Securities Law & Instruments

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CSA Notice of Approval

Amendments to National Instrument 21-101 Marketplace Operation



October 23, 2014

I. Introduction

The Canadian Securities Administrators (CSA or we) have made amendments to National Instrument 21-101 Marketplace Operation (NI 21-101) and its related Companion Policy 21-101CP (21-101 CP) with respect to the transparency requirements of the trading of government debt securities.

Provided all necessary ministerial approvals are obtained, the amendments to NI 21-101 and 21-101CP (the Amendments) will come into force on December 31, 2014.

II. Substance and Purpose

Currently, section 8.6 of NI 21-101 provides for an exemption from transparency requirements for government debt securities until January 1, 2015. The Amendments will extend this exemption until January 1, 2018. The purpose of the Amendments is to maintain the regulatory framework for government debt transparency but delay imposing regulatory requirements until such time they are appropriate.

III. Background

Part 8 of NI 21-101 sets out transparency requirements for marketplaces dealing in debt securities, inter-dealer bond brokers and dealers trading unlisted debt securities. Section 8.1 sets out specific pre-trade and post-trade transparency requirements for government debt securities. Section 8.6 contains an exemption from section 8.1 until January 1, 2015. This exemption was last extended in 2011.

The Amendments were published for comment along with other proposed amendments on April 24, 2014 (2014 Proposed Amendments). The CSA are now finalizing the proposed change applicable to the extension of the exemption from government debt transparency, and intend to review and proceed with the other proposed amendments included in the 2014 Proposed Amendments on a separate timetable.

Domestic Developments

Since the exemption was last extended, the CSA has continued to review regulatory developments with respect to fixed income, including government debt transparency, and the appropriateness of the exemption in section 8.6 of NI 21-101 and the alternatives for transparency of government fixed income securities.

In Canada, some regulatory developments have occurred. For example, IIROC has implemented Dealer Member Rule 3300 -- Fair Pricing of Over-The-Counter Securities (the Fair Pricing Rule) whose purpose is to ensure that dealers' clients, in particular retail clients, are given prices for over-the-counter securities that are fair and reasonable in relation to prevailing market conditions. Furthermore, amendments to IIROC Dealer Member Rules 29 Business Conduct, 200 Minimum Records and 3500 Relationship Disclosure and Dealer Member Form 1 came into force on July 15, 2014. These include requirements that dealers disclose to their retail clients, on the debt security trade confirmations, the total compensation or the gross commission taken on a trade, with additional disclosure required where gross commission is disclosed.{1}

In addition, proposed IIROC Rule 2800C -- Transaction Reporting for Debt Securities will require dealers to report, on a post-trade basis, all debt market transactions executed by a dealer member, including those executed on a marketplace or through an inter-dealer bond broker. This proposed rule is expected to facilitate the creation of a database of transaction information that would enable IIROC to carry out its responsibilities with respect to the surveillance and oversight of over-the-counter debt market trading.

International Developments

A number of noteworthy regulatory developments have recently occurred in Europe. Specifically, the final legislative texts of the new Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR) were approved by the European Parliament on April 15, 2014 and by the European Council on May 13, 2014, and entered into force on June 12, 2014. When implemented, MiFIR will establish a new transparency regime which extends to bonds, structured products, emission allowances and derivatives (collectively, non-equity financial instruments).

This regime will include requirements for pre-trade transparency for non-equity financial instruments and will apply to market operators and investment firms operating a trading venue.{2} Waivers from these requirements would apply, including for large orders.{3} There will also be post-trade transparency requirements for non-equity financial instruments, which will also apply to market operators and investment firms operating a trading venue.{4} The information to be made public will be the price, volume and time of the transactions, and it may be delayed in certain instances, for example, when executing large transactions or transactions in less liquid products.{5}

The European Securities and Markets Authority (ESMA) was tasked with drafting the regulatory technical standards (RTS) that will specify the precise content of the pre and post-trade information to be made transparent, including the conditions under which waivers from the pre-trade transparency requirements would be granted. ESMA was also required to develop RTS for the implementation of the post-trade transparency regime, which would include conditions for the deferred publication of transactions, and the content of the information to be made public. ESMA is required to submit the draft RTSs to the European Commission by July 3, 2015, and implementation would follow at a later date.

