Securities Law & Instruments

NOTICE OF AMENDMENTS TO THE SECURITIES ACT AND THE COMMODITY FUTURES ACT

On December 10, 1999 the Commission published parts of Bill 14, the More Tax Cuts for Jobs, Growth and Prosperity Act, 1999 (the "Prosperity Act") which included proposed amendments to the Securities Act, the Commodity Futures Act, and the Toronto Stock Exchange Act. The Prosperity Act received royal assent on December 14, 1999. The Commission is republishing below the amendments to both the Securities Act and the Commodity Futures Act together with an explanation of the amendments.

I. Amendments to the Securities Act

This table shows the amendments to the Securities Act and provides a brief explanation of each amendment. All the amendments came into force the day the Prosperity Act received royal assent unless specifically noted otherwise below.

More Tax Cuts for Jobs, Growth and
Prosperity Act, 1999
- Part XXI

Explanatory Note
193. (1) The definition of "clearing agency" in subsection 1 (1) of the Securities Act is amended,

 

(a) by striking out "and" in the fourth line and substituting "or"; and

(b) by adding "or provides centralized facilities as a depository of securities, but does not include a stock exchange, a quotation and trade reporting system or a registered dealer" at the end.

The definition of "clearing agency" has been amended to reflect an important activity performed by clearing agencies in providing centralized facilities for the deposit of securities. This provision harmonizes the Act with legislation in Alberta and British Columbia.
(2) The definition of "distribution" in subsection 1 (1) of the Act is amended by striking out "and" at the end of clause (d), by adding "and" at the end of clause (e) and by adding the following clause:

 

(f) any trade that is a distribution under the regulations.

The definition of "distribution" has been amended to provide that any trade that is a "distribution" under the Regulations also is a "distribution" under the Act. This ensures that the use of the term "distribution" in the Act is consistent with its use in the Regulations.
(3) The definition of "market participant" in subsection 1 (1) of the Act, as enacted by the Statutes of Ontario, 1994, chapter 11, section 350, is amended by adding "a recognized quotation and trade reporting system," after "recognized clearing agency" in the eighth line. The definition of "market participant" has been amended to include "a recognized quotation and trade reporting system". The definition already includes a recognized stock exchange.
(4) Subsection 1 (1) of the Act, as amended by the Statutes of Ontario, 1994, chapter 11, section 350, 1994, chapter 33, section 1 and 1997, chapter 19, section 23, is further amended by adding the following definition:

 

"offering memorandum" means a document, together with any amendments to that document, purporting to describe the business and affairs of an issuer that has been prepared primarily for delivery to and review by a prospective purchaser so as to assist the prospective purchaser to make an investment decision in respect of securities being sold in a distribution to which section 53 would apply but for the availability of one or more of the exemptions contained in Ontario securities law, but does not include a document setting out current information about an issuer for the benefit of a prospective purchaser familiar with the issuer through prior investment or business contacts. ("notice d'offre")

The definition of "offering memorandum" is used in new section 130.1.
(5) Clause (b) of the definition of "reporting issuer" in subsection 1 (1) of the Act is repealed and the following substituted:

 

(b) that has filed a prospectus and has obtained a receipt for it under this Act,

(b.1) that has filed a securities exchange takeover bid circular under this Act before the date on which the More Tax Cuts for Jobs, Growth and Prosperity Act, 1999 receives Royal Assent.

(6) The definition of "reporting issuer" in subsection 1 (1) of the Act is amended by striking out "or" at the end of clause (d), by adding "or" at the end of clause (e) and by adding the following clause:

(f) that the Commission has deemed to be a reporting issuer under section 83.1.

The definition of "reporting issuer" has been amended as a consequence of new section 83.1 as well as to remove the ability of issuers to become reporting issuers by filing a securities exchange take-over bid circular.

 

New section 83.1 permits the Commission to deem issuers to be reporting issuers in certain circumstances.

The filing of a securities exchange take-over bid circular to attain reporting issuer status may raise investor protection concerns because a take-over bid circular, unlike a prospectus, is not subject to a review process and does not require certification that it "constitutes full, true and plain disclosure of all material facts". In addition, under the previous definition, the issuer became a reporting issuer even if the bid does not proceed.

(7) Clauses (m) and (n) of the definition of "security" in subsection 1 (1) of the Act are repealed and the following substituted:

 

(m) any income or annuity contract not issued by an insurance company,

(n) any investment contract.

The definition of "security" has been amended to remove references to a statute, the Investment Contracts Act, that has been repealed.
(8) Clause (b) of the definition of "trade" or "trading" in subsection 1 (1) of the Act is repealed and the following substituted:

 

(b) any participation as a trader in any transaction in a security through the facilities of any stock exchange or quotation and trade reporting system.

The definition of "trade" or "trading" has been amended to remove an anachronistic reference to "floor" trading that has been overtaken by technological developments.
194. Subsection 3.5 (4) of the Act, as enacted by the Statutes of Ontario, 1997, chapter 10, section 37, is amended by inserting "except section 17" after "under Part VI" in the second and third lines. Subsection 3.5(4) of the Act has been amended to allow a Commissioner who signs an order under section 17 to sit on a subsequent hearing related to the merits of the same matter.
195. Subsection 8 (1) of the Act is repealed and the following substituted:

 

Review of decision

(1) Within 30 days after a decision of the Director, the Commission may notify the Director and any person or company directly affected of its intention to convene a hearing to review the decision.

Subsection 8(1) of the Act has been amended to remove limitations on the Commission's authority to review decisions by the Director. The Commission may now on its own accord review any decision of the Director upon notice to the Director and any person or company directly affected by such decision. Previously the review was limited to decisions relating to refusals of registration and refusals to issue a receipt for a prospectus.
196. Section 17 of the Act, as re-enacted by the Statutes of Ontario, 1994, chapter 11, section 358, is amended by adding the following subsections:

 

Disclosure in investigation or proceeding

(6) A person appointed to make an investigation or examination under this Act may, for the purpose of conducting an examination or in connection with a proceeding commenced or proposed to be commenced by the Commission under this Act, disclose or produce anything mentioned in subsection (1).

Disclosure to police

(7) Without the written consent of the person from whom the testimony was obtained, no disclosure shall be made under subsection (6) of testimony given under subsection 13 (1) to,

(a) a municipal, provincial, federal or other police force or to a member of a police force; or

(b) a person responsible for the enforcement of the criminal law of Canada or of any other country or jurisdiction.

Section 17 of the Act has been amended to allow disclosure by an investigator of information obtained pursuant to powers of compulsion, for the purpose of conducting an examination or in connection with a proceeding under the Act, without the requirement to obtain further Commission orders and subject to certain conditions.
197. Subsection 19 (3) of the Act, as enacted by the Statutes of Ontario, 1994, chapter 11, section 358, is repealed and the following substituted:

Provision of information to Commission

(3) Every market participant shall deliver to the Commission at such time or times as the Commission or any member, employee or agent of the Commission may require,

(a) any of the books, records and documents that are required to be kept by the market participant under Ontario securities law; and

(b) except where prohibited by law, any filings, reports or other communications made to any other regulatory agency whether within or outside of Ontario.

Subsection 19(3) of the Act has been amended to require market participants to deliver required books and records and other information to the Commission when required to do so by or on behalf of the Commission. This amendment will increase government efficiency by clarifying that any member, employee or agent of the Commission, in addition to the Commission itself, may require market participants to provide books and records.
198. Part VIII of the Act is amended by adding the following section:

 

Restriction on shareholdings in The Toronto Stock Exchange Inc.

21.11 (1) Without the prior approval of the Commission, no person or company and no combination of persons or companies acting jointly or in concert shall beneficially own or exercise control or direction over more than 5 per cent, or such other percentage as may be prescribed under subsection (5), of any class or series of voting shares of The Toronto Stock Exchange Inc.

Sale of restricted shares

(2) The Toronto Stock Exchange Inc. may sell any shares held contrary to the restriction in subsection (1) in accordance with section 45 of the Business Corporations Act, with necessary modifications.

Transition

(3) Despite subsection (1), if a person or company beneficially owns or exercises control or direction over more than 5 per cent, or such other percentage as may be prescribed under subsection (5), of any class or series of voting shares of The Toronto Stock Exchange Inc. as a result of the issue of shares by The Toronto Stock Exchange Inc. in connection with the continuance of The Toronto Stock Exchange under the Business Corporations Act, the person or company may continue to beneficially own or exercise control or direction over the shares, but shall not vote or cause to permit to be voted any shares of any class or series of voting shares in excess of the 5 per cent level or the prescribed level, as the case may be, without the prior approval of the Commission.

Approval

(4) The Commission may, by order, give its approval to a person, company or transaction, for the purposes of subsection (1) or (3), and may impose such terms and conditions on the approval as the Commission considers appropriate.

Regulations

(5) The Commission may, by regulation, prescribe a percentage for the purposes of subsections (1) and (3) and may prescribe different percentages for different classes of persons or companies.

Non-application of s.42 Business Corporations Act

(6) Section 42 of the Business Corporations Act does not apply to the Toronto Stock Exchange Inc.

A complementary amendment is made with respect to the amendments to the Toronto Stock Exchange Act set out in Part XXII of the Prosperity Act. Part XXII of the Prosperity Act provides for demutualization by amending the Toronto Stock Exchange Act to allow continuance of the Toronto Stock Exchange (the "TSE") under the Ontario Business Corporations Act.

 

New section 21.11(1) of the Act provides that no person or company and no combination of persons or companies acting jointly or in concernt will be permitted to beneficially own or control more than 5% of the outstanding shares of the Toronto Stock Exchange Inc. without the prior approval of the Commission.

Section 21.11(1) provides for the TSE to remain widely held and not under the control of any person or group without the prior approval of the Commission, in recognition of the TSE's important role in the Ontario and Canadian economies.

Section 21.11(3) provides that a member that receives more than 5% of the outstanding shares pursuant to the seat exchange will be grand fathered but will not be able to exercise more than 5% of the votes outstanding unless the prior approval of the Commission is obtained.

Section 21.11(4) provides that the Commission in giving its approval under 21.11(1) and (3) may impose such terms and conditions as it considers appropriate

Section 21.11(5) provides that the Commission may by regulation prescribe a percentage or different percentages for different classes of persons or companies for the purposes of subsection (1) and (3)

Section 21.11(6) over-rides section 42 of the Business Corporations Act, which otherwise limits restrictions on transfer.

199. (1) Clause 25 (1) (a) of the Act is amended by inserting "or act as an underwriter" after "trade in a security" in the first line and by adding "or" at the end.

 

(2) Clause 25 (1) (b) of the Act is repealed.

(3) Clause 25 (1) (c) of the Act is amended by inserting "as a representative or" before "as a partner" in the third line.

Subsection 25(1) of the Act has been been amended by amending paragraph (a) and deleting paragraph (b) to eliminate "underwriter" as a separate category of registration. Trading in securities and underwriting both would require registration as a dealer. This change simplifies the registration regime by eliminating an unnecessary category of registration that has rarely ever been used.

 

Paragraph (c) of subsection 25(1) of the Act has been amended to ensure that persons other than partners and officers may be registered to advise on behalf of a registered adviser.

200. Subsection 26 (1) of the Act is repealed and the following substituted:

 

Granting of registration

(1) Unless it appears to the Director that the applicant is not suitable for registration, renewal of registration or reinstatement of registration or that the proposed registration, renewal of registration, reinstatement of registration or amendment to registration is objectionable, the Director shall grant registration, renewal of registration, reinstatement of registration or amendment to registration to an applicant.

The requirement that the Director grant registration unless an applicant is not suitable parallels the provisions of section 61 of the Act regarding issuance of a receipt for a prospectus and provides legal and statutory support for mutual reliance amongst the Canadian Securities regulators as part of the Canadian Securities Regulatory System.
201. Section 32 of the Act is repealed. Section 32 of the Act is repealed because its provisions regarding residency requirements are unclear and obsolete.
202. Section 33 of the Act, as amended by the Statutes of Ontario, 1993, chapter 27, Schedule and 1994, chapter 11, section 362, is repealed. Section 33 of the Act is repealed because it contains detailed provisions for the filing of notices of change in registration that are better dealt with by rule.

This provision will come into force on a day to be named by proclamation of the Lieutenant Governor.

203. (1) Subparagraph 3 iii.1 of subsection 35 (1) of the Act, as enacted by the Statutes of Ontario, 1997, chapter 19, section 23, is repealed and the following substituted:

 

iii.1 a subsidiary of any company referred to in subparagraph i, ii, ii.1 or iii, where the company owns all of the voting shares of the subsidiary.

(2) Paragraph 4 of subsection 35 (1) of the Act is amended by striking out "other than an individual" in the third line.

(3) Paragraph 5 of subsection 35 (1) of the Act is amended by striking out "$97,000" at the end and substituting "$150,000 or such other amount as is prescribed".

(4) Paragraph 18 of subsection 35 (1) of the Act is amended by striking out "$100,000" at the end and substituting "$150,000 or such other amount as is prescribed".

(5) Paragraph 7 of subsection 35 (2) of the Act is amended by striking out "no part of the net earnings of such issuer enure to the benefit of any security holder and" in the fifth, sixth and seventh lines.

Subparagraph 3.iii.1 of subsection 35(1) of the Act is amended to include cross-references to wholly-owned subsidiaries of all relevant institutions. This amendment corrects an inadvertent omission of a cross-reference to insurance companies.

 

Paragraph 4 of subsection 35(1) of the Act is amended to permit appropriately sophisticated individuals to qualify as "exempt purchasers", thereby improving access to capital by business. Currently, individuals may not qualify under this section as "exempt purchasers".

The Regulations previously have changed the dollar amounts stated in paragraphs 5 and 18 of subsection 35(1) of the Act. The amendments incorporate these higher dollar amounts into the Act and avoid possible future confusion by an unfamiliar reader by clarifying that changes to these amounts may be prescribed by the Regulations.

Paragraph 7 of subsection 35(2) of the Act is amended to facilitate appropriate reliance on this exemption and consequent capital-raising by charities by deleting the ambiguous requirement that "no part of the issuer's net earnings enure to the benefit of any security holder".

204. Subsection 38 (3) of the Act is repealed and the following substituted:

 

Listing

(3) Subject to the regulations, no person or company, with the intention of effecting a trade in a security, shall, except with the written permission of the Director, make any representation, written or oral, that such security will be listed on any stock exchange or quoted on any quotation and trade reporting system, or that application has been or will be made to list such security upon any stock exchange or quote such security on any quotation and trade reporting system, unless,

(a) application has been made to list or quote the securities being traded, and securities of the same issuer are currently listed on any stock exchange or quoted on any quotation and trade reporting system; or

(b) the stock exchange or quotation and trade reporting system has granted approval to the listing or quoting of the securities, conditional or otherwise, or has consented to, or indicated that it does not object to, the representation.

Subsection 38(3) of the Act currently imposes restrictions on representations about listing on a stock exchange. The amendments expand the restrictions to include quotation and trade reporting systems. They also remove the need for many unnecessary applications for relief by expressly permitting listing representations in situations where applications are granted on a routine basis.
205. Section 42 of the Act is repealed. Section 42 of the Act is repealed to reduce the regulatory burden of requiring dealers to disclose 5% shareholders. The disclosure requirement is in some respects also duplicative of other requirements for disclosure in particular situations. In particular the disclosure required by sections 39 and 41 combined with the related and connected issuer disclosure requirements in Part XIII of the Regulation adequately address conflict situations.
206. (1) Subsection 58 (1) of the Act is amended by inserting "and subject to any waiver or variation consented to in writing by the Director," after "subsection 63 (2)" in the second line.

 

(2) Subsection 58 (5) of the Act is amended by inserting "or a guarantor" after "promoter" in the second line.

(3) Subsection 58 (6) of the Act is amended by inserting " or who is a guarantor of the securities being distributed" after "years" in the fourth line.

(4) Subsection 58 (7) of the Act is amended by inserting "or a guarantor" after "promoter" in the second line.

Subsection 58(1) of the Act is amended to allow the Director to approve the modification of the form of the issuer's certificate in a prospectus. This amendment will provide the necessary flexibility to deal with the form of certificate required to be included in a prospectus filed by non-corporate issuers and by corporate issuers in unusual situations.

 

Subsections 58(5), 58(6) and 58(7) of the Act are amended to provide for certificates of guarantors in prospectuses and to allow variations in those certificates in a similar manner as they are allowed for promoters. These amendments clarify and make more transparent existing practices and requirements with respect to guarantors.

207. (1) Clause 72 (1) (d) of the Act is amended by striking out "$97,000" at the end and substituting "$150,000 or such other amount as is prescribed".

 

(2) Clause 72 (1) (l) of the Act is amended by striking out $100,000" at the end and substituting "$150,000 or such other amount as is prescribed".

(3) Clause 72 (1) (m) of the Act is repealed and the following substituted:

(m) the trade is made by an issuer in a security of its own issue in consideration of mining claims where the vendor enters into such escrow or pooling agreement as the Director considers necessary or where the security proposed to be issued, or the security underlying that security, is listed and posted for trading on a stock exchange recognized for the purpose of this clause by the Commission and the issuer has received, where required by the by-laws, rules or policies of that stock exchange, the consent of that stock exchange to the issuance of the security.

(4) Subsection 72 (4) of the Act is amended by striking out "other than a further trade exempted by subsection (1)" in the fourth and fifth lines and substituting "other than a further trade exempted by Ontario securities law".

(5) Subsection 72 (5) of the Act is amended by striking out "other than a further trade exempted by subsection (1)" in the sixth and seventh lines and substituting "other than a further trade exempted by Ontario securities law".

