=267057"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}