Final Amendments

We note that no other jurisdiction has mandated transparency requirements for government debt securities, and we believe it would be appropriate to extend the existing exemption as we continue to monitor international developments, including those described above.

Therefore, the Amendments will further defer the introduction of the transparency requirements in section 8.1 until January 1, 2018, in order to allow the CSA an opportunity to consider international and domestic regulatory and industry developments and to determine what, if any, mandatory requirements are needed in this area.

IV. Summary of Written Comments Received by the CSA

We received eight comment letters in response to the 2014 Proposed Amendments and two commenters specifically responded to the proposed amendment relating to the extension of the government debt transparency exemption. Both commenters were in favour of the proposed extension of the exemption. A list of those who submitted comments, as well as a summary of the comments pertaining to the extension of the government debt transparency exemption and our responses to them are contained in Annex D of this notice. Copies of the comment letters are posted at www.osc.gov.on.ca and www.lautorite.qc.ca.

V. Contents of Annexes

Annex A -- Amending Instrument for NI 21-101

Annex B -- Blackline of Part 8 of NI 21-101 indicating the Amendments

Annex C -- Blackline of Part 10 of 21-101CP indicating the Amendments

Annex D -- Comment Summary and CSA Responses

VI. Local Matters

In Ontario, the Amendments to NI 21-101 and other required materials were delivered to the Minister of Finance on October 17, 2014. The Minister may approve or reject the Amendments or return them for further consideration. If the Minister approves the Amendments or does not take any further action by December 17, 2014, the Amendments will come into force on December 31, 2014.

In Québec, the Amendments will be delivered to the Minister of Finance for approval. The Amendments will come into force on December 31, 2014.

Questions

The Amendments are available on certain websites of CSA members, including:

www.lautorite.qc.ca
www.albertasecurities.ca
www.bcsc.ca
www.osc.gov.on.ca

Please refer your questions to any of the following:

Ruxandra Smith
Senior Accountant
Ontario Securities Commission
416-593-8322
ruxsmith@osc.gov.on.ca
 
Alex Petro
Oversight Analyst
Ontario Securities Commission
416-263-3796
apetro@osc.gov.on.ca
 
Serge Boisvert
Senior Policy Advisor
Autorité des marchés financiers
514-395-0337 ext. 4358
serge.boisvert@lautorite.qc.ca
 
Maxime Lévesque
SRO Analyst
Autorité des marches financiers
514-395-0337 ext. 4324
maxime.levesque@lautorite.qc.ca
 
Bonnie Kuhn
Manager, Legal
Alberta Securities Commission
403-355-3890
bonnie.kuhn@asc.ca
 
Meg Tassie
Senior Advisor
British Columbia Securities Commission
604-899-6819
mtassie@bcsc.bc.ca

{1} New sub-clause 200.2(I)(v)(C) of IIROC Dealer Member Rule 200 Minimum Records.

{2} MiFIR Article 8 Pre-Trade transparency requirements for trading venues in respect of bonds, structured finance products, emission allowances and derivatives.

{3} MiFIR Article 9 Waivers for non-equity instruments.

{4} MiFIR Article 10 Post-trade transparency requirements for trading venues in respect of bonds, structured finance products, emission allowances and derivatives.

{5} MiFIR Article 11 Authorisation of deferred publication.

 

ANNEX A

AMENDMENTS TO NATIONAL INSTRUMENT 21-101 MARKETPLACE OPERATION

1. National Instrument 21-101 Marketplace Operation is amended by this Instrument.

2. Section 8.6 is amended by replacing "2015" with "2018".

3. This Instrument comes into force on December 31, 2014.

 

ANNEX A

SCHEDULE

1. The changes to Companion Policy 21-101CP to National Instrument 21-101 Marketplace Operation are set out in this Schedule.