(6) Subsection 72 (6) of the Act is amended by striking out "other than a further trade exempted by subsection (1)" in the third and fourth lines and substituting "other than a further trade exempted by Ontario securities law".

(7) Clause 72(7)(a) of the Act is amended by striking out "by subsection (1)" and substituting "by Ontario securities law".

The amendments to clauses 72(1)(d) and 72 (1) (l) of the Act correspond to the amendments to paragraphs 5 and 18 of subsection 35(1).

Clause 72(1)(m) of the Act is amended to remove the requirement for the Director to review escrow or pooling arrangements acceptable to a recognized stock exchange. This will avoid duplicative regulation and facilitate capital raising by business.

The references in subsections 72(4), 72(5), 72(6) and 72(7) of the Act to trades or distributions "exempted by subsection (1)" are expanded to cover trades or distributions "exempted by Ontario securities law". These technical amendments to the provisions governing resales of securities issued without a prospectus correct those provisions to include all prospectus exemptions, whether contained in the Act or elsewhere.

208. (1) Section 80 of the Act, as amended by the Statutes of Ontario, 1994, chapter 33, section 4, is further amended by inserting "or other interested person or company" after "application of a reporting issuer" in the first and second lines.

 

(2) Clause 80 (a) of the Act is repealed.

Section 80 of the Act is amended to broaden the scope of who may apply for relief from the requirements of Part XVIII of the Act.

 

Subsection 80(a) is repealed because it is redundant as clause 80(b)(iii) gives the Commission broad discretionary powers to provide relief.

209. Section 83 of the Act is amended by striking out "that has fewer than fifteen security holders whose latest address as shown on the books of the reporting issuer is in Ontario" in the second, third and fourth lines. Section 83 of the Act is amended to increase the ability of the Commission to deem that a reporting issuer has ceased to be a reporting issuer by removing the requirement that an applicant must have fewer than fifteen security holders whose latest address as shown on the books of the company as in Ontario.
210. Part XVIII of the Act is amended by adding the following section:

 

Deeming an issuer to be a reporting issuer

83.1 (1) The Commission may, upon the application of,

(a) an issuer, if the Commission considers that it would not be prejudicial to the public interest; or

(b) the Director, if the Commission considers that it would be in the public interest,

make an order deeming the issuer to be a reporting issuer for the purposes of Ontario securities law.

Opportunity to be heard

(2) The Commission shall not make an order under clause (1) (b) without giving the issuer an opportunity to be heard.

Section 83.1 of the Act is new and gives the Commission the ability to deem issuers to be reporting issuers either upon their application or upon the application of the Director provided, in the latter case, that they are given an opportunity to be heard. This provision is found in the legislation of a number of other Canadian jurisdictions and provides the flexibility to deem an issuer to be a reporting issuer upon their application and in appropriate circumstances as well as a further means of protecting the public by ensuring that issuers with publicly traded securities are subject to the requirements of the Act where appropriate.
211. (1) Paragraphs 2, 3 and 4 of section 95 of the Act are repealed and the following substituted:

 

Minimum deposit period

2. The offeror shall allow at least 35 days from the date of the bid during which securities may be deposited pursuant to the bid.

When taking up prohibited

3. No securities deposited pursuant to the bid shall be taken up by the offeror until the expiration of 35 days from the date of the bid.

Withdrawal rights

4. Securities deposited pursuant to the bid may be withdrawn by or on behalf of a depositing security holder,

i. at any time where the securities have not been taken up by the offeror,

ii. at any time before the expiration of 10 days from the date of a notice of change or variation under section 98, and

iii. if the securities have not been paid for by the offeror within three business days after having been taken up.

(2) Paragraph 10 of section 95 of the Act is repealed and the following substituted:

Same

10. Any securities that are taken up by the offeror under the bid shall be paid for by the offeror as soon as possible, and in any event not more than three business days, after the taking up of the securities.

(3) Paragrpah 12 of section 95 of the Act is repealed and the following substituted:

Extension restricted

12. A bid may not be extended by the offeror, where all the terms and conditions thereof have been complied with except those waived by the offeror, unless the offeror first takes up all securities deposited thereunder and not withdrawn.

(4) Section 95 of the Act, as amended by the Statutes of Ontario, 1994, chapter 11, section 349, is further amended by adding the following paragrpah:

Same

12.1 Despite paragraph 12, if the offeror waives any terms or conditions of a bid and extends the bid in circumstances where the rights of withdrawal conferred by subparagraph 4 ii are applicable, the bid shall be extended without the offeror first taking up the securities which are subject to such rights of withdrawal.

212. Subsection 99 (1) of the Act, as amended by the Statutes of Ontario, 1993, chapter 27, Schedule, is repealed and the following substituted:

Directors' circular

(1) Where a take-over bid has been made, a directors' circular shall be prepared and delivered by the board of directors of an offeree issuer to every person and company to whom a take-over bid must be delivered under paragraph 1 of section 95 not later than 15 days after the date of the bid.

213. Section 100 of the Act is repealed and the following substituted:

Commencement of take-over bid

100. (1) A take-over bid may be commenced in accordance with either subsection (2) or subsection (7).

Commencement by delivery

(2) A take-over bid may, and an issuer bid shall, be commenced by delivering the bid to the security holders referred to in paragraph 1 of section 95 in accordance with subsection (6).

Filing and delivery to offeree issuer

(3) If a bid is commenced under subsection (2), the bid shall be filed and, in the case of a take-over bid, delivered to the offeree issuer's principal office on the same day as, or as soon as practicable after, the bid is delivered under subsection (2).

Notice of change or variation

(4) A notice of change or variation in respect of a bid shall be filed and, in the case of a take-over bid, delivered to the offeree issuer's principal office on the same day as, or as soon as practicable after, the notice of change or variation is delivered to holders of securities of the offeree issuer.

Directors' circulars

(5) Every directors' circular and every individual director's or officer's circular or any related notice of change that is delivered to security holders of an offeree issuer shall be filed and shall be delivered to the offeror's principal office on the day the directors' circular or individual director's or officer's circular or the notice of change is delivered to the holders of securities of the offeree issuer, or as soon as practicable thereafter.

Delivery and date of bid, etc.

(6) A take-over bid or issuer bid, a take-over bid circular, an issuer bid circular, a directors' circular, an individual director's or officer's circular and every notice of change or variation in any such bid or circular shall be mailed by prepaid first class mail or delivered by personal delivery or in such other manner as the Director may approve to the intended recipient and any bid, circular or notice so mailed or delivered shall be deemed to have been delivered and, subject to and any bid, circular or notice so mailed or delivered shall be deemed to have been delivered and, subject to subsections (8) and (9), shall be deemed conclusively for the purposes of this Part and the regulations to have been dated as of the date on which it was so mailed or delivered to all or substantially all of the persons or companies entitled to receive it.

Commencing take-over bid by advertisement

(7) An offeror may commence a take-over bid by publishing an advertisement containing a brief summary of the bid in at least one major daily newspaper of general and regular paid circulation in Ontario, or by disseminating the advertisement in a prescribed manner, if,

(a) on or before the date of first publication or first dissemination of the advertisement, the offeror, or a person or company acting on its behalf, files the bid and delivers it to the offeree issuer's principal office, and files the advertisement;

(b) on or before the date of first publication or first dissemination of the advertisement, the offeror, or a person or company acting on its behalf, requests from the offeree issuer a list of the security holders referred to in paragraph 1 of section 95; and

(c) within two business days of the receipt by or on behalf of the offeror of a list of the security holders referred to in paragraph 1 of section 95, the bid is delivered to those security holders in accordance with subsection (6).

Same

(8) If a take-over bid is commenced in accordance with subsection (7), the bid shall be deemed conclusively for the purposes of this Part and the regulations to have been dated as of the date of first publication or first dissemination of the advertisement referred to in subsection (7).

Same

(9) If a take-over bid is advertised in accordance with subsection (7), and the offeror or a person or company acting on its behalf has complied with clauses (7) (a) and (b) but has not yet delivered the bid under clause (7) (c), a change or variation in the bid prior to the date on which the bid is delivered to security holders in accordance with clause (7) (c) that is advertised in a manner provided under subsection (7) shall be deemed conclusively for the purposes of this Part and the regulations to have been dated as of the date of first publication or first dissemination of the advertisement relating to the change or variation if,

(a) the advertisement contains a brief summary of the change or variation;

(b) on or before the date of first publication or first dissemination of the advertisement relating to the change or variation, the offeror, or a person or company acting on its behalf, files the notice of change or variation and delivers it to the offeree issuer's principal office, and files such advertisement; and

(c) within two business days of the receipt by or on behalf of the offeror of a list of the security holders referred to in paragraph 1 of section 95, the bid and the notice of change or variation is delivered to those security holders in accordance with subsection 98 (2) or 98 (4), as applicable, and subsection (6).

Same

(10) If an offeror, or a person or company acting on its behalf, satisfies the requirements of subsection (9), the notice of change or variation shall not be required to be filed and delivered under subsection (4).

Sections 95, 99 and 100 and paragraph 28 of subsection 143(1) of the Act are amended, among other things, to extend the time periods required for take-over bids, to permit bids to be commenced by advertisement and certain related matters. These amendments to the take-over bid provisions were all recommended in the Report of the Committee of the Investment Dealers Association of Canada to review Take-Over Bid Time Limits (known also as the "Zimmerman Report") to appropriately balance interests of target companies and their shareholders with those of acquiring companies. Such amendments have already been enacted by a number of other Canadian jurisdictions, but their proclamation has been deferred pending legislative change in all jurisdictions (including Ontario).

 

These provisions will come into force on a day to be named by proclamation of the Lieutenant Governor in order to ensure their coordinated introduction across Canada.

214. Section 107 of the Act is repealed and the following substituted:

 

Report

107. (1) A person or company who becomes an insider of a reporting issuer, other than a mutual fund, shall, within 10 days from the day that he, she or it becomes an insider, or such shorter period as may be prescribed by the regulations, file a report as of the day on which he, she or it became an insider disclosing any direct or indirect beneficial ownership of or control or direction over securities of the reporting issuer as may be required by the regulations.

Same

(2) An insider who has filed or is required to file a report under this section or any predecessor section and whose direct or indirect beneficial ownership of or control or direction over securities of the reporting issuer changes from that shown or required to be shown in the report or in the latest report filed by the person or company under this section or any predecessor section shall, within 10 days from the day on which the change takes place, or such shorter period as may be prescribed by the regulations, file a report of direct or indirect beneficial ownership of or control or direction over securities of the reporting issuer as of the day on which the change took place and the change or changes that occurred, giving any details of each transaction as may be required by the regulations.

Same

(3) A person or company who becomes an insider of a reporting issuer by reason of subsection 1 (8) or (9) shall file the reports required by subsections (1) and (2) of this section for the previous six months or such shorter period that he or she was a director or officer of the reporting issuer within 10 days from the day that the issuer became an insider of a reporting issuer or the reporting issuer became an insider of another reporting issuer, as the case may be, or such shorter period as may be prescribed by the regulations.

Section 107 of the Act is amended to require insider reports to be filed within 10 days of trades or whatever shorter period is prescribed by the rules or regulations, rather than within 10 days of the end of the month of the trade. (A corresponding amendment has been made to the rule-making provisions and the heads of authority enumerated therein that will afford the Commission the necessary flexibility to vary by rule any of the time periods prescribed under the Act in future). This will ensure that the public has access to insider trading information on a more timely basis than is currently the case. The amendment harmonizes with the requirements found in other provincial securities legislation.
215. Subsection 127 (1) of the Act, as re-enacted by the Statutes of Ontario, 1994, chapter 11, section 375, is amended by adding the following paragraphs:

 

7. An order that a person resign one or more positions that the person holds as a director or officer of an issuer.

8. An order that a person is prohibited from becoming or acting as a director or officer of any issuer.

Section 127 of the Act is amended to provide additional orders that the Commission may make for violations of the Act, to include orders to prohibit persons from acting as an officer or director of an issuer and requiring them to resign from such positions. This amendment harmonizes with the requirements found in other provincial securities legislation.
216. The Act is amended by adding the following section:

 

Payment of investigation costs

127.1 (1) If, in respect of a person or company whose affairs were the subject of an investigation, the Commission,

(a) is satisfied that the person or company has not complied with, or is not complying with, Ontario securities law; or

(b) considers that the person or company has not acted in the public interest,

the Commission may, after conducting a hearing, order the person or company to pay the costs of the investigation.

Payment of hearing costs

(2) If, in respect of a person or company whose affairs were the subject of a hearing, the Commission, after conducting the hearing,

 

(a) is satisfied that the person or company has not complied with, or is not complying with, Ontario securities law; or

(b) considers that the person or company has not acted in the public interest,

the Commission may order the person or company to pay the costs of or related to the hearing that are incurred by or on behalf of the Commission.

Payment of costs where offence

(3) Where a person or company is guilty of an offence under this Act or the regulations, the Commission may, after conducting a hearing, order the person or company to pay the costs of any investigation carried out in respect of that offence.

Costs

(4) For the purposes of subsections (1), (2) and (3), the costs that the Commission may order the person or company to pay include, but are not limited to, all or any of the following:

1. Costs incurred in respect of services provided by persons appointed or engaged under section 5, 11 or 12.

2. Costs of matters preliminary to the hearing.

3. Costs for time spent by the Commission or the staff of the Commission.

4. Any fee paid to a witness.

5. Costs of legal services provided to the Commission.

A new section 127.1 is added to give the Commission the power to order a person or company to pay the costs of a hearing or investigation on the conclusion of a hearing. The amendment harmonizes with the requirements found in other provincial securities legislation.
217. Section 129.1 of the Act, as enacted by the Statutes of Ontario, 1994, chapter 11, section 375, is repealed and the following substituted:

 

Limitation period

129.1 Except where otherwise provided in this Act, no proceeding under this Act shall be commenced later than six years from the date of the occurrence of the last event on which the proceeding is based.

The amendment to section 129.1 of the Act harmonizes this section with legislation in other Canadian provinces such as Alberta, British Columbia and Saskatchewan by changing the limitation for proceedings taken under the Act to six years from the current five years.
218. The Act is amended by adding the following section:

 

Liability for misrepresentation in offering memorandum

130.1 (1) Where an offering memorandum contains a misrepresentation, a purchaser who purchases a security offered by the offering memorandum during the period of distribution shall be deemed to have relied on the misrepresentation if it was a misrepresentation at the time of purchase, and,

(a) the purchaser has a right of action for damages against the issuer and a selling security holder on whose behalf the distribution is made; or

(b) where the purchaser purchased the security from a person or company referred to in clause (a), the purchaser may elect to exercise a right of rescission against the person or company, in which case the purchaser shall have no right of action for damages against such person or company.

Defence

(2) No person or company is liable under subsection (1) if he, she or it proves that the purchaser purchased the securities with knowledge of the misrepresentation.

Limitation in action for damages

(3) In an action for damages pursuant to subsection (1), the defendant is not liable for all or any portion of the damages that the defendant proves do not represent the depreciation in value of the security as a result of the misrepresentation relied upon.

Joint and several liability

(4) Subject to subsection (5), all or any one or more of the persons or companies specified in subsection (1) are jointly and severally liable, and every person or company who becomes liable to make any payment under this section may recover a contribution from any person or company who, if sued separately, would have been liable to make the same payment, unless the court rules that, in all the circumstances of the case, to permit recovery of the contribution would not be just and equitable.

Same

(5) Despite subsection (4), an issuer shall not be liable where it is not receiving any proceeds from the distribution of the securities being distributed and the misrepresentation was not based on information provided by the issuer, unless the misrepresentation,

(a) was based on information that was previously publicly disclosed by the issuer;

(b) was a misrepresentation at the time of its previous public disclosure; and

(c) was not subsequently publicly corrected or superseded by the issuer prior to the completion of the distribution of the securities being distributed.

Limitation re amount recoverable

(6) In no case shall the amount recoverable under this section exceed the price at which the securities were offered.

No derogation of rights

(7) The right of action for rescission or damages conferred by this section is in addition to and without derogation from any other right the purchaser may have at law.

Application

(8) This section only applies,

(a) to an offering memorandum which has been furnished to a prospective purchaser in connection with a distribution of a security under an exemption from section 53; and

(b) in the circumstances specified in the regulations for the purposes of this section.

A seller of securities in certain private placement transactions is required, by rule, to provide purchasers with a contractual right to sue for misrepresentations contained in the offering document. New section 130.1 of the Act converts this contractual right of action, which originally was introduced into the Regulations on an interim basis, into a statutory right of action. Section 130.1 extends the right of action to cover selling security holders as well as issuers and also extends the limitation period. The amendment furthers harmonization with other provinces which already have a statutory right of action. It also improves the efficiency of the capital markets by removing the need for foreign issuers to seek relief from the contractual right of action requirement.
219. Subsection 140 (2) of the Act is amended by striking out "by this Act" in the third line and substituting "by Ontario securities law". Section 140(2) is amended to track the language in subsection 140(1) and so provide the Commission with the necessary flexibility to maintain the confidentiality of information that is required to be filed under requirements established under the regulations or rules in addition to the Act itself.
220. (1) Paragraph 7 of subsection 143 (1) of the Act, as re-enacted by the Statutes of Ontario, 1994, chapter 33, section 8, is amended by adding "or providing for exemptions from or varying the requirements under this Act in respect of the disclosure or furnishing of information to the public or the Commission by registrants" at the end.