2. Subsection 10.1(1) is amended by replacing "2015" with "2018".

3. These changes become effective on December 31, 2014.

 

ANNEX B

NATIONAL INSTRUMENT 21-101 MARKETPLACE OPERATION

PART 8 INFORMATION TRANSPARENCY REQUIREMENTS FOR MARKETPLACES DEALING IN UNLISTED DEBT SECURITIES, INTER-DEALER BOND BROKERS AND DEALERS

8.6 Exemption for Government Debt Securities -- Section 8.1 does not apply until January 1, 20158.

 

ANNEX C

COMPANION POLICY 21-101 TO NATIONAL INSTRUMENT 21-101 MARKETPLACE OPERATION

PART 10 INFORMATION TRANSPARENCY REQUIREMENTS FOR UNLISTED DEBT SECURITIES

10.1 Information Transparency Requirements for Unlisted Debt Securities

(1) The requirement to provide transparency of information regarding orders and trades of government debt securities in section 8.1 of the Instrument does not apply until January 1, 20158. The Canadian securities regulatory authorities will continue to review the transparency requirements, in order to determine if the transparency requirements summarized in subsections (2) and (3) below should be amended.

 

ANNEX D

COMMENT SUMMARY AND CSA RESPONSES

Commenters:

Scotia Capital Inc.

Investment Industry Association of Canada

Topic

Summary of Comments

Response to Comments

 

Extension of exemption for the transparency requirements applicable to government debt securities in section 8.6 of NI 21-101 to January 1, 2018.

Both commenters supported the proposal to extend the exemption for the transparency requirements applicable to government debt securities in section 8.6 to January 1, 2018.

We note the support for the extension of the exemption for government debt transparency.

 

One commenter cited that as no other international jurisdictions have mandated transparency for government debt trading, it would not be appropriate to do so in Canada at this time.

 

 

 

Another commenter stated that there have been significant advances in debt market transparency delivered by the marketplace since the original government debt transparency exemption was put in place and the prevalence of electronic trading in government debt securities in Canada today has contributed favourably to price discovery. This commenter also noted that CanPx, the designated information processor for Canadian corporate debt markets, continues to voluntarily provide transparency on government debt transactions.

 

 

Chapter 8 -- Notice of Exempt Financings

REPORT OF TRADES ON FORM 45-106F1 AND 45-501F1

There are no Reports of Exempt Distribution on Forms 45-106F1 or 45-501F1 (Reports) in this Bulletin.

Reports filed on or after February 19, 2014 must be filed electronically.

As a result of the transition to mandated electronic filings, the OSC is considering the most effective manner to make data about filed Reports available to the public, including whether and how this information should be reflected in the Bulletin. In the meantime, Reports filed with the Commission continue to be available for public inspection during normal business hours.

 

Chapter 11 -- IPOs, New Issues and Secondary Financings

Issuer Name:

Carlaw Capital V Corp.
Principal Regulator -- Ontario

Type and Date:

Preliminary CPC Prospectus dated October 20, 2014
NP 11-202 Receipt dated October 20, 2014

Offering Price and Description:

MINIMUM OFFERING: $300,000 -- 1,500,000 Common Shares
MAXIMUM OFFERING: $400,000 -- 2,000,000 Common Shares
Price: $0.20 per Common Share

Underwriter(s) or Distributor(s):

Canaccord Genuity Corp.

Promoter(s):

Amar Bhalla

Project #2268985

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Diversified Royalty Corp.
Principal Regulator -- British Columbia

Type and Date:

Preliminary Short Form Prospectus dated October 20, 2014
NP 11-202 Receipt dated October 20, 2014

Offering Price and Description:

$30,000,000 -- 12,500,000 Common Shares
Price: $2.40 per Offered Share

Underwriter(s) or Distributor(s):

CORMARK SECURITIES INC.
GMP SECURITIES L.P.
LAURENTIAN BANK SECURITIES INC.
NATIONAL BANK FINANCIAL INC.
PI FINANCIAL CORP.