 

(2) Paragraph 16 of subsection 143 (1) of the Act, as re-enacted by the Statutes of Ontario, 1994, chapter 33, section 8, is repealed the following substituted:

16. Varying this Act to facilitate, expedite or regulate the distribution of securities or the issuing of receipts, including by establishing,

i. requirements in respect of distributions of securities by means of a prospectus incorporating other documents by reference,

ii. requirements in respect of distributions of securities by means of a simplified or summary prospectus or other form of disclosure document,

iii. requirements in respect of distributions of securities on a continuous or delayed basis,

iv. requirements in respect of pricing of distributions of securities after the issuance of a receipt for the prospectus filed in relation thereto,

v. procedures for the issuing of receipts for prospectuses after expedited or selective review thereof,

vi. provisions for the incorporation by reference of certain documents in a prospectus and the effect, including from a liability and evidentiary perspective, of modifying or superseding statements,

vii. requirements for the form of a prospectus certificate, including providing for alternative forms in circumstances other than those referred to in subsection 63 (2) of this Act,

viii. provisions for eligibility requirements to obtain a receipt for, or distribute under, a particular form of prospectus and the loss of that eligibility, and

ix. provisions for varying withdrawal rights.

(3) Subparagraph 28 ii of subsection 143 (1) of the Act, as enacted by the Statutes of Ontario, 1994, chapter 33, section 8, is amended by adding "varying the requirements of or" at the beginning.

 

(4) Subparagraph 28 iii of subsection 143 (1) of the Act, as enacted by the Statutes of Ontario, 1994, chapter 33, section 8, is amended by striking out "section 95" and substituting "sections 95, 96, 97, 98, 99 or 100 or providing exemptions therefrom".

(5) Subparagraph 28 iv of subsection 143 (1) of the Act, as enacted by the Statutes of Ontario, 1994, chapter 33, section 8, is amended by adding "varying the requirements of or" at the beginning.

(6) Paragraph 28 of subsection 143 (1) of the Act, as re-enacted by the Statutes of Ontario, 1994, chapter 33, section 8, is amended by striking out "and" at the end of subparagraph v and by adding the following subparagraphs:

vii. varying any or all of the time periods in Part XX, and

viii. prescribing manners of disseminating advertisements in accordance with subsection 100 (7).

(7) Paragraph 30 of subsection 143 (1) of the Act, as re-enacted by the Statutes of Ontario, 1994, chapter 33, section 8, is repealed and the following substituted:

30. Prescribing time periods under section 107 of the Act or varying or providing for exemptions from any requirement of Part XXI (Insider Trading and Self-Dealing).

(8) Paragraph 31 of subsection 143 (1) of the Act, as re-enacted by the Statutes of Ontario, 1994, chapter 33, section 8, is amended by striking out "and" at the end of subparagraph x, by adding "and" at the end of subparagraph xi and by adding the following subparagraph:

xii. prescribing requirements in respect of, or in relation to, promoters, advisers or persons and companies who administer or participate in the administration of the affairs of mutual funds or non-redeemable investment funds.

(9) Subsection 143 (1) of the Act, as re-enacted by the Statutes of Ontario, 1994, chapter 33, section 8 and amended by 1997, chapter 19, section 23 and 1997, chapter 43, Schedule F, section 13, is further amended by striking out "varying the application of", wherever it appears, and substituting in each case "varying" and by adding the following paragraphs:

47. Regulating scholarship plans and the distribution and trading of the securities of scholarship plans.

48. Specifying the conditions under which any particular type of trade that would not otherwise be a distribution shall be a distribution.

49. Varying this Act to permit or require methods of filing or delivery, to or by the Commission, issuers, registrants, security holders or others, of documents, information, notices, books, records, things, reports, orders, authorizations or other communications required under or governed by Ontario securities laws.

50. Providing for exemptions from or varying the requirements set out in Part XIII.

51. Prescribing amounts for the purposes of paragraphs 5 and 18 of subsection 35 (1) and clauses 72 (1) (d) and (l).

52. Providing for exemptions from or varying the requirements under this Act in respect of amendments to prospectuses or preliminary prospectuses, or prescribing circumstances under which an amendment to a preliminary prospectus or prospectus must be filed.

53. Providing for exemptions from or varying the requirements of section 62, 65 or 71.

54. Providing for exemptions from or varying the requirements of subsections 72 (4), (5), (6) and (7).

55. Specifying exemptions and circumstances that shall be subject to section 130.1.

56. Prescribing, providing for exemptions from or varying any or all of the time periods in this Act.

Amendments to section 143 of the Act ensure that the Commission's rule-making authority is sufficient to encompass areas in which the Commission has previously regulated by policy statement and other instruments and to ensure consistency in approach and language. The proposed changes to the Commission's rule-making authority are enabling, not determinative. Any proposed rule must be published for comment and is subject to review by the Minister of Finance.

 

Section 220(6) of the Prosperity Act will come into force on a day to be named by proclamation of the Lieutenant Governor. As the rule-making authority under section 220(6) relates back to sections 211, 212, and 213 of the Prosperity Act (i.e., the amendments recommended in the Zimmerman Report) whose proclamation is being deferred pending legislative changes in other jurisdictions, the proclamation date of this specific amendment is also being deferred.

221. The Act is amended by adding the following section:

 

Exchange of information

153. Despite the Freedom of Information and Protection of Privacy Act, the Commission may provide information to and receive information from other securities or financial regulatory authorities, stock exchanges, self-regulatory bodies or organizations, law enforcement agencies and other governmental or regulatory authorities, both in Canada and elsewhere, and any information so received by the Commission shall be exempt from disclosure under that Act if the Commission determines that the information should be maintained in confidence.

Commencement

222. (1) Subject to subsection (2), this Part comes into force on the day this Act receives Royal Assent.

Same

(2) Sections 202, 211, 212 and 213 and subsection 220 (6) come into force on a day to be named by proclamation of the Lieutenant Governor.

New section 153 of the Act establishes that the "Freedom of Information and Protection of Privacy Act" does not prevent the exchange of information with other regulators, stock exchanges, self-regulatory organizations and law enforcement agencies, both in Canada and elsewhere, nor does it require disclosure of information so obtained. In the context of today's global capital markets, this provision enhances the ability of the Commission to duly administer Ontario securities law and regulate the capital markets in Ontario.

 

II. Amendments to the Commodity Futures Act

The amendments to the Commodity Futures Act (the "CFA") are numerous. The vast majority of these amendments have been made to bring the CFA (which has not been significantly amended since it was first introduced) into line with the Securities Act. The Securities Act has had a number of amendments made to it to reflect current market activity and to achieve harmonization with the legislation of other Canadian jurisdictions.

In particular, included in the package of amendments to the CFA are amendments which correspond to the amendments previously made to the Securities Act by the Financial Services Statute Law Reform Amendment Act 1994, S.O. 1994 c.11 (the "Reform Act") and An Act to Amend the Securities Act S.O. 1994, c.33 ("Bill 190"). The amendments also bring the Commission's powers regarding commodity futures more into harmony with the powers of the Alberta, British Columbia and Saskatchewan Securities Commissions which regulate commodity futures as part of their respective Securities Acts. Additional amendments correspond to new amendments to the Securities Act contained in the More Tax Cuts for Jobs, Growth and Prosperity Act, 1999 (the "Prosperity Act").

The summary below includes the text of the amendments to the CFA together with a brief explanation for each amendment to the CFA (which appears in italics). All the amendments to the CFA came into force the day the Prosperity Act received Royal Assent unless specifically otherwise noted below.

Summary of the Changes to the CFA

PART IV

COMMODITY FUTURES ACT

21. The Commodity Futures Act is amended by striking out "self-regulatory body" and "self-regulatory bodies" wherever they occur and substituting in each case "self-regulatory organization" and "self-regulatory organizations", as the case may be.

22. (1) Section 1 of the Act is amended by adding the following definitions:

"market participant" means a registrant, a person or company exempted from the requirement to be registered under this Act by a ruling of the Commission, a recognized clearing house, a registered commodity futures exchange, a recognized commodity futures exchange, a recognized self-regulatory organization, the Canadian Investor Protection Fund, the Toronto Futures Exchange Contingency Fund, the general partner of a market participant or any other person or company or member of a class of persons or companies designated by the regulations; ("participant au marche")

"Ontario commodity futures law" means,

(a) this Act,

(b) the regulations, and

(c) in respect of a person or company, a decision of the Commission or a Director to which the person or company is subject; ("droit ontarien des contrats a terme sur marchandises")

"recognized clearing house" means a clearing house recognized by the Commission under subsection 17 (1); ("chambre de compensation reconnue")

"recognized commodity futures exchange" means a person or company that is recognized by the Commission as a commodity futures exchange under this Act or that is exempted from the requirement to be recognized by order of the Commission; ("Bourse reconnue de contrats à terme sur marchandises")

"recognized self-regulatory organization" means a self-regulatory organization recognized by the Commission under subsection 16 (1); ("organisme d'autoréglementation reconnu")

"registered commodity futures exchange" means a person or company that is registered by the Commission as a commodity futures exchange under this Act; ("Bourse inscrite de contrats à terme sur marchandises")

"rules" means,

(a) the rules made under section 66, and

(b) the orders and rulings listed in the Schedule to this Act; ("règles")

"self-regulatory organization" means a person or company that represents registrants and is organized for the purpose of regulating the operations and standards of practice and business conduct of its members and their representatives with a view to promoting the protection of investors and the public interest. ("organisme d'autoréglementation")

(2) The definitions of "commodity futures exchange", "decision", "Director", "Minister", "misrepresentation" and "regulations" in section 1 of the Act are repealed and the following substituted:

"commodity futures exchange" means an association or organization, whether incorporated or unincorporated, operated for the purpose of providing the facilities necessary for the trading of contracts; ("bourse de contrats à terme sur marchandises")

"decision" means, in respect of a decision of the Commission or a Director, a direction, decision, order, ruling or other requirement made under a power or right conferred by this Act or the regulations; ("décision")

"Director" means the Executive Director of the Commission, a Director or Deputy Director of the Commission, or a person employed by the Commission in a position designated by the Executive Director for the purpose of this definition; ("directeur")

"Minister" means the Minister of Finance or other member of the Executive Council to whom the administration of this Act may be assigned; ("ministre")

"misrepresentation" means,

(a) an untrue statement of material fact, or

(b) an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in the light of the circumstances in which it was made;("présentation inexacte des faits")

"regulations" means the regulations made under this Act and, unless the context otherwise indicates, includes the rules. ("règlements")

(3) The definition of "officer" in section 1 of the Act is amended by inserting "or any individual acting in a similar capacity on behalf of a registrant" after "authority" at the end.

(4) The definition of "register" in section 1 of the Act is repealed.

(5) Section 1 of the Act is amended by adding the following subsection:

Same

(2) For the purposes of this Act, the regulations and the rules, any of "future-oriented financial information" and "non-redeemable investment fund" may be defined in the regulations or the rules and if so defined shall have the defined meaning.

23. The Act is amended by adding the following section:

Purposes

1.1 (1) The purposes of this Act are,

(a) to provide protection to investors from unfair, improper or fraudulent practices; and

(b) to foster fair and efficient commodity futures markets and confidence in those markets.

Principles to consider

(2) In pursuing the purposes of this Act, the Commission shall have regard to the following fundamental principles:

1. Balancing the importance to be given to each of the purposes of this Act may be required in specific cases.

2. The primary means for achieving the purposes of this Act are,

i. requirements for timely, accurate and efficient disclosure of information,

ii. restrictions on fraudulent and unfair market practices and procedures, and

iii. requirements for the maintenance of high standards of fitness and business conduct to ensure honest and responsible conduct by market participants.

3. Effective and responsive commodity futures regulation requires timely, open and efficient administration and enforcement of this Act by the Commission.

4. The Commission should, subject to an appropriate system of supervision, use the enforcement capability and regulatory expertise of recognized self-regulatory organizations.

5. The integration of commodity futures markets is supported and promoted by the sound and responsible harmonization and co-ordination of commodity futures regulation regimes.

6. Business and regulatory costs and other restrictions on the business and investment activities of market participants should be proportionate to the significance of the regulatory objectives sought to be realized.

Explanatory Note

Interpretation

New definitions of "market participant", "Ontario commodity futures law", "rules" and "self-regulatory organization" are added to section 1 of the CFA. These definitions are used in various sections that have been added to the CFA by the Prosperity Act. The definitions correspond with changes made to subsection 1(1) of the Securities Act by various sections of the Reform Act and the current amendments to the Securities Act by the Prosperity Act.

New definitions of "recognized clearing house", "recognized commodity futures exchange", "recognized self-regulatory organization", and "registered commodity futures exchange", are added to section 1 of the CFA. These definitions are used in the new Part VI which has been added to the CFA. The new definitions correspond to the amendments made to the Securities Act by the Reform Act. As a result of the new definition of "self-regulatory organization", all references to "self-regulatory body" in the CFA are replaced by that term.

The definition of "commodity futures exchange" in section 1 of the CFA is amended to delete the

words "by open auction" and the word "physical" from the phrase "physical facility". Many commodity futures exchanges trade exclusively through electronic trading systems. The definition of the term "commodity futures exchange" previously contained in the CFA required that the association or organization be operated for the purpose of providing the "physical"

facilities and that contracts be traded by "open auction". The movement of the market to electronic trading systems and computer "trading floors" makes both references obsolete. The amendments are necessary to ensure that exchanges where trading occurs electronically can be recognized "commodity futures exchanges" and can continue to be subject to the CFA. The previous definition of "commodity futures exchange" was drafted before alternative trading systems were developed.

The amendments to the definitions of "decision" and "Director" in section 1 of the CFA are technical amendments. These definitions are used in the new Part II.1 which has been added to the CFA. The new definitions correspond to the amendments made to the Securities Act by the Reform Act.

The amendment to the definition of "Minister" in section 1 of the CFA from Minister of Financial Institutions to Minister of Finance is a purely technical amendment.

The definition of "misrepresentation", "officer" and "regulation" in section 1 of the CFA are amended, to correspond to the Securities Act.

The definition of "register" in section 1 of the CFA is repealed, to correspond to the amendments to the Securities Act by the Reform Act.

New subsection 1(2) of the CFA contemplates the definition of "future-oriented financial information" and "non-redeemable investment fund" by regulation or rule, to correspond to the Securities Act.

A new purpose section is added to the CFA as section 1.1 to correspond to the Securities Act.

24. The Act is amended by adding the following Part:

PART I.1

COMMISSION

Responsibility for administration of Act

2.1 (1) The Commission is responsible for the administration of this Act.

Eligibility to sit on hearing

(2) No member who exercises a power or performs a duty of the Commission under Part IV, except section 13, in respect of a matter under investigation or examination shall sit on a hearing by the Commission that deals with the matter, except with the written consent of the parties to the proceeding.

25. Subsection 3 (2) of the Act is amended by striking out "subsections 7 (3) and (4) apply" in the second last line and substituting "subsection 9 (1) applies".

Explanatory Note

Part I.1 Commission

Part I.1 of the CFA is new and is added to give the Commission responsibility for the administration of the CFA, to correspond to section 2 of the Securities Act. The CFA, as previously drafted, did not contain language which directly vested in the Commission the authority to administer the statute. The Part 1.1 is necessary to address this oversight.

The cross-references in subsection 3(2) of the CFA are changed as a consequence of other amendments to the CFA.

26. The Act is amended by adding the following part:

PART II.1

EXECUTIVE DIRECTOR AND SECRETARY

Assignment of powers and duties

3.1 (1) A quorum of the Commission may assign any of its powers and duties under this Act, except powers and duties under section 4 and Part IV, to the Executive Director or to another Director.

Same

(2) The Executive Director may assign any of his or her powers and duties to another Director, other than powers and duties assigned to the Executive Director by the Commission.

Revocation of assignment

(3) The Commission may revoke, in whole or in part, an assignment of powers and duties made under subsection (1) and the Executive Director may revoke, in whole or in part, an assignment of powers and duties made under subsection (2).

Terms and conditions

(4) An assignment under this section may be subject to such terms and conditions as are set out in the assignment.

Powers and duties of the Secretary

3.2 (1) The Secretary,

(a) may accept service of all notices and other documents on behalf of the Commission;

(b) when authorized by the Commission, may sign a decision made by the Commission as a result of a hearing;

(c) may certify under his or her hand a decision made by the Commission or a document, record or thing used in connection with a hearing by the Commission if certification is required for a purpose other than that stated in subsection 5 (3);

(d) may exercise such other powers as are vested in the Secretary by this Act or the regulations; and

(e) shall perform such duties as are imposed on the Secretary by this Act or the regulations or by the Commission.

Acting Secretary

(2) If the Secretary is absent for any reason, the Commission may designate another individual to act in the capacity of Secretary and the individual designated has all the powers and duties of the Secretary.

Certification by Secretary

(3) A certificate purporting to be signed by the Secretary is, without proof of the office or signature, admissible in evidence, so far as it is relevant, for all purposes in any action, prosecution or other proceeding.

27. Subsection 4 (1) of the Act is repealed and the following substituted:

Review of decision

(1) Within 30 days after a decision of the Director, the Commission may notify the Director and any person or company directly affected of its intention to convene a hearing to review the decision.

28. (1) Subsection 5 (1) of the Act is repealed and the following substituted:

Appeal

(1) A person or company directly affected by a final decision of the Commission may appeal to the Divisional Court within 30 days after the later of the making of the final decision or the issuing of the reasons for the final decision.

(2) Subsection 5 (3) of the Act is amended by striking out the portion before clause (a) and substituting the following:

Certification of documents

(3) The Secretary shall certify to the Divisional Court,

. . . . .

(3) Subsection 5 (4) of the Act is repealed and the following substituted:

Respondent on appeal

(4) The Commission is the respondent to an appeal under this section.

Minister

(4.1) The Minister is entitled to be heard by counsel or otherwise on the argument of an appeal under this section, whether or not the Minister is named as a party to the appeal.

29. Section 6 of the Act is repealed.

Explanatory Note

Part II.1 Executive Director and Secretary

New Part II.1 of the CFA provides for the powers and duties of the Executive Director and Secretary and for the assignment or delegation of their powers and duties and those of the Commission, to correspond to the Securities Act. The Securities Act, prior to the Reform Act, provided for the assignment of certain powers to the Director. The Reform Act modified this provision by recognizing the existence of the Executive Director and by elaborating on the right to assign, and revoke, powers. The CFA, as currently drafted, does not currently contemplate the assignment of any of the Commission's powers regarding the CFA. The amendment, therefore, constitutes a new power with respect to the CFA which is necessary to permit the consistent administration of the two pieces of legislation under the Commission's jurisdiction. The CFA previously outlined the duties of the Secretary in section 6, as part of Part III - Administrative Proceedings, Reviews and Appeals. The amendments delete section 6 and create new Part II.1 to cover the duties of the Executive Director and the Secretary, as had been done in the Reform Act.

Subsection 4(1) of the CFA dealing with the review of decisions by the Director is amended to delete the language limiting the ability of the Commission to review the decisions of a Director. The amendment is intended to ensure that there is an appropriate check on the powers of a Director under the CFA and corresponds to the amendment to subsection 8(1) of the Securities Act by the Prosperity Act.

The amendment to section 5 of the CFA is a technical amendment regarding appeal procedures. The amendment corresponds to the amendments made to the appeal process in section 9 of the Securities Act by the Reform Act.

30. Parts IV, V, VI and VII of the Act are repealed and the following substituted:

PART IV

INVESTIGATIONS AND EXAMINATIONS

Investigation order

7. (1) The Commission may, by order, appoint one or more persons to make such investigation with respect to a matter as it considers expedient,

(a) for the due administration of Ontario commodity futures law or the regulation of the commodity futures markets in Ontario;

(b) with respect to any other matter relating to trading in contracts; or

(c) to assist in the due administration of the commodity futures laws or the regulation of trading in contracts in another jurisdiction.

Contents of order

(2) An order under this section shall describe the matter to be investigated.

Scope of investigation

(3) For the purposes of an investigation under this section, a person appointed to make the investigation may investigate and inquire into,

(a) the affairs of the person or company in respect of which the investigation is being made, including any trades, communications, negotiations, transactions, investigations, loans, borrowings or payments to, by, on behalf of, or in relation to or connected with the person or company and any property, assets or things owned, acquired or alienated, in whole or in part, by the person or company or by any other person or company acting on behalf of, or as agent for, the person or company; and

(b) the assets at any time held, the liabilities, debts, undertakings and obligations at any time existing, the financial or other conditions at any time prevailing in or in relation to or in connection with the person or company, and any relationship that may at any time exist or have existed between the person or company and any other person or company by reason of trades in contracts, investments, commissions promised, secured or paid, interests held or acquired, the loaning or borrowing of money, stock or other property, the transfer or holding of stock, interlocking directorates, common control, undue influence or control or any other relationship.

Right to examine

(4) For the purposes of an investigation under this section, a person appointed to make the investigation may examine any documents or other things, whether they are in the possession or control of the person or company in respect of which the investigation is ordered or of any other person or company.

Minister may order investigation

(5) Despite subsection (1), the Minister may, by order, appoint one or more persons to make such investigation as the Minister considers expedient,

(a) for the due administration of Ontario commodity futures law or the regulation of the commodity futures markets in Ontario;

(b) with respect to any other matter relating to trading in contracts; or

(c) to assist in the due administration of the commodity futures laws or the regulation of trading in contracts in another jurisdiction.

Same

(6) A person appointed under subsection (5) has, for the purpose of the investigation, the same authority, powers, rights and privileges as a person appointed under subsection (1).

Financial examination order

8. (1) The Commission may, by order, appoint one or more persons to make such examination of the financial affairs of a market participant as it considers expedient,

(a) for the due administration of Ontario commodity futures law or the regulation of the commodity futures markets in Ontario;

(b) with respect to any other matter relating to trading in contracts; or

(c) to assist in the due administration of the commodity futures laws or the regulation of trading contracts in another jurisdiction.

Contents of order

(2) An order under subsection (1) shall describe the matter to be examined.

Right to examine

(3) For the purposes of an examination under this section, a person appointed to conduct the examination may examine any documents or other things, whether they are in the possession or control of the market participant or any other person or company.

Power of investigator or examiner

9. (1) A person making an investigation or examination under section 7 or 8 has the same power to summon and enforce the attendance of any person and to compel him or her to testify on oath or otherwise, and to summon and compel any person or company to produce documents and other things, as is vested in the Superior Court of Justice for the trial of civil actions, and the refusal of a person to attend or to answer questions or of a person or company to produce such documents or other things as are in his, her or its custody or possession makes the person or company liable to be committed for contempt by the Superior Court of Justice as if in breach of an order of that court.

Rights of witness

(2) A person or company giving evidence under subsection (1) may be represented by counsel and may claim any privilege to which the person or company is entitled.

Inspection

(3) A person making an investigation or examination under section 7 or 8 may, on production of the order appointing him or her, enter the business premises of any person or company named in the order during business hours and inspect any documents or other things that are used in the business of that person or company and that relate to the matters specified in the order, except those maintained by a lawyer in respect of his or her client's affairs.

Authorization to search

(4) A person making an investigation or examination under section 7 or 8 may apply to a judge of the Superior Court of Justice in the absence of the public and without notice for an order authorizing the person or persons named in the order to enter and search any building, receptacle or place specified and to seize anything described in the authorization that is found in the building, receptacle or place and to bring it before the judge granting the authorization or another judge to be dealt with by him or her according to law.

Grounds

(5) No authorization shall be granted under subsection (4) unless the judge to whom the application is made is satisfied on information under oath that there are reasonable and probable grounds to believe that there may be in the building, receptacle or place to be searched anything that may reasonably relate to the order made under section 7 or 8.

Power to enter, search and seize

(6) A person named in an order under subsection (4) may, on production of the order, enter any building, receptacle or place specified in the order between 6 a.m. and 9 p.m., search for and seize anything specified in the order, and use as much force as is reasonably necessary for that purpose.

Expiration

(7) Every order under subsection (4) shall name the date that it expires, and the date shall be not later than 15 days after the order is granted.

Application

(8) Sections 159 and 160 of the Provincial Offences Act apply to searches and seizures under this section with such modifications as the circumstances require.

Private residence

(9) In subsections (4), (5) and (6), "building, receptacle or place" does not include a private residence.

Copying

10. (1) Anything seized or produced under this Part shall be made available for inspection and copying by the person or company from which it was obtained, if practicable.

Return

(2) Anything seized or produced under this Part shall be returned to the person or company from which it was obtained when,

(a) retention is no longer necessary for the purposes of an investigation, examination, proceeding or prosecution; or

(b) the Commission so orders.

Report of investigation or examination

11. (1) A person appointed under subsection 7 (1) or 8 (1) shall, at the request of the Chair of the Commission or of a member of the Commission involved in making the appointment, provide a report to the Chair or member, as the case may be, or any testimony given and any documents or other things obtained under section 9.

Same

(2) A person appointed under subsection 7 (5) shall, at the request of the Chair of the Commission, provide a report to the Chair or any testimony given and any documents or other things obtained under section 9.

Report privileged

(3) A report provided under this section is privileged.

Non-disclosure

12. (1) Except in accordance with section 13, no person or company shall disclose at any time, except to his, her or its counsel,

(a) the nature or content of an order under section 7 or 8; or

(b) the name of any person examined or sought to be examined under section 9, any testimony given under section 9, any information obtained under section 9, the nature or content of any questions asked under section 9, the nature or content of any demands for the production of any document or other thing under section 9 or the fact that any document or other thing was produced under section 9.

Confidentiality

(2) Any report provided under section 11 and any testimony given or documents or other things obtained under section 9 shall be for the exclusive use of the Commission and shall not be disclosed or produced to any other person or company or in any other proceeding except in accordance with section 13.

Disclosure by Commission

13. (1) If the Commission considers that it would be in the public interest, it may make an order authorizing the disclosure to any person or company of,

(a) the nature and content of an order under section 7 or 8;

(b) the name of any person examined or sought to be examined under section 9, any testimony given under section 9, any information obtained under section 9, the nature or content of any questions asked under section 9, the nature or content of any demands for the production of any document or other thing under section 9 or the fact that any document or other thing was produced under section 9; or

(c) all or part of a report provided under section 11.

Opportunity to object

(2) No order shall be made under subsection (1) unless the Commission has, where practicable, given reasonable notice and an opportunity to be heard to,

(a) persons and companies named by the Commission; and

(b) in the case of disclosure of testimony given or information obtained under section 9, the person or company that gave the testimony or from which the information was obtained.

Disclosure to police

(3) Without the written consent of the person from whom the testimony was obtained, no order shall be made under subsection (1) authorizing the disclosure of testimony given under subsection 9 (1) to,

(a) a municipal, provincial, federal or other police force or to a member of a police force; or

(b) a person responsible for the enforcement of the criminal law of Canada or of any other country or jurisdiction.

Terms and conditions

(4) An order under subsection (1) may be subject to terms and conditions imposed by the Commission.

Disclosure by court

(5) A court having jurisdiction over a prosecution under the Provincial Offences Act initiated by the Commission may compel production to the court of any testimony given or any document or other thing obtained under section 9, and after inspecting the testimony, document or thing and providing all interested parties with an opportunity to be heard, the court may order the release of the testimony, document or thing to the defendant if the court determines that it is relevant to the prosecution, is not protected by privilege and is necessary to enable the defendant to make full answer and defence, but the making of an order under this subsection does not determine whether the testimony, document or thing is admissible in the prosecution.

Disclosure in investigation or proceeding

(6) A person appointed to make an investigation or examination under this Act may, for the purpose of conducting an examination or in connection with a proceeding commenced or proposed to be commenced by the Commission under this Act, disclose or produce anything mentioned in subsection (1).

Disclosure to police

(7) Without the written consent of the person from whom the testimony was obtained, no disclosure shall be made under subsection (6) of testimony given under subsection 9 (1) to,

(a) a municipal, provincial, federal or other police force or to a member of a police force; or

(b) a person responsible for the enforcement of the criminal law of Canada or of any other country or jurisdiction.

Prohibition on use of compelled testimony

(8) Testimony given under section 9 shall not be admitted in evidence against the person from whom the testimony was obtained in a prosecution for an offence under section 55 or in any other prosecution governed by the Provincial Offences Act.

Explanatory Note

Part IV - Investigations and Examinations

Part IV of the CFA, concerning the investigation and examination powers of the Commission, is amended, to correspond to amendments made in Part VI of the Securities Act by the Reform Act, and includes provisions which parallel new amendments to section 17 of the Securities Act under the Prosperity Act.

(i) Investigation, subsections 7(1) and (2) of the CFA

The requirement of the former subsection 7(1) of the CFA that there be a sworn statement that a person or company appears to have contravened the CFA or the regulations or committed a criminal offence in connection with a transaction relating to contracts has been removed. Previously Commission staff could have sought an investigation order pursuant to former subsection 7(2) of the CFA which did not require a sworn statement. Also, under subsection 7(1) of the CFA, as set out in the Prosperity Act, the Commission's investigation power no longer extends to criminal offences under the Criminal Code. This particular amendment is necessary because of case law suggesting that it may be unconstitutional for a provincial securities commission to order an investigation into activities constituting an offence under the Criminal Code. The scope of the investigation power of the Commission has been clarified by clause 7(1)(c), which would specifically enable the Commission to order an investigation in order to assist in the due administration of the commodity futures laws or the regulation of trading in contracts in another jurisdiction. This is appropriate since commodity futures related transactions often cross inter-provincial and international borders.

The investigation power of the Commission under former subsections 7(1) and (2) of the CFA extended to any person or company. In this respect, there is no change to the status quo.

(ii) Scope of Investigation and Right to Examine, subsections 7(3) and (4) of the CFA

Subsection 7(3) sets out the matters that can be investigated or inquired into.

Subsection 7(4) specifies that "documents or other things" can be examined, whether or not they are in the possession or control of the person or company under investigation. This clarifies the scope of former subsection 7(3) and 7(4) of the CFA.

(iii) Investigation May be Ordered by Minister subsection 7(5) and (6) of the CFA

The scope of the Minister's authority to order an investigation is the same as that of the Commission. Similarly, a person appointed by the Minister to make an investigation has the same powers, rights and privileges as a person appointed by the Commission to make an investigation.

(iv) Financial Examination, section 8 of the CFA

The circumstances under which the Commission may order a financial examination or audit are the same as those for ordering an investigation. However, the Commission's investigation power is broader than its financial audit power because the latter is confined to "market participants". Compared to the financial audit power under the former subsection 14(1) of the CFA, the Commission's financial examination power under subsection 8(1) of the Act as set out in the Prosperity Act is wider in scope, to the extent that "market participant" is broadly defined to capture not just a registrant or clearing house of a commodity futures exchange in Ontario, but also other participants in Ontario's commodity futures market. In auditing the financial affairs of a market participant, a person authorized to do so has the power to examine any "documents or other things", whether or not they are in the possession or control of the person or company being audited. The authority to order a financial examination to assist in the administration of the commodity futures law or the regulation of trading of contracts in another jurisdiction is consistent with increased efforts to co-ordinate commodity futures regulation on an inter-provincial and international basis. Extending the scope of the power to market participants generally will allow the Commission to inquire into the financial integrity of a broader class of entities which may handle investor funds, thereby enhancing the integrity of Ontario's commodity futures market

The fee requirement of the former subsection 14(3) of the CFA will not apply to financial examinations. Instead, it will apply to compliance reviews pursuant to section 14.1 of the CFA (below).

(v) Power to Compel Testimony or Production of Documents, subsection 9(1) and (2) of the CFA

The power to compel testimony under oath pursuant to subsection 9(1) is available to both an investigator and a financial examiner. The reference to the Evidence Act (in former section 7(4) of the CFA) has been omitted in subsection 9(1) but is picked up in new section 79 of the CFA (below). Under the Evidence Act, a bank in an action to which it is not a party is exempted from producing any books or records for the purpose of proving any matters, transactions or accounts noted therein unless an order of the court is made for special cause. Similarly, officers of a bank are exempt from being compelled to attend as witnesses. These exemptions are specifically overridden by new section 79 of the CFA, with the result that the Commission may compel a bank or bank officer to produce records and may compel the attendance of bank officers to give evidence.

(vi) Inspection Power, subsection 9(3) of the CFA

This is a new provision that will enable an investigator or financial examiner to enter, without a warrant, the business premises of the person or company named in the investigation or financial examination order in order to inspect documents and records used in the business in relation to the matter under investigation or examination. However, this could be done only during business hours and upon production of the investigation or financial examination order. Also, it does not permit an investigator or financial examiner to take away any of the documents under inspection. Any other form of entry, search or seizure will require a prior court order under subsection 9(4) below.

To address concerns about solicitor-client privilege, the provision expressly exempts from the inspection power those documents and other things that are maintained by a lawyer in respect of his or her client's affairs.

(vii) Search and Seizure Power, subsections 9(4) to (9) of the CFA

The search and seizure power is now subject to the requirement of a prior court authorization or warrant, based on a sworn statement giving rise to reasonable and probable grounds to believe that there may be something in the place to be searched that reasonably relates to the investigation or financial examination order. Other safeguards are provided for, such as, the time during which the search and seizure may be conducted, the use of reasonable force, the automatic expiry of the court authorization 15 days after it is granted, and the exclusion of private residences.

(viii) Copying, Inspection and Return of Documents Seized or Produced, section 10 of the CFA

The right to inspect and copy documents seized pursuant to the search and seizure provision, which was already provided for in the former subsection 7(7) of the CFA, is not only preserved but is also extended by subsection 10(1) to documents produced pursuant to a summons compelling production of documents.

In addition, subsection 10(2) now provides for the return of such documents.

(ix) Report of Investigation or Financial Examination, section 11 of the CFA

Under subsection 11(1) of the CFA, the report of an investigation or financial examination ordered by a Commissioner is required to be submitted to the same Commissioner. The objective is that only one or two Commissioners will review the staff report (if any) so there can be no question of bias on the part of the other Commissioners who may subsequently sit on a hearing resulting from the report.

Under subsection 11(2), the report of an investigation ordered by the Minister is required to be made to the Chair.

It is essential, under subsection 11(3), that the investigation or financial examination report remain privileged and confidential to ensure that those who are asked to participate in the process are not inhibited in providing information necessary for the purposes of the investigation or financial examination.

(x) Non-disclosure of Investigation or Financial Examination Report, section 12 of the CFA

The confidentiality requirement contained in the former section 10 of the CFA is clarified by section 12 of the CFA, the primary purpose of which is the protection of witnesses confidences to encourage candour and the prevention of witness collaboration.

(xi) Disclosure by the Commission, section 13 of the CFA

Section 13 is a new provision that complements the confidentiality requirement of section 12 above.

Subsection 13(1) prescribes the substantive requirement ("in the public interest") for disclosure by the Commission of matters relating to or arising from an investigation or financial examination.

Subsection 13(2) and (3) prescribe the procedural requirements for such disclosure, such as prior notice to certain of those who would be affected by the disclosure and, in case of disclosure of testimony to the police, written consent by the person from whom the testimony was obtained.