Promoter(s):

-

Project #2268042

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Fidelity Income Focused Private Pool
Fidelity U.S. Bond Investment Trust
Principal Regulator -- Ontario

Type and Date:

Preliminary Simplified Prospectuses dated October 15, 2014
NP 11-202 Receipt dated October 15, 2014

Offering Price and Description:

Series B, Series S5, Series S8, Series I, Series I5, Series I8, Series F, Series F5, Series F8 and Series O Untis

Underwriter(s) or Distributor(s):

Fidelity Investments Canada ULC

Promoter(s):

FIDELITY INVESTMENTS CANADA ULC

Project #2267943

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

RBC Conservative Growth & Income Fund
RBC Emerging Markets Foreign Exchange Fund
Principal Regulator -- Ontario

Type and Date:

Preliminary Simplified Prospectuses dated October 14, 2014
NP 11-202 Receipt dated October 15, 2014

Offering Price and Description:

Series A, Advisor Series, Advisor T5 Series, Series T5, Series H, Series D, Series F, Series FT5, Series I and Series O Units

Underwriter(s) or Distributor(s):

Royal Mutual Funds Inc.
RBC Global Asset Management Inc.
Royal Mutual Funds Inc.

Promoter(s):

RBC Global Asset Management Inc.

Project #2267741

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Roxgold Inc.
Principal Regulator -- Ontario

Type and Date:

Preliminary Short Form Prospectus dated October 17, 2014
NP 11-202 Receipt dated October 17, 2014

Offering Price and Description:

$30,030,000 -- 46,200,000 Units
Price: $0.65 per Unit

Underwriter(s) or Distributor(s):

CORMARK SECURITIES INC.
BMO NESBITT BURNS INC.
MACQUARIE CAPITAL MARKETS CANADA LTD.
GMP SECURITIES L.P.
RBC DOMINION SECURITIES INC.
HAYWOOD SECURITIES INC.
CANACCORD GENUITY CORP.
RAYMOND JAMES LTD.

Promoter(s):

-

Project #2268530

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Star Gold Corp.

Type and Date:

Preliminary Long Form Non-Offering Prospectus dated October 9, 2014
Receipted on October 16, 2014

Offering Price and Description:

-

Underwriter(s) or Distributor(s):

-

Promoter(s):

-

Project #2267007

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

BMO High Yield Bond Fund
(series F, I and Advisor Series)
BMO European Fund
(series A, F, D, I and Advisor Series)
Principal Regulator -- Ontario

Type and Date:

Amendment #2 dated October 6, 2014 to the Simplified Prospectus and Annual Information Form dated April 3, 2014
NP 11-202 Receipt dated October 15, 2014

Offering Price and Description:

-

Underwriter(s) or Distributor(s):

BMO Investments Inc.
Guardian Group of Funds Ltd.

Promoter(s):

BMO Investments Inc.

Project #2166827

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Brookfield Office Properties Inc.
Principal Regulator -- Ontario

Type and Date:

Final Short Form Prospectus dated October 16, 2014
NP 11-202 Receipt dated October 16, 2014

Offering Price and Description:

C$300,000,000.00
12,000,000 Class AAA Preference Shares, Series AA

Underwriter(s) or Distributor(s):

RBC DOMINION SECURITIES INC.
CIBC WORLD MARKETS INC.
SCOTIA CAPITAL INC.
TD SECURITIES INC.
BMO NESBITT BURNS INC.
NATIONAL BANK FINANCIAL INC.
HSBC SECURITIES (CANADA) INC.
RAYMOND JAMES LTD.
BROOKFIELD FINANCIAL CORP.
DESJARDINS SECURITIES INC.