Subsection 13(5) grants the courts an ability, in a prosecution under the Provincial Offences Act, to order disclosure of testimony given or document obtained in an investigation or financial examination to enable a defendant to make full answer and defence.

Subsection 13(6) and (7) correspond to the amendments to section 17 of the Securities Act under the Prosperity Act. The subsections allow disclosure by an investigator of information obtained pursuant to powers of compulsion, for the purpose of conducting an investigation or related hearing without the need to obtain further Commission orders and subject to certain conditions.

Subsection 13(8) is intended to provide protection against self-incrimination for those who are compelled to give testimony in an investigation or financial examination and who are subsequently charged with a CFA or other provincial offence.

PART V

RECORD-KEEPING AND COMPLIANCE REVIEWS

Record-keeping

14. (1) Every market participant shall keep such books, records and other documents as are necessary for the proper recording of its business transactions and financial affairs and the transactions that it executes on behalf of others and shall keep such other books, records and documents as may otherwise be required under Ontario commodity futures law.

Record of transaction

(2) Without limiting the generality of subsection (1), every registered commodity futures exchange shall keep a record of the time at which each transaction on such commodity futures exchange took place and shall supply to any client of a member of such commodity futures exchange, on production of a written confirmation of a transaction with the member, particulars of the time at which the transaction took place and verification or otherwise of the matters set forth in the written confirmation.

Provision of information to Commission

(3) Every market participant shall deliver to the Commission at such time or times as the Commission or any member, employee or agent of the Commission may require,

(a) any of the books, records and documents that are required to be kept by the market participant under Ontario commodity futures law; and

(b) except where prohibited by law, any filings, reports or other communications made to any other regulatory agency whether within or outside of Ontario.

Compliance reviews

14.1 (1) The Commission may designate in writing one or more persons to review the books, records and documents that are required to be kept by a market participant under section 14 for the purpose of determining whether Ontario commodity futures law is being complied with.

Powers of compliance reviewer

(2) A person conducting a compliance review under this section may, on production of his or her designation,

(a) enter the business premises of any market participant during business hours; and

(b) inquire into and examine the books, records and documents of the market participant that are required to be kept under section 14, and make copies of the books, records and documents.

Fees

(3) A market participant in respect of which a compliance review is conducted under this section shall pay the Commission such fees as may be prescribed by the regulations.

Explanatory Note

Part V - Record-Keeping and Compliance Reviews

Part V of the CFA, concerning the record-keeping practices of market participants and the Commission's compliance review procedures, is amended, to correspond to the amendments made to Part VII of the Securities Act by the Reform Act, and includes new amendments to subsection 19(3) of the Securities Act under the Prosperity Act.

(i) Record-Keeping, section 14

This amendment updates the present record-keeping requirement of the CFA.

Subsection 14(1) consolidates the express record-keeping requirement of the former section 18 of the CFA (which applied only to registrants that are not members of a registered commodity futures exchange or self-regulatory body recognized by the Commission) and also of the former section 21 of the CFA (which applied only to a commodity futures exchange and its clearing house). Subsection 14(1) is also broader in scope as it applies not just to certain registrants or a commodity futures exchange but to every market participant (which is broadly defined above), and requires record-keeping not only in respect of a market participant's own business transactions and financial affairs but also in respect of transactions that the market participant executes on behalf of others.

Subsection 14(2) merely restates the former section 21 of the CFA. Subsection 14(3) will enable the Commission, any member, employee or agent of the Commission to require market participants to respond to requests for information from the Commission. Previously, the Commission had this ability only under the former section 18 of the CFA with respect to certain registrants.

(ii) Compliance Reviews, section 14.1

Subsection 14.1(1) and (2) are new provisions. Through compliance reviews, the Commission can play a more active role in supervising matters of capital adequacy and compliance with the financial reporting and other disclosure requirements of the CFA and the regulations. The compliance review is also a tool for the early detection and correction of a market participant's operational and procedural deficiencies, before they give rise to problems that could be the subject of an investigation or financial examination.

Subsection 14.1(3) restates the fee requirement of the former section 14(3) of the CFA, which will only apply to compliance reviews.

PART VI

SELF-REGULATION

Commodity futures exchanges

15. (1) No person or company shall carry on business as a commodity futures exchange in Ontario unless registered by the Commission under this section.

Registration

(2) The Commission shall, on the application of a person or company proposing to carry on business as a commodity futures exchange in Ontario, register the person or company if the Commission is satisfied that to do so would be in the public interest.

Same

(3) A registration under this section shall be made in writing and shall be subject to such terms and conditions as the Commission may impose.

Factors

(4) In making its decision as to whether registration under this section is in the public interest, the Commission shall take into account whether,

(a) the clearing and other arrangements made and the financial condition of the commodity futures exchange, its clearing house and its members are such as to provide reasonable assurance that all obligations arising out of contracts entered into on such commodity futures exchange will be met;

(b) the rules and regulations applicable to exchange members and clearing house members are in the public interest, are actively enforced and permit the commodity futures exchange to maintain orderly trading in its markets;

(c) trading practices are fair and properly supervised;

(d) adequate measures have been taken to prevent manipulation and excessive speculation;

(e) adequate provision has been made to record and publish details of trading, including volume and open interest; and

(f) the commodity futures exchange has satisfied or can satisfy all conditions prescribed under the regulations for the conduct of the business of a commodity futures exchange.

Right to be heard

(5) The Commission shall not refuse to grant registration to a commodity futures exchange for the purposes of subsection (2) without giving the applicant an opportunity to be heard.

Filings

(6) Every registered commodity futures exchange shall file with the Commission all by-laws, rules, regulations, policies, procedures, interpretations and practices as soon as practicable and in any event within five days of the date on which the by-law, rule, regulation, policy, procedure, interpretation or practice is approved by the Board of Directors of the commodity futures exchange and prior to approval by the membership of the commodity futures exchange.

Commission's powers

(7) The Commission may, if it appears to be in the public interest, make any decision,

(a) with respect to the manner in which a registered commodity futures exchange carries on business;

(b) with respect to any by-law, rule, regulation, policy, procedure, interpretation or practice of a registered commodity futures exchange or its clearing house; or

(c) with respect to trading on or through the facilities of a registered commodity futures exchange or with respect to any contract traded on a registered commodity futures exchange, including the setting of levels of margin, daily price limits, daily trading limits and position limits.

Self-regulatory organizations

16. (1) The Commission may, on application of a self-regulatory organization, recognize the self-regulatory organization if the Commission is satisfied that to do so would be in the public interest and that the self-regulatory organization has satisfied or can satisfy all conditions with respect to self-regulatory bodies prescribed under the regulation.

Same

(2) A recognition under this section shall be made in writing and shall be subject to such terms and conditions as the Commission may impose.

Standards and conduct

(3) A recognized self-regulatory organization shall, subject to Ontario commodity futures law, regulate the operations and the standards of practice and business conduct of its members and their representatives in accordance with its by-laws, rules, regulations, policies, procedures, interpretations and practices.

Commission's powers

(4) The Commission may, if it is satisfied that to do so would be in the public interest, make any decision with respect to any by-law, rule, regulation, policy, procedure, interpretation or practice of a recognized self-regulatory organization.

Clearing houses

17. (1) The Commission may, on the application of a person or company carrying on or proposing to carry on the business of a clearing house for a commodity futures exchange registered pursuant to subsection 15 (2), recognize the clearing house, if the Commission is satisfied that to do so would be in the public interest and that the clearing house has satisfied or can satisfy all conditions with respect to clearing houses prescribed under the regulation.

Same

(2) A recognition under this section shall be made in writing and shall be subject to such terms and conditions as the Commission may impose.

Filings

(3) Every recognized clearing house shall file with the Commission copies of all constating documents, and any general agreement with its members, and copies of all by-laws, rules, regulations, procedures and policies, and any amendments thereto, relating to trading in contracts, as soon as practicable and in any event within five days of the date on which the by-law, rule, regulation, procedure or policy, or any amendment thereto, is approved by the Board of Directors of the recognized clearing house and prior to approval by its membership.

Commission's powers

(4) The Commission may, if it is satisfied that to do so would be in the public interest, make any decision,

(a) with respect to any constating document, general agreement with its members, by-law, rule, regulation, procedure, policy, interpretation or practice of a recognized clearing house; or

(b) with respect to the manner in which any recognized clearing house carries on its business.

Council, committee or ancillary body

18. (1) A registered commodity futures exchange or a recognized self-regulatory organization may, with the prior approval of the Commission and on such terms and conditions as the Commission may determine to be necessary or appropriate in the public interest, establish a council, committee or other ancillary body to which it assigns regulatory or self-regulatory powers or responsibilities, or both.

Same

(2) A council, committee or ancillary body that exercises the powers or assumes the responsibilities of a registered commodity futures exchange or recognized self-regulatory organization is also included in,

(a) the registration or recognition of the registered commodity futures exchange or recognized self-regulatory organization;

(b) any suspension, restriction or termination of the registration or recognition of the registered commodity futures exchange or recognized self-regulatory organization; and

(c) any imposition of terms or conditions on the registration or recognition of the registered commodity futures exchange or recognized self-regulatory organization.

Same

(3) The provisions of Ontario commodity futures law that apply to registered commodity futures exchanges and recognized self-regulatory organizations also apply with necessary modifications to the council, committee or ancillary body.

Voluntary surrender

19. On application by a registered commodity futures exchange, recognized self-regulatory organization or recognized clearing house, the Commission may accept, on such terms and conditions as it may impose, the voluntary surrender of the registration of the commodity futures exchange, or of the recognition of the self-regulatory organization or clearing house, if the Commission is satisfied that the surrender of the registration or recognition would not be prejudicial to the public interest.

Assignment of powers and duties

20. (1) The Commission may, on such terms and conditions as it may impose, assign to a registered commodity futures exchange or recognized self-regulatory organization any of the powers and duties of the Commission under Part VIII or the regulations related to that Part.

Same

(2) The Executive Director may, with the approval of the Commission, assign to a registered commodity futures exchange or recognized self-regulatory organization any of the powers and duties of the Director under Part VIII or the regulations related to that Part.

Revocation of assignment

(3) The Commission or, with the approval of the Commission, the Executive Director may at any time revoke, in whole or in part, an assignment of powers and duties made under this section.

Contravention of Ontario commodity futures law

21. No by-law, rule, regulation, policy, procedure, interpretation or practice of a registered commodity futures exchange, recognized self-regulatory organization or recognized clearing house shall contravene Ontario commodity futures law, but a registered commodity futures exchange, recognized self-regulatory organization or recognized clearing house may impose additional requirements within its jurisdiction.

Review of decisions

21.1 (1) The Executive Director or a person or company directly affected by, or by the administration of, a direction, decision, order or ruling made under a by-law, rule, regulation, policy, procedure, interpretation, direction or practice of a registered commodity futures exchange, recognized self-regulatory organization or a recognized clearing house may apply to the Commission for a hearing and review of the direction, decision, order or ruling.

Procedure

(2) Section 4 applies to the hearing and review of the direction, decision, order or ruling in the same manner as it applies to a hearing and review of a decision of the Director.

Registered commodity futures exchange auditor

21.2 (1) Every registered commodity futures exchange shall appoint an auditor for the exchange.

Recognized self-regulatory organization auditor

(2) At the request of the Commission, a recognized self-regulatory organization shall appoint an auditor for the self-regulatory organization.

Auditor of member

21.3 (1) Every registered commodity futures exchange and every recognized self- regulatory organization shall cause each of its members to appoint an auditor.

Selection of auditor

(2) The auditor of a member shall be chosen from the panel of auditing firms selected under subsection (3).

Panel of auditors

(3) Every registered commodity futures exchange and every recognized self-regulatory organization shall select a panel of auditing firms for their members.

Auditor

(4) No person shall be appointed as an auditor under subsection (1) unless the person has practised as an auditor in Canada for five years or more.

Examination and report

(5) The auditor of a member shall make an examination, in accordance with generally accepted auditing standards, of the annual financial statements and regulatory filings of the member as called for by the by-laws, rules, regulations, policies, procedures, interpretations, directions or practices applicable to the member, and shall report on the financial affairs of the member to the registered commodity futures exchange or recognized self-regulatory organization,as the case may be, in accordance with professional reporting standards.

Auditor of registrant

21.4 (1) Every registered dealer and registered adviser that is not subject to section 21.3 shall appoint an auditor who satisfies such requirements as may be established by the Commission.

Examination and report

(2) The auditor of a registered dealer or registered adviser that is not subject to section 21.3 shall make an examination of the annual financial statements and other regulatory filings of the registered dealer or registered adviser, in accordance with generally accepted auditing standards, and shall prepare a report on the financial affairs of the registered dealer or registered adviser in accordance with professional reporting standards.

Filing with Commission

(3) The registered dealer or registered adviser shall file the report with the Commission, together with its annual financial statements and other regulatory filings.

Delivery of financial statements

(4) A registered dealer or registered adviser that is not subject to section 21.3 shall deliver to the Commission annual audited financial statements, prepared in accordance with generally accepted accounting principles, and other regulatory filings as prescribed by the regulations, within 90 days after the end of its financial year or as otherwise prescribed by the regulations.

Certification of financial statements

(5) The annual financial statements and regulatory filings delivered to the Commission shall be certified by the registered dealer or registered adviser or an officer or partner of the registered dealer or registered adviser.

Additional information

(6) The registered dealer or registered adviser shall deliver to the Commission such other information as the Commission may require in such form as it may require.

Explanatory Note

Part VI - Self-Regulation

Part VI of the CFA, which deals with the recognition and oversight of market participants, governs self-regulation and prescribes minimum requirements applicable to registrants not subject to self-regulation, is amended, to correspond to amendments made to Part VIII of the Securities Act by the Reform Act. This section enhances the ability of the Commission to rely on industry self-regulation.

(i) Self-Regulation: Commodity Futures Exchange, section 15 of the CFA

Section 15(1) does not contain any substantive changes to the present registration requirement for a commodity futures exchange before it can operate as such in Ontario. Subsection 15(2) and (3) provide for the recognition process, while subsection 15(4) describes the factors that the Commission must take into account when making its decision as to whether registration is in the public interest. The oversight powers of the Commission over a registered commodity futures exchange is somewhat broadened under subsection 15(7) because it now extends also to the registered commodity futures exchange's "policy, procedure, interpretation or practice". The amendment is consistent with changes made to the Securities Act under the Reform Act.

(ii) Self-Regulation: Self-Regulatory Organizations, section 16 of the CFA

Section 16(1) does not contain any substantive changes to the present recognition requirement for a self-regulatory body. Subsection 16(2) provides for the recognition process, while subsection 16(3) mandates self-regulation by a recognized SRO. The oversight powers of the Commission over a recognized SRO is somewhat broadened under subsection 16(4) because it now extends also to a recognized SRO's "policy, procedure, interpretation or practice". The change is consistent with changes made to the Securities Act under the Reform Act.

(iii) Self-Regulation: Clearing Agencies, section 17 of the CFA

Section 17 of the CFA is new and provides the power to the Commission to recognize a clearing house if it is in the public interest to do so. Previously, under the CFA the Commission had indirect authority over a clearing house of a registered commodity futures exchange through its oversight powers over the exchange.

(Iv) Council, Committee or Ancillary Body of a Registered Commodity Futures Exchange or Recognized SRO, section 18 of the CFA

Section 18 is a new provision that would enable a registered commodity futures exchange or recognized SRO to assign its self-regulatory power to a council, committee or ancillary body established by, and accountable to, the governing body of the registered commodity futures exchange or recognized SRO. Such committee, council or ancillary body would be covered by the registration granted to the commodity futures exchange or the recognition granted to the SRO and would be subject to the same requirements applicable to the registered commodity futures exchange or recognized SRO.

(v) Voluntary Surrender of Recognition, section 19 of the CFA

Section 19 is a new provision that authorizes the Commission to determine whether it would be in the public interest for a registered commodity futures exchange, recognized SRO or recognized clearing house to give up its registration or recognition, as applicable, so that, in effect, it would no longer be subject to the Commission's oversight.

(vi) Assignment of Powers and Duties to a Registered Commodity Futures Exchange or Recognized SRO, section 20 of the CFA

Subsection 20(1) and (2) are new provisions that permit the Commission, and the Executive Director with the approval of the Commission, to delegate their respective registration powers to a registered commodity futures exchange or recognized SRO. The exercise by a registered commodity futures exchange or recognized SRO of the delegated registration powers would continue to be subject to Commission oversight.

Subsection 20(3) is also a new provision which reflects the principle that the authority to delegate includes the ability to revoke a delegation.

(vii) No Contravention of Ontario Commodity Futures Law, section 21 of the CFA

Section 21 is a new provision intended to make it clear that the rules and regulations of a registered commodity futures exchange, recognized SRO and recognized clearing agency are subject to Ontario commodities futures law. However, they have the ability to impose requirements that are in addition to are more stringent than the requirements under Ontario commodities futures law.

(viii) Review of Decisions of Registered Commodity Futures Exchange, Recognized SRO and Recognized Clearing Agency, section 21.1 of the CFA

The review authority provided for by section 21.1 is based on the Commission's oversight powers over a registered commodity futures exchange or its clearing agency, and is now extended to a recognized SRO.

(ix) Auditor of a Registered Commodity Futures Exchange or Recognized SRO, section 21.2 of the CFA

Under subsection 21.2, there is no change to the requirement that a registered commodity futures exchange appoint an auditor.

Under subsection 21.2, a recognized SRO is required to appoint an auditor upon request of the Commission.

(x) Auditor of Members of Registered Commodity Futures Exchange or Recognized SRO, section 21.3 of the CFA

Under subsection 21.3, there is no change to the requirement of the former subsection 17 of the CFA that a registered commodity futures exchange and recognized SRO (previously referred to as a recognized self-regulatory body under the CFA) cause their members to appoint an auditor, to be selected from the panel of auditing firms pursuant to subsection 21.3(2).

Subsection 21.3 requires the selection of a "panel of auditing firms" rather than a panel of auditors.

Subsection 21.3 retains the 5 year experience requirement for an auditor of a member of a registered commodity futures exchange or recognized SRO.

Instead of the former requirement that the actual conduct of examinations be satisfactory to the Commission, subsection 21.3 introduces objective standards by requiring that the audit and report on the financial affairs of a member of a registered commodity futures exchange or recognized SRO be conducted in accordance with generally accepted auditing standards and professional reporting standards, respectively. The member's auditor is required to submit its audit report on the member directly to the registered commodity futures exchange or recognized SRO.

(xi) Auditor of Registrant Non-Member of a Registered Commodity Futures Exchange or Recognized SRO, section 21.4 of the CFA

With subsection 21.4, there is now a statutory requirement for a registrant that is not a member of a registered commodity futures exchange or recognized SRO to appoint an auditor whose qualifications are to be established by the Commission.

Subsection 21.4 elevates to the statute the standards presently prescribed by the regulations for an audit and report on the financial affairs of a registrant that is not a member of a registered commodity futures exchange or recognized SRO. The audit must be conducted in accordance with generally accepted auditing standards. However, the report must be made in accordance with professional reporting standards, rather than pursuant to generally accepted auditing standards as presently required by the regulations.

Subsections 21.4(3), (4), (5) and (6) restate the requirements of the former section 18 of the CFA. The 90-day period for regulatory filing is taken from the regulations. However, the requirement that audited financial statements be prepared in accordance with generally accepted accounting principles is new.

31. (1) Clause 22 (1) (b) of the Act is amended by inserting "as a representative or" before "as a partner" in the third line.

(2) Subsection 22 (1) of the Act, as amended by the Statutes of Ontario, 1997, chapter 19, section 1, is further amended by striking out "this Act and the regulations" in the second line of the portion following clause (b) and substituting "Ontario commodity futures law".

32. Section 24 of the Act is repealed and the following substituted:

Surrender

24. On application by a registrant, the Commission may accept, subject to such terms and conditions as it may impose, the voluntary surrender of the registration of the registrant if the Commission is satisfied that the financial obligations of the registrant to his, her or its clients have been discharged and the surrender of the registration would not be prejudicial to the public interest.

33 Section 29 of the Act is repealed.

34. Section 30 of the Act, as amended by the Statutes of Ontario, 1997, chapter 19, section 1, is repealed.

Explanatory Note

Part VIII - Registration For Trading, Acting as Adviser

Subsection 22(1) of the CFA is amended to reflect the new definition of "Ontario commodity futures law" introduced by the Prosperity Act. The amendment corresponds to amendments made to subsection 25(1) of the Securities Act by the Reform Act. Subsection 22(1) is further amended to ensure that persons other than officers and partners may be registered to provide advisory services on behalf of a registered dealer.

Except for some technical changes, section 24 restates the requirements of the former section 24 of the CFA.

Section 29 of the CFA, concerning residency requirements, is repealed, to correspond with the repeal of section 32 of the Securities Act under the Prosperity Act. These statutory residency requirements have been problematic in their application and have restricted the ability of the Commission to impose residency requirements.

Section 30 of the CFA, concerning notices of change in registration, is repealed, to correspond with the repeal of section 33 of the Securities Act under the Prosperity Act. The section is being repealed because it contains detailed provisions for the filing of notices of change in registration that are better dealt with by rule. This provision will come into force on a day to be named by proclamation of the Lieutenant Governor.

35. Clause 31 (a) of the Act is amended by inserting after "Loan and Trust Corporations Act" in the third last line "or a credit union or league to which the Credit Unions and Caisses Populaires Act, 1994 applies".

Explanatory Note

Part IX - Exemptions From Registration Requirements

Clause 31(a) of the CFA is amended to expand the exemption to register as an adviser to include a reference to "the Credit Unions and Caisse Populaires Act, 1994", to correspond to the Securities Act.

36. Part XI of the Act is repealed.

Explanatory Note

Part XI - Revocation of Registration or Recognition of Commodity Futures Exchanges and Acceptance of Form of Contract

Part XI of the CFA, concerning the Commission's power to revoke the registration or recognition of registration of commodity futures exchanges and to accept forms of contract, is repealed. This part is unnecessary as a result of the amendments contained in new Part XV which give the Commission the general power to make rules regarding the revocation of registration or recognition of commodity futures exchanges and acceptance of form of contract.

37. (1) Subsection 48 (1) of the Act is amended by,

(a) striking out "The Director" at the beginning and substituting "The Commission"; and

(b) inserting "or described" after "named" in the fourth line.

(2) Subsection 48 (2) of the Act is repealed and the following substituted:

Hearing

(2) The Commission shall not make an order under subsection (1) without giving the person or company affected an opportunity to be heard.

38. Subsection 54 (4) of the Act is repealed.

Explanatory Note

Part XII - Trading Generally

Section 48 of the CFA, concerning prohibited calls to residences, is amended, to require that the Commission rather than the Director, to make any order limiting the ability of a registrant under the CFA to make sales calls at a residence. The change brings the CFA's provisions into accord with equivalent subsections of the Securities Act.

Subsection 54(4) of the CFA, providing for the rescission or variation of an order with respect to advertising is repealed. The provision has been replaced by new subsection 78(1) which provides for the variation and revocation of Commission decisions. This parallels the Commission power to revoke or vary its decision under the Securities Act introduced by the Reform Act.

39. Sections 55 and 56 of the Act are repealed and the following substituted:

Offences, general

55. (1) Every person or company that,

(a) makes a statement in any material, evidence or information submitted to the Commission, a Director, any person acting under the authority of the Commission or the Executive Director or any person appointed to make an investigation or examination under this Act that, in a material respect and at the time and in the light of the circumstances under which it is made, is misleading or untrue or does not state a fact that is required to be stated or that is necessary to make the statement not misleading;

(b) makes a statement in any application, release, report, return, financial statement or other document required to be filed or furnished under Ontario commodity futures law that, in a material respect and at the time and in the light of the circumstances under which it is made, is misleading or untrue or does not state a fact that is required to be stated or that is necessary to make the statement not misleading; or

(c) contravenes Ontario commodity futures law,

is guilty of an offence and on conviction is liable to a fine of not more than $1,000,000 or to imprisonment for a term of not more than two years, or to both.

Defence

(2) Without limiting the availability of other defences, no person or company is guilty of an offence under clause (1) (a) or (b) if the person or company did not know and in the exercise of reasonable diligence could not have known that the statement was misleading or untrue or that it omitted to state a fact that was required to be stated or that was necessary to make the statement not misleading in light of the circumstances in which it was made.

Directors and officers

(3) Every director or officer of a company or of a person other than an individual who authorizes, permits or acquiesces in the commission of an offence under subsection (1) by the company or person, whether or not a charge has been laid or a finding of guilt has been made against the company or person in respect of the offence under subsection (1), is guilty of an offence and is liable on conviction to a fine of not more than $1,000,000 or to imprisonment for a term of not more than two years, or to both.

Consent of the Commission

(4) No proceeding under this section shall be commenced except with the consent of the Commission.

Trial by provincial judge

(5) The Commission or an agent for the Commission may by notice to the clerk of the court having jurisdiction in respect of an offence under this Act require that a provincial judge preside over the proceeding.

40. Subsection 58 (1) of the Act, as amended by the Statutes of Ontario, 1997, chapter 19, section 1, is further amended by striking out "Ontario Court (Provincial Division)" in the sixth and seventh lines and substituting "Ontario Court of Justice".

41. Sections 59 and 60 of the Act are repealed and the following substituted:

Interim preservation of property

59. (1) If the Commission considers it expedient,

(a) for the due administration of Ontario commodity futures law or the regulation of the commodity futures markets in Ontario; or

(b) to assist in the due administration of the commodity futures laws or the regulation of the commodity futures markets in another jurisdiction,

the Commission may,

(c) direct a person or company having on deposit or under its control or for safekeeping any funds, securities or property of any person or company to retain those funds, securities or property and to hold them until the Commission in writing revokes the direction or consents to release a particular fund, security or property from the direction, or until the Superior Court of Justice orders otherwise; or

(d) direct a person or company holding or having under its control a contract of any person or company, to liquidate the contract and to retain the proceeds of liquidation and to hold them until the Commission in writing revokes the direction or consents to release a particular amount from the direction, or until the Superior Court of Justice orders otherwise.

Application

(2) A direction under subsection (1) that names a bank or other financial institution shall apply only to the branches of the bank or other financial institution identified in the direction.

Exclusions

(3) A direction under subsection (1) shall not apply to funds, securities or property in a recognized clearing house or to securities in process of transfer by a transfer agent unless the direction so states.

Certificate of pending litigation

(4) The Commission may order that a direction under subsection (1) be certified to a land registrar or mining recorder and that it be registered or recorded against the lands or claims identified in the direction, and on registration or recording of the certificate it shall have the same effect as a certificate of pending litigation.

Review by court

(5) As soon as practicable and not later than seven days after a direction is issued under subsection (1), the Commission shall apply to the Superior Court of Justice to continue the direction or for such other order as the court considers appropriate.

Notice

(6) A direction under subsection (1) may be made without notice but, in that event, copies of the direction shall be sent forthwith by such means as the Commission may determine to all persons and companies named in the direction.

Clarification or revocation

(7) A person or company directly affected by a direction may apply to the Commission for clarification or to have the direction varied or revoked.

Orders in the public interest

60. (1) The Commission may make one or more of the following orders if, in its opinion, it is in the public interest to make the order or orders:

1. An order that the registration or recognition granted to a person or company under Ontario commodity futures law be suspended or restricted for such period as is specified in the order or be terminated, or that terms and conditions be imposed on the registration or recognition.

2. An order that the acceptance of the form of a contract be revoked.

3. An order that any exemptions contained in Ontario commodity futures law do not apply to a person or company permanently or for such period as is specified in the order.

4. An order that a market participant submit to a review of his, her or its practices and procedures and institute such changes as may be ordered by the Commission.

5. If the Commission is satisfied that Ontario commodity futures law has not been complied with, an order that a release, report, return, financial statement or other document described in the order,

i. be provided by a market participant to a person or company,

ii. not be provided by a market participant to a person or company, or

iii. be amended by a market participant to the extent that amendment is practicable.

6. An order that a person or company be reprimanded.

7. An order that a person resign one or more positions that the person holds as a director or officer of an issuer.

8. An order that a person is prohibited from becoming or acting as a director or officer of any issuer.

Terms and conditions

(2) An order under this section may be subject to such terms and conditions as the Commission may impose.

Hearing requirement

(3) No order shall be made under this section without a hearing, subject to section 4 of the Statutory Powers Procedure Act.

Temporary orders

(4) Despite subsection (3), if in the opinion of the Commission the length of time required to conclude a hearing could be prejudicial to the public interest, the Commission may make a temporary order under paragraph 1, 2 or 3 of subsection (1) or subparagraph 5 ii of subsection (1).

Period of temporary order

(5) The temporary order shall take effect immediately and shall expire on the fifteenth day after its making unless extended by the Commission.

Extension of temporary order

(6) The Commission may extend a temporary order until the hearing is concluded if a hearing is commenced within the 15-day period.

Same

(7) Despite subsection (6), the Commission may extend a temporary order under paragraph 2 of subsection (1) for such period as it considers necessary if satisfactory information is not provided to the Commission within the 15-day period.

Notice of temporary order

(8) The Commission shall give written notice of every temporary order made under subsection (4), together with a notice of hearing, to any person or company directly affected by the temporary order.

Payment of investigation costs

60.1 (1) If, in respect of a person or company whose affairs were the subject of an investigation, the Commission,

(a) is satisfied that the person or company has not complied with, or is not complying with, Ontario commodity futures law; or

(b) considers that the person or company has not acted in the public interest,

the Commission may, after conducting a hearing, order the person or company to pay the costs of the investigation.

Payment of hearing costs

(2) If, in respect of a person or company whose affairs were the subject of a hearing, the Commission, after conducting the hearing,

(a) is satisfied that the person or company has not complied with, or is not complying with, Ontario commodity futures law; or

(b) considers that the person or company has not acted in the public interest,

the Commission may order the person or company to pay the costs of or related to the hearing that are incurred by, or on behalf of, the Commission.

Payment of costs where offence

(3) Where a person or company is guilty of an offence under this Act or the regulations, the Commission may, after conducting a hearing, order the person or company to pay the costs of any investigation carried out in respect of that offence.

Costs

(4) For purposes of subsections (1), (2) and (3), the costs that the Commission may order the person or company to pay include, but are not limited to, all or any of the following:

1. Costs incurred in respect of services provided by persons appointed or engaged under sections 3, 7 or 8.

2. Costs of matters preliminary to the hearing.

3. Costs for time spent by the Commission or staff of the Commission.

4. Any fee paid to a witness.

5. Costs of legal services provided to the Commission.

Applications to court

60.2 (1) The Commission may apply to the Superior Court of Justice for a declaration that a person or company has not complied with or is not complying with Ontario commodity futures law.

Prior hearing not required

(2) The Commission is not required, before making an application under subsection (1), to hold a hearing to determine whether the person or company has not complied with or is not complying with Ontario commodity futures law.

Remedial powers of court

(3) If the court makes a declaration under subsection (1), the court may, despite the imposition of any penalty under section 55 and despite any order made by the Commission under section 60, make any order that the court considers appropriate against the person or company, including, without limiting the generality of the foregoing, one or more of the following orders:

1. An order that the person or company comply with Ontario commodity futures law.

2. An order requiring the person or company to submit to a review by the Commission of his, her or its practices and procedures and to institute such changes as may be directed by the Commission.

3. An order that a release, report, return, financial statement or any other document described in the order,

i. be provided by the person or company to another person or company,

ii. not be provided by the person or company to another person or company,

iii. be amended by the person or company to the extent that amendment is practicable.

4. An order prohibiting the voting or exercise of any other right attaching to securities by the person or company.

5. An order prohibiting the person from acting as officer or director of any market participant permanently or for such period as is specified in the order.

6. An order appointing officers and directors in place of, or in addition to, all or any of the officers and directors of the company then in office.

7. An order requiring the person or company to produce to the court or an interested person financial statements in the form required by Ontario commodity futures law, or an accounting in such other form as the court may determine.

8. An order directing rectification of the registers or other records of the company.

9. An order requiring the person or company to compensate or make restitution to an aggrieved person or company.

10. An order requiring the person or company to pay general or punitive damages to any other person or company.

11. An order requiring the person or company to disgorge to the Minister any amounts obtained as a result of the non-compliance with Ontario commodity futures law.

12. An order requiring the person or company to rectify any past non-compliance with Ontario commodity futures law to the extent that rectification is practicable.

Interim orders

(4) On an application under this section the court may make such interim orders as it considers appropriate.

Appointment of receiver, etc.

60.3 (1) The Commission may apply to the Superior Court of Justice for an order appointing a receiver, receiver and manager, trustee or liquidator of all or any part of the property of any person or company.

Grounds

(2) No order shall be made under subsection (1) unless the court is satisfied that,

(a) the appointment of a receiver, receiver and manager, trustee or liquidator of all or any part of the property of the person or company is in the best interests of the creditors of the person or company or of persons or companies any of whose property is in the possession or under the control of the person or company or the security holders of, or subscribers to, the person or company; or

(b) it is appropriate for the due administration of Ontario commodity futures law.

Application without notice

(3) The court may make an order under subsection (1) on an application without notice, but the period of appointment shall not exceed 15 days.

Motion to continue order

(4) If an order is made without notice under subsection (3), the Commission may make a motion to the court within 15 days after the date of the order to continue the order or for the issuance of such other order as the court considers appropriate.

Powers of receiver, etc.

(5) A receiver, receiver and manager, trustee or liquidator of the property of a person or company appointed under this section shall be the receiver, receiver and manager, trustee or liquidator of all or any part of the property belonging to the person or company or held by the person or company on behalf of, or in trust for, any other person or company, and, if so directed by the court, the receiver, receiver and manager, trustee or liquidator has the authority to wind up or manage the business and affairs of the person or company and has all powers necessary or incidental to that authority.

Directors' powers cease

(6) If an order is made appointing a receiver, receiver and manager, trustee or liquidator of the property of a person or company under this section, the powers of the directors of the company that the receiver, receiver and manager, trustee or liquidator is authorized to exercise may not be exercised by the directors until the receiver, receiver and manager, trustee or liquidator is discharged by the court.

Fees and expenses

(7) The fees charged and expenses incurred by a receiver, receiver and manager, trustee or liquidator appointed under this section in relation to the exercise of powers pursuant to the appointment shall be in the discretion of the court.

Variation or discharge of order

(8) An order made under this section may be varied or discharged by the court on motion.

Limitation period

60.4 Except where otherwise provided in this Act, no proceeding under this Act shall be commenced later than six years from the date of the occurrence of the last event on which the proceeding is based.

Explanatory Note

Part XIII - Enforcement

Sections 55 and 56 of the CFA are repealed and replaced with new section 55. Section 55 deals with offences under the CFA and the amendments correspond to the amendments made to section 122 of the Securities Act by the Reform Act except that subsection 122(4), (5) and (6) of the Securities Act are omitted as they do not apply in the commodity futures context. The changes to the language of the present subsection 55(1) of the CFA are mostly technical and are intended to clarify its meaning. The former clause 55(1)(d) of the CFA has been deleted because a "direction, decision, ruling, order or other requirement made under the CFA or the regulations" is included in the definition of "Ontario commodity futures law", a contravention of which is an offence under the new clause 55(1)(c) of the CFA.

Section 59 and 60 of the CFA have been repealed and replaced with new sections dealing with the powers of the Commission to preserve property in the interim and to make orders in the public interest. The amendments parallel the amendments to the Securities Act effected by the Reform Act with necessary modification to reflect the differences in regulation of commodity futures markets.

Under new section 59(1) the Commission is given the power to freeze funds, securities or property in the same circumstances in which it may order an investigation under new section 7 or a financial examination under new section 8, namely:

1. for the due administration of Ontario commodity futures law;

2. for the regulation of the commodity futures markets in Ontario; or

3. to assist in the due administration of the commodity futures laws or the regulation of the commodity futures markets in another jurisdiction.

Under a freeze direction the Commission may direct a person or company to retain any funds, securities or property that are on deposit, under its control or for safekeeping. The freeze order applies until the Commission revokes the order in writing. Alternatively, the Commission may consent to the release of a particular fund, security or property from the application of the freeze direction or the Superior Court of Justice may revoke the freeze direction or consent to a partial release of any funds, securities or property. In this regard, under new section 59(5) the Commission is required to apply to such court within seven days after the issue of a freeze direction to "continue the direction or for such other orders as the court considers appropriate".

Under subsections 59(2) and (3) the freeze direction must be specific to have application in three matters. First, a freeze direction applies to the specific branches named in the freeze direction of any bank or other financial institution. Second, the freeze direction must specifically state that funds, securities or property in a recognised clearing agency are covered by the direction. Third the freeze direction must specifically state that funds, securities or property in the process of transfer by a transfer agent are covered by the direction.

Under subsection 59(4) the Commission may order the freeze direction to be certified to a land registrar or mining recorder and be registered or recorded against the lands or claims named in the freeze direction. Upon registration or recording, the effect is to "freeze" property or mining claims because the registered direction has the same effect as a certificate of pending litigation.

There is no requirement that the Commission give notice of the making of any freeze direction but if made without notice the Commission is required under subsection 59(6) to send a copy of the freeze direction to the person and companies named in the direction.

A person or company directly affected by a freeze direction may apply to the Commission under subsection 59(7) to clarify, vary or revoke the freeze direction. Section 59 corresponds to existing section 126 of the Securities Act.

New section 60 is an expansion of the powers of the Commission as it relates to commodity futures markets as its public interest jurisdiction under the CFA was previously limited to registration issues and acceptance of the forms of contracts. This gives the Commission greater flexibility in responding to misconduct in Ontario's commodity futures markets. The new remedies would enable the Commission to require market participants to submit to a review of their practices and procedures, to order market participants to provide, not provide or amend certain documents, or to order that a person or company be reprimanded. The amendments also include provisions which allow the Commission to prohibit persons from acting as an officer or director of an issuer which corresponds to the amendments to the Securities Act under the Prosperity Act.

New section 60.1 of the CFA allows the Commission to make an order of costs of an investigation or hearing after a Commission hearing is concluded. The new section corresponds to the amendment to the Securities Act under the Prosperity Act.

New section 60.2 of the CFA provides the Commission with the power to apply to the Superior Court of Justice without having to first hold a hearing and describes the powers of that court to deal with CFA issues. The amendment expands the range of remedies available to the Superior Court of Justice (formerly the Ontario Court (General Division)) where it finds that there has been non-compliance with Ontario commodity futures law. Previously, the court was limited to directing compliance. The amendment corresponds to the amendments made to the Securities Act by the Reform Act.

New section 60.3 of the CFA provides the Commission with the power to determine when it is appropriate to apply to the court for the appointment of a receiver, receiver and manager, trustee or liquidator and describes the power of the court and the receiver. The amendment corresponds to the amendments made to the Securities Act by the Reform Act.

Former section 60 of the CFA, dealing with limitation periods, is replaced and amended by new section 60.4 of the Act. Section 60.4 amends the limitation period for actions under the CFA to six years and corresponds to the amendments to the Securities Act under the Prosperity Act.

42. (1) Subsection 63 (1) of the Act is amended by striking out "this Act or the regulations require" in the first and second lines and substituting "Ontario commodity futures law requires".

(2) Subsection 63 (2) of the Act is amended by striking out "this Act" in the third line and substituting "Ontario commodity futures law".

43. (1) Subsection 64 (1) of the Act is amended by striking out "this Act or a regulation" in the eighth line and substituting "Ontario commodity futures law".

(2) Subsection 64 (2) of the Act is amended by striking out "this Act, the regulations or any direction, decision, order, ruling or other requirement made or given under this Act or the regulations" in the last four lines and substituting "Ontario commodity futures law".

44. Section 65 of the Act, as amended by the Statutes of Ontario, 1997, chapter 19, section 1, is repealed.

45. Section 66 of the Act is repealed.

46. Section 67 of the Act, as enacted by the Statutes of Ontario, 1997, chapter 19, section 1, is repealed.

Explanatory Note

Part XIV - General Provisions

Sections 63 and 64 of the CFA are amended to incorporate the new definition of "Ontario commodity futures law", corresponding to the Securities Act. The amendments are housekeeping in nature and correspond to amendments made to the Securities Act by the Reform Act.

Sections 65, 66, and 67 of the CFA are repealed and have been replaced elsewhere in the legislation (Part XV below). The regulation making powers of the Lieutenant Governor in Council are included in new Part XV which is equivalent to section 143 of the Securities Act introduced in Bill 190.

47.The Act is amended by adding the following Part:

PART XV

RULES, REGULATIONS AND POLICIES

Rules

65. (1) The Commission may make rules in respect of the following matters:

1. Prescribing requirements in respect of applications for registration and the renewal, amendment, expiration or surrender of registration and in respect of suspension, cancellation or reinstatement of registration.

2. Prescribing categories or sub-categories of registrants, classifying registrants into categories or sub-categories and prescribing the conditions of registration or other requirements for registrants or any category or sub-category, including,

i. standards of practice and business conduct of registrants in dealing with their customers and clients and prospective customers and clients,

ii. requirements that are advisable for the prevention or regulation of conflicts of interest, and

iii. requirements in respect of membership in a self-regulatory organization.

3. Extending any requirements prescribed under paragraph 2 to unregistered directors, partners, salespersons and officers of registrants.

4. Prescribing requirements in respect of the residence in Ontario or Canada of registrants.

5. Prescribing requirements in respect of notification by a registrant or other person or company in respect of a proposed change in beneficial ownership of, or control or direction over, securities of the registrant and authorizing the Commission to make an order that a proposed change may not be effected before a decision by the Commission as to whether it will exercise its powers under paragraph 1 of subsection 60 (1) as a result of the proposed change.

6. Prescribing requirements for persons and companies in respect of calling at or telephoning to residences for the purpose of trading in any contract.

7. Prescribing requirements in respect of the disclosure or furnishing of information to the public or the Commission by market participants, or providing for exemptions from or varying the requirements under this Act in respect of the disclosure or furnishing of information to the public or the Commission by market participants.

8. Providing for exemptions from the registration requirements under this Act or for the removal of exemptions from those requirements.

9. Providing for exemptions from requirements applicable to dealers or advisers, or for the removal of exemptions from those requirements.

10. Providing for exemptions from or varying the requirements set out in Part XII.

11. Prescribing requirements in respect of the books, records and other documents required by Ontario commodity futures law to be kept by market participants, including the form in which and the period for which the books, records and other documents are to be kept.

12. Regulating recognized commodity futures exchanges, recognized self-regulatory organizations and recognized clearing houses, including prescribing requirements in respect of the review or approval by the Commission of any by-law, rule, regulation, policy, procedure, interpretation or practice.

13. Prescribing requirements in respect of market participants, including requirements in respect of membership in a self-regulatory organization and participation by registered dealers and registered advisers in a compensation fund.

14. Providing for exemptions from the requirement that a contract be traded on a commodity futures exchange that has been registered or recognized by the Commission under this Act or the removal of exemptions from those requirements.

15. Providing exemptions from the requirement that a commodity futures contract provide for physical delivery of the underlying interest or be traded on a commodity futures exchange.

16. Prescribing requirements in respect of the acceptance of the form of contracts, including designating any goods, article, service, right, interest, security, financial instrument, currency, interest rate, foreign exchange rate, economic indicator, index, basket, agreement or other benchmark of any kind, and the relationship between any of the foregoing, as a commodity.

17. Regulating the trading of contracts, including requiring reporting of trades and quotations.

18. Regulating trading or advising in contracts to prevent trading or advising that is fraudulent, manipulative, deceptive or unfairly detrimental to investors.

19. Designating activities, including the use of documents or advertising, in which market participants are permitted to engage or are prohibited from engaging in connection with the trading of contracts.

20. Prescribing which trading is trading outside Ontario.

21. Prescribing requirements relating to the qualification of a registrant to act as an adviser to a mutual fund, non-redeemable investment fund, commodity pool or managed futures account.

22. Prescribing requirements in respect of financial accounting, reporting and auditing or purposes of this Act, the regulations and the rules, including,

  • defining accounting principles and auditing standards acceptable to the Commission,

ii. financial reporting requirements for the preparation and dissemination of future-oriented financial information and pro forma financial statements,

iii. standards of independence and other qualifications for auditors,

iv. requirements respecting a change in auditors by a registered dealer or registered adviser, and

v. requirements respecting a change in the financial year of a market participant.

23. Requiring or respecting the media, format, preparation, form, content, execution, certification, dissemination and other use, filing and review of all documents required under or governed by this Act, the regulations or the rules and all documents determined by the regulations or the rules to be ancillary to any such documents, including,

i. applications for registration and other purposes,

ii. risk disclosure statements, and

iii. interim financial statements and financial statements.

24. Varying the form and content of any of the documents referred to in paragraph 23, including substituting a form of document and its contents for any form of document and its contents prescribed by this Act.

25. Prescribing the fees payable to the Commission, including those for filing, for applications for registration or exemptions, for trades in contracts, in respect of audits made by the Commission and in connection with the administration of Ontario commodity futures law.

26. Respecting the designation or recognition of any person, company, market or jurisdiction if advisable for purposes of any provision of Ontario commodity futures law, including,

i. registering or recognizing commodity futures exchanges, self-regulatory organizations and clearing houses,

ii. exempting commodity futures exchanges from the need to be registered or recognized, and

iii. designating a person or company for the purpose of the definition of market participant.

27. Respecting the practice and procedure for the segregation of customers' money, securities, property, proceeds and funds, including the form and content of any agreement respecting assets in segregation.

28. Respecting the conduct of the Commission and its employees in relation to duties and responsibilities and discretionary powers under this Act, including,

i. the conduct of investigations and examinations carried out under Part IV (Investigations), and

ii. the conduct of hearings.

29. Varying the application of this Act to permit or require the use of an electronic or computer-based system for the filing, delivery or deposit of,

i. documents or information required under or governed by Ontario commodity futures law, and

ii. documents determined by the regulations or rules to be ancillary to documents required under or governed by Ontario commodity futures law.

30. Establishing requirements for and procedures in respect of the use of an electronic or computer-based system for the filing, delivery or deposit of documents or information.

31. Prescribing the circumstances in which persons or companies shall be deemed to have signed or certified documents on an electronic or computer-based system for any purpose of this Act.

32. Varying this Act to permit or require methods of filing or delivery, to or by the Commission, market participants or others of documents, information, notices, books, records, things, reports, orders, authorizations or other communications required under or governed by Ontario commodity futures law.

33. Respecting any other matter authorized by or required to implement any provision of this Act.

Regulations

(2) The Lieutenant Governor in Council may make regulations in respect of,

(a) any matter in respect of which the Commission may make rules, with necessary modifications;

(b) any matter advisable for carrying out the purposes of this Act.

Revoking regulations

(3) Subject to the approval of the Minister, the Commission, concurrently with making a rule, may make a regulation that amends or revokes any provision of a regulation made by the Lieutenant Governor in Council under this Act or by the Commission under this subsection that, in the opinion of the Commission, is necessary or advisable to effectively implement the rule.

Effective date

(4) A regulation made under subsection (3) is not effective before the rule referred to in that subsection comes in force.

Retroactive

(5) Subject to subsection (4), a regulation made under subsection (3), if it so provides, is effective with reference to a period before it was filed.

Incorporation by reference

(6) A regulation or rule authorized by this section may incorporate by reference, in whole or in part, any standard, procedure or guideline and may require compliance with any standard, procedure or guideline adopted.

Classes

(7) Regulations or rules in respect of registrants, other persons or companies, contracts, trades or other matters or things may be made in respect of any class or category of registrants, other persons or companies, contracts, trades or other matters or things.

Scope

(8) A regulation or rule may be general or particular in its application, may be limited as to time or place, or both, and may exclude any place from the application of the regulation or rule.

Exemptions

(9) A regulation or rule may authorize the Commission or the Director to grant an exemption to it.

Same

(10) An exemption or a removal of an exemption,

(a) may be granted or made, in whole or in part; and

(b) may be granted or made subject to conditions or restrictions.

Existing regulations become rules

(11) The Lieutenant Governor in Council may, by order, determine at any time that any regulation, or part thereof, in force at that time shall thereafter be a rule.

Regulations Act does not apply

(12) The Regulations Act does not apply to the rules.

Same

(13) A regulation made under subsection (3) is subject to the Regulations Act.

L.G. in C. prevails

(14) If there is a conflict or an inconsistency between a regulation made by the Lieutenant Governor in Council under this Act and a rule, the regulation prevails, but in all other respects a rule has the same force and effect as a regulation.

Deemed rules

66. (1) Every order and ruling of the Commission that is listed in the Schedule shall be deemed to be a rule validly made under this Act and to have come into force on the day this section comes into force.

Amended orders or rulings

(2) For the purposes of subsection (1), a reference to an order, ruling or policy, whether or not it is referred to in the Schedule, as amended, is a reference to the order, ruling or policy as it exists on the day this section comes into force.

Publication

67. (1) The Commission shall publish in its Bulletin notice of every rule that it proposes to make under section 65.

Notice

(2) The notice must include the following:

1. The proposed rule.

2. A statement of the substance and purpose of the proposed rule.

3. A summary of the proposed rule.

4. A reference to the authority under which the rule is proposed.

5. A discussion of all alternatives to the proposed rule that were considered by the Commission and the reasons for not proposing the adoption of the alternatives considered.

6. A reference to any significant unpublished study, report or other written materials on which the Commission relies in proposing the rule.

7. A description of the anticipated costs and benefits of the proposed rule.

8. A reference to every regulation or provision in a regulation to be amended or revoked under section 65.

Exception

(3) The Commission does not have to make reference to written material that, in the opinion of the Commission, should be held in confidence because it discloses intimate financial, personal or other information and the desirability of avoiding disclosure of the substance of it or its existence in the interests of any person or company affected outweighs the desirability of making it or knowledge of its existence available to the public.

Representations

(4) Upon publication of a notice under subsection (1), the Commission shall invite, and shall give a reasonable opportunity to, interested persons and companies to make written representations with respect to the proposed rule within a period of at least 90 days after the publication.

Exceptions to notice requirement

(5) Publication of a notice is not required if,

(a) all persons and companies who would be subject to the proposed rule are named, the information set out in subsection (2) is sent to each of them and they and any other person or company whose interests are likely to be substantially affected by the proposed rule are given an opportunity to make written representations with respect to it;

(b) the proposed rule grants an exemption or removes a restriction and is not likely to have a substantial effect on the interests of persons or companies other than those who benefit under it;

(c) what is proposed is only an amendment that does not materially change an existing rule;

(d) the Commission,

(i) believes that there is an urgent need for the proposed rule and that, without it, there is a substantial risk of material harm to investors or to the integrity of the capital markets, and

(ii) has the approval of the Minister to make the rule without publication of notice; or

(e) the proposed rule remakes an order, ruling or policy that was deemed to be a rule by the operation of section 66 without materially changing the effect or intent of the rule.

Publication

(6) When a rule to which clause (5) (d) applies comes into force, the Commission shall publish in its Bulletin a statement setting out the substance and purpose of the rule and the nature of the urgency and the risk.

Changes to proposal

(7) If, following publication of the notice and consideration of the submissions, the Commission proposes material changes to the proposed rule, the Commission shall publish in its Bulletin notice of the proposed changes.

Notice

(8) The notice must include the following:

1. The proposed rule with the changes incorporated.

2. A concise statement of the purpose of the changes.

3. The reasons for the changes.

Representations re changes

(9) Upon publication of a notice of changes, the Commission shall invite, and shall give a reasonable opportunity to, interested persons and companies to make written representations with respect to the changes within such period as the Commission considers appropriate.

Making rule

(10) In cases where a notice and comment process is required, the Commission may make the rule only at the end of the notice and comment process and after considering all representations made as a result of that process.

Inspection of material

(11) Section 63 applies to all written representations made under this section as if they were material required to be filed.

Definition

(12) In this section and in section 68,

"rule" includes an amendment to and a revocation of a rule.

Delivery of rules to Minister

68. (1) The Commission must deliver to the Minister a copy of every rule made by it together with the following:

1. A copy of the notices published under section 67, unless publication of notice was not required and copies of all documents referred to in the notices.

2. A summary of the representations made and other documents submitted in respect of the rule as proposed.

3. All other material information that was considered by the Commission in connection with the making of the rule.

Publication

(2) The Commission shall publish in its Bulletin every rule made by it as soon after the rule is made as practicable together with the following:

1. The date on which a rule and the material required under subsection (1) were delivered to the Minister.

2. The date the rule is to come into force if an action is not taken by the Minister under subsection (3).

3. A statement of the substance and purpose of the rule.

4. A summary of the written comments received during the comment periods if notice and comment were required.

5. A statement of the Commission setting out its response to the significant issues and concerns brought to the attention of the Commission during the comment periods.

Action by Minister

(3) Within 60 days after a rule is delivered to the Minister, the Minister may,

(a) approve the rule,

(b) reject the rule; or

(c) return it to the Commission for further consideration.

When rules effective

69. (1) A rule that is approved by the Minister comes into force 15 days after it is approved unless there is a later day specified in the rule in which case it comes into force on that later day.

Same

(2) If the Minister does not approve a rule, reject it or return it to the Commission for further consideration and a coming into force day,

(a) that is at least 75 days after the rule is delivered to the Minister is specified in the rule, the rule comes into force on the specified day;

(b) is not specified in the rule, the rule comes into force on the 75th day after the rule is delivered to the Minister; or

(c) that is within 75 days after the rule is delivered to the Minister is specified in the rule, the rule comes into force on the 75th day after the rule is delivered to the Minister.

Same

(3) A rule that is returned to the Commission for further consideration cannot come into force until it is returned by the Commission to the Minister at which time this section applies as if the rule were delivered for the first time.

Same

(4) A rule that is rejected by the Minister does not come into force.

Same

(5) A rule to which clause 67 (5) (d) (urgency provision) applies that is approved by the Minister comes into force on the day it is published in the Commission's Bulletin.

Revocation by operation of law

(6) Every rule to which clause 67 (5) (d) applies is revoked on the 275th day after it comes into force.

Publication

(7) The Commission shall publish every rule that comes into force in The Ontario Gazette and in its Bulletin.

Deemed notice

(8) Every person or company affected by a rule shall be deemed to have notice of it when it is published in the Commission's Bulletin.

Returned for consideration

70. (1) If the Minister returns a rule to the Commission for further consideration, the Minister may specify what is to be considered, the conditions that apply and the process to be followed.

Same

(2) Subject to any instruction that the Commission receives under subsection (1), the Commission shall consider any rule returned to it in the manner and following the process that it feels is appropriate.

Publication

71. The Commission shall publish in its Bulletin notice of,

(a) any action taken by the Minister under subsection 68 (3) in respect of every rule that the Commission has delivered to the Minister; and

(b) any matters specified by the Minister under subsection 70 (1) to be considered.

Studies

72. (1) The Minister may in writing require the Commission,

(a) to study and make recommendations in respect of any matter of a general nature under or affecting Ontario commodity futures law; and

(b) to consider making a rule in respect of a matter specified by the Minister.

Publication

(2) The Commission shall publish in its Bulletin notice of every requirement from the Minister made under subsection (1).

Notice

(3) The notice must include the following:

1. A statement of the substance of the requirement.

2. A reference to every unpublished study, report or other written materials provided to the Commission by the Minister other than materials that the Minister has asked the Commission to treat as confidential.

Definition, "policy"

73. (1) In this Act,

"policy" means a written statement of the Commission of,

(a) principles, standards, criteria or factors that relate to a decision or exercise of a discretion by the Commission or the Director under this Act, the regulations or the rules,

(b) the manner in which a provision of this Act, the regulations or the rules is interpreted or applied by the Commission or the Director,

(c) the practices generally followed by the Commission or the Director in the performance of duties and responsibilities under this Act or regulations, and

(d) something that is not legislative in nature.

Publication

(2) The Commission shall publish in its Bulletin notice of the proposed adoption of a policy.

Notice

(3) The notice must include the following:

1. The proposed policy.

2. A statement of the purpose of the proposed policy.

3. A summary of the proposed policy.

4. A reference to any significant unpublished study, report, decision or other written materials on which the Commission relies in proposing the policy.

5. A reference to any provision of this Act, a regulation or a rule to which the proposed policy relates.

Exception

(4) The Commission does not have to make reference to written material that, in the opinion of the Commission, should be held in confidence because it discloses intimate financial, personal or other information and the desirability of avoiding disclosure of the substance of it or its existence in the interests of any person or company affected outweighs the desirability of making it or knowledge of its existence available to the public.

Representations

(5) Upon publication of the notice, the Commission shall invite, and shall give a reasonable opportunity to, interested persons and companies to make written representations with respect to the proposed policy within a period of at least 60 days after the publication.

Exceptions to notice requirement

(6) Publication of a notice is not required if the proposed policy would make no material substantive change to an existing policy.

Changes to proposal

(7) If, following publication of the notice, the Commission proposes material changes to the proposed policy, the Commission shall publish in its Bulletin,

(a) the proposed policy with the changes incorporated;

(b) a concise statement of the purpose for the changes; and

(c) the reasons for the changes.

Representations re changes

(8) Upon publication of a notice of change, the Commission shall invite, and shall give a reasonable opportunity to, interested persons and companies to make written representations with respect to the change within such period as the Commission considers appropriate.

Publication in Bulletin

(9) The Commission shall publish in its Bulletin every policy adopted by it as soon after the policy is adopted as practicable together with the following:

1. The date the policy comes into effect.

2. A statement of the substance and purpose of the policy.

3. A summary of the written comments received during the period for comments.

4. A statement of the Commission setting out its response to the significant issues and concerns brought to the attention of the Commission during the comment periods and the reasons for any changes made to the proposed policy following its publication.

Inspection of material

(10) Section 62 applies to all written representations made under this section as if they were material required to be filed.

Restriction

(11) The Commission shall not adopt a policy that, by reason of its prohibitive or mandatory character, is of a legislative nature.

Definition

(12) In this section,

"policy" includes a change to and a rescission of a policy.

Memorandum of understanding

74. (1) The Commission must first deliver to the Minister and then publish in the Commission's Bulletin every agreement, memorandum of understanding or arrangement between the Commission and,

(a) any agency of the Government of Ontario or any agency of any other government that exercises regulatory authority under statute over transactions in contracts or markets therefor, commodities transactions or markets therefor, or financial institutions;

(b) any self-regulatory organization or clearing house; or

(c) any jurisdiction.

Minister's option

(2) The Minister may approve or reject the agreement, memorandum of understanding or arrangement within 60 days after it is published in the Bulletin.

Coming into effect

(3) If the Minister approves the agreement, memorandum of understanding or arrangement, it comes into effect on the day it is approved.

Same

(4) If the Minister does not approve or reject the agreement, memorandum of understanding or arrangement, it comes into effect on the 60th day after its publication in the Bulletin.

Same

(5) If the Minister rejects the agreement, memorandum of understanding or arrangement before it comes into effect by the operation of subsection (4), it does not come into effect.

General orders prohibited

75. The Commission shall not make any order or rulings of general application.

Review by Committee

76. (1) Within five years after this section comes into force and within each five-year period after that, the Minister shall appoint an advisory committee to review the legislation, regulations and rules relating to matters dealt with by the Commission and the legislative needs of the Commission.

Same

(2) The committee shall review the legislation, regulations and rules relating to matters dealt with by the Commission and the legislative needs of the Commission and solicit the view of the public in respect of those matters by means of a notice and comment process.

Report

(3) The committee shall prepare for the Minister a report of its review and its recommendations.

Same

(4) The Minister shall table the report in the Legislature.

Committee Review

(5) Upon the report being tabled, a select or standing committee of the Legislative Assembly shall be appointed to review the report, hear the opinions of interested persons or companies and make recommendations to the Legislative Assembly regarding amendments to this Act.

Confidential information

77. The Minister is entitled to keep confidential any information or documents received from the Commission that the Commission was entitled to keep confidential.

Revocation or variation of decision

78. (1) The Commission may, on the application of the Executive Director or a person or company affected by the decision, make an order revoking or varying a decision of the Commission if, in the Commission's opinion, the order would not be prejudicial to the public interest.

Terms and conditions

(2) The order may be made on such terms and conditions as the Commission may impose.

No privilege

79. (1) Despite subsection 33 (4) of the Evidence Act, the Commission may, by order, compel a bank or officer of a bank, in an investigation, financial examination or hearing under Ontario commodity futures law to which the bank is not a party, to produce any book or record the contents of which can be proved under section 33 of the Evidence Act or to appear as a witness to prove the matters, transactions and accounts contained in the book or record.

Definitions

(2) In subsection (1),

"bank" and "officer of a bank" have the same meanings as in subsection 33 (4) of the Evidence Act.

Exemption

80. Except where exemption applications are otherwise provided for in Ontario commodity futures law, the Commission may, on the application of an interested person or company and if, in the Commission's opinion, it would not be prejudicial to the public interest, make an order on such terms and conditions as it may impose exempting the person or company from any requirement of Ontario commodity futures law.

Costs

81. Nothing shall preclude a court from ordering costs payable to the Commission and in the event that costs are awarded to the Commission, a counsel fee may be awarded despite the fact that the Commission was represented by Commission staff.

Decision under more than one provision

82. Nothing in this Act shall be construed as limiting the Commission's ability to make a decision under more than one provision of Ontario commodity futures law in respect of the same conduct or matter.

Enforcement of Commission decision

83. (1) On filing with the Superior Court of Justice, a decision made by the Commission or by a Director pursuant to subsection 3.1 (1) shall be deemed to be an order of the Superior Court of Justice and is enforceable as an order of that court.

Filing decision

(2) A decision of a Director may not be filed with the court under subsection (1) until the time permitted for an application to review the Director's decision pursuant to subsection 4 (2) has expired or, if the decision has been appealed, the Commission has confirmed it.

Application for letters of request

84. (1) The Commission may apply to the Superior Court of Justice for an order,

(a) appointing a person to take the evidence of a witness outside of Ontario for use in a proceeding before the Commission; and

(b) providing for the issuance of a letter of request directed to the judicial authorities of the jurisdiction in which the witness is to be found, requesting the issuance of such process as is necessary to compel the person to attend before the person appointed under clause (a) to give testimony on oath or otherwise and to produce documents and things relevant to the subject-matter of the proceeding.

Practice and procedure

(2) The practice and procedure in connection with an appointment under this section, the taking of evidence and the certifying and return of the appointment shall, as far as possible, be the same as those that govern similar matters in civil proceedings in the Superior Court of Justice.

Admissibility of evidence

(3) The making of an order under subsection (1) does not determine whether evidence obtained pursuant to the order is admissible in the proceeding before the Commission.

Reciprocal assistance

(4) If it is made to appear to the Superior Court of Justice that a court or tribunal of competent jurisdiction outside of Ontario has, on behalf of a securities commission, a commodity futures commission or other body empowered by statute to administer or regulate trading in contracts, duly authorized, by commission, order or other process, the obtaining of the testimony of a witness outside the jurisdiction of the securities commission, commodity futures commission or other body, the Superior Court of Justice may order the examination of the witness before the person appointed in the manner and form directed by the commission, order or other process, and may, by the same or by subsequent order, command the attendance of the witness for the purpose of being examined, or the production of a writing or other document or thing mentioned in the order, and may give all such directions as to the time and place of the examination and all other matters connected with the examination as seem proper.

Exchange of information

85. Despite the Freedom of Information and Protection of Privacy Act, the Commission may provide information to and receive information from other securities or financial regulatory authorities, stock exchanges, self-regulatory bodies or organizations, law enforcement agencies and other governmental or regulatory authorities, both in Canada and elsewhere, and any information so received by the Commission shall be exempt from disclosure under that Act if the Commission determines that such information should be maintained in confidence.

48. The Act is amended by adding the following Schedule:

Schedule

(Definition of "rule" in subsection 1 (1))

In The Matter Of The Members Of The Toronto Stock Exchange And Of The Investment Dealers Association of Canada (Order) (exempts members of the TSE and IDA from the need to segregate) November 29, 1979
In The Matter Of Trading In Commodity Futures Contracts And Commodity Futures Options Entered Into On Commodity Futures Exchanges Situate Outside Canada Other Than Commodity Futures Exchanges In The United States of America (Order)

(exempts trades by registered futures commission merchants in contracts on offshore exchanges from requirements of s. 33 of Act)

January 3, 1980
In The Matter Of Trading Commodity Futures Contracts Entered Into On The Montreal Stock Exchange (Order)

 

(exempts trades by registered futures merchants in contracts on ME from requirements of s. 33 of Act)

August 25, 1980
In The Matter Of The Toronto Futures Exchange (Order) (exempts registrants from the need to provide customers with the terms and conditions of contracts) January 10, 1984
In The Matter Of The Toronto Futures Exchange (Order) (exempts TFE members from the need to segregate) January 10, 1984
In The Matter Of The Toronto Futures Exchange (Ruling) (exempts trades made on the floor of the TFE by floor traders from s.22) January 10, 1984
In The Matter Of Trading In Commodity Futures Contracts And Commodity Futures Options Entered Into On Commodity Futures Exchanges Situate Outside Canada Other Than Commodity Futures Exchanges In The United States of America (Order)

 

(exempts trades by registered futures commission merchants in contracts subject to rules of London Metal Exchange from s. 33 of Act)

January 26, 1984
In The Matter Of Trading In Commodity Futures Contracts And Commodity Futures Options Entered Into On Commodity Futures Exchanges In The United States Of America (Order) (exempts trades by registered dealers in contracts on contract markets designated by CFTC) October 26, 1984
In The Matter Of The Toronto Stock Exchange (Ruling) (exempts traders on floor of TSE from s. 22 of Act) April 9, 1985
In The Matter Of The Toronto Stock Exchange (Ruling) (exempts trades in Government of Canada Bond Options from s.22 of the CFA if made by Securities Act registrants) September 16, 1985
In The Matter Of The Toronto Stock Exchange (Order and Ruling)

 

(exempts trades in contracts made on the floor of the TFE by options attorneys and competitive options traders from s.22)

May 15, 1987
In The Matter Of The Toronto Futures Exchange (Order and Ruling) May 15, 1987
In The Matter Of Trading In Commodity Futures Contracts And Commodity Futures Options Entered Into On The Montreal Exchange (Order) August 22, 1989
In The Matter Of Certain Members Of The Toronto Futures Exchange (Order)

 

(limits the exemption from the need to segregate)

January 8, 1990
In The Matter Of The Toronto Stock Exchange (Ruling) (exempts options attorneys and competitive options traders from s.22 if they trade TSE 300 contracts) January 15, 1994

 

Explanatory Note

Part XV - Rules, Regulations and Policies

Part XV of the CFA provides the Commission with rule-making power, sets out the process for making rules under the CFA and adds a number of general provisions dealing with privilege, costs and the Commission's power to grant exemptions. These additions give the Commission rule-making powers with respect to the CFA similar to the powers that were given to the Commission under Bill 190 with respect to the Securities Act. Bill 190 responded to recommendations from the Ontario Task Force on Securities Regulation, chaired by University of Toronto law professor Ron Daniels. The joint Ministry of Finance and Commission task force (the "Daniels Task Force") was set up in October 1993 to review, and make recommendations in respect of, the legislative framework for the development of securities policy in the province of Ontario with particular attention to the policy making role of the Commission and to assess the implications of, and recommend an appropriate legislative response to certain judicial decisions which raised concerns about the use of policy statements by provincial securities regulators. The reasoning contained in these judicial decisions could also be applied to the CFA but as a result of time constraints the Daniels Task Force did not include the CFA in its recommendations.

The main purpose of Part XV is to authorize the Commission to make rules of a legislative nature that will be treated as subordinate legislation in the same manner as the regulations on the same subject matter made by the Lieutenant Governor in Council.

The rules, unlike the regulations, will not be subject to the Regulations Act and will not be filed with the Registrar of Regulations. They will, however, be published in the Commission's Bulletin and The Ontario Gazette.

If there is a conflict or inconsistency between a rule and a regulation, the regulation prevails. When a conflict is identified, the Commission may, with the approval of the Minister, revoke the conflicting regulation.

The rules must go through a notice and comment process before they can come into force. New section 67 of the CFA sets out the process. The process can be bypassed, with the approval of the Minister, if there is a particular urgency for making the rule or if the rule is an amending rule that does not have a substantive effect. A rule, that because of urgency, did not go through the notice and comment process expires, by operation of law, 275 days after it comes into force.

Under new section 68 of the CFA all rules, before they come into force, must be sent to the Minister. The Minister may reject a rule or return it to the Commission for further consideration. In either case the rule does not come into force. A rule for which there is a particular urgency comes into force when it is published in the Commission's Bulletin.

The Schedule lists a number of orders and rulings that the Commission has issued over the years that are of a general nature. These are considered to be of a legislative nature and are deemed to be rules without having to go through the notice and comment process or to be subject to the Minister's approval or rejection.

New section 72 of the CFA authorizes the Minister to require the Commission to undertake studies or consider matters specified by the Minister.

Under new section 73 of the CFA policies of the Commission are, also, subject to a notice and comment process before they are adopted by the Commission.

Under new section 74 of the CFA the Commission is authorized to enter into agreements with other jurisdictions or self-regulatory bodies with the approval of the Minister.

New section 85 of the CFA establishes that the Freedom of Information and Protection of Privacy Act does not prevent the exchange of information with other regulators, stock exchanges, self- regulatory organizations and law enforcement agencies, both in Canada and elsewhere, nor does it require disclosure of information so obtained. The amendment corresponds to the amendment made to the Securities Act under the Prosperity Act.

Commencement

49. (1) Subject to subsection (2), this Part comes into force on the day this Act receives Royal Assent.

Same

(2) Section 34 comes into force on a day to be named by proclamation of the Lieutenant Governor.