Promoter(s):

-

Project #2266148

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

First Trust AlphaDEX U.S. Consumer Discretionary Sector Index ETF
First Trust AlphaDEX U.S. Consumer Staples Sector Index ETF
First Trust AlphaDEX U.S. Energy Sector Index ETF
First Trust AlphaDEX U.S. Financial Sector Index ETF
First Trust AlphaDEX U.S. Health Care Sector Index ETF
First Trust AlphaDEX U.S. Industrials Sector Index ETF
First Trust AlphaDEX U.S. Materials Sector Index ETF
First Trust AlphaDEX U.S. Technology Sector Index ETF
First Trust AlphaDEX U.S. Utilities Sector Index ETF
Principal Regulator -- Ontario

Type and Date:

Final Long Form Prospectus dated October 17, 2014
NP 11-202 Receipt dated October 20, 2014

Offering Price and Description:

Hedged units @ net asset value

Underwriter(s) or Distributor(s):

-

Promoter(s):

FT Portfolios Canada Co.

Project #2259983

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Great Panther Silver Limited
Principal Regulator -- British Columbia

Type and Date:

Final Base Shelf Prospectus dated October 14, 2014
NP 11-202 Receipt dated October 15, 2014

Offering Price and Description:

$80,000,000
Common Shares
Warrants
Subscription Receipts
Units

Underwriter(s) or Distributor(s):

-

Promoter(s):

-

Project #2265056

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Lundin Mining Corporation
Principal Regulator -- Ontario

Type and Date:

Final Short Form Prospectus dated October 17, 2014
NP 11-202 Receipt dated October 17, 2014

Offering Price and Description:

$674,000,700
132,157,000 Subscription Receipts
each representing the right to receive one common share
Price: $5.10 per Subscription Receipt

Underwriter(s) or Distributor(s):

GMP Securities L.P.
BMO Nesbitt Burns Inc.
Scotia Capital Inc.
Merrill Lynch Canada Inc.
TD Securities Inc.
CIBC World Markets Inc.
Dundee Securities Ltd.
RBC Dominion Securities Inc.
Haywood Securities Inc.

Promoter(s):

-

Project #2265983

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Purpose High Interest Savings ETF
(ETF units and Class I units)
Purpose Short Duration Emerging Markets Bond Fund
(ETF units, Class A units, Class F units, Class I units and Class D units)
Purpose Short Duration Global Bond Fund
(ETF units, Class A units, Class F units, Class I units and Class D units)
Purpose US Dividend Fund
(ETF units, ETF non-currency hedged units, Class A units, Class A non-currency hedged units,
Class F units, Class F non-currency hedged units, Class I units, Class I non-currency hedged
units, Class D units and Class D non-currency hedged units)
Purpose International Dividend Fund
(ETF units, Class A units, Class F units, Class I units and Class D units)
Purpose International Tactical Hedged Equity Fund (ETF shares, Series A shares, Series F
shares, Series I shares, Series D shares, Series XA shares and Series XF shares)
Principal Regulator -- Ontario

Type and Date:

Final Simplified Prospectuses dated October 15, 2014
NP 11-202 Receipt dated October 20, 2014

Offering Price and Description:

ETF units, ETF non-currency hedged units, Class A units, Class A non-currency hedged units, Class F units, Class F non-currency hedged units, Class I units, Class I non-currency hedged units, Class D units and Class D non-currency hedged units; and ETF shares, Series A shares, Series F shares, Series I shares, Series D shares, Series XA shares and Series XF shares

Underwriter(s) or Distributor(s):

-

Promoter(s):

Purpose Investments Inc.

Project #2258245

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Issuer Name:

Sears Canada Inc.
Principal Regulator -- Ontario

Type and Date:

Final Short Form Prospectus dated October 15, 2014
NP 11-202 Receipt dated October 16, 2014

Offering Price and Description:

Up to 40,000,000.00 Outstanding Common Shares Deliverable Upon Exercise of the
Subscription Rights Distributed by Sears Holdings Corporation

Underwriter(s) or Distributor(s):

-

Promoter(s):

-

Project #2266284

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

 

Chapter 12 -- Registrations

Registrants

Type

Company

Category of Registration

Effective Date

 

New Registration

Headsail Wealth Management Incorporated

Portfolio Manager

October 15, 2014

 

New Registration

Adaptive Asset Management Ltd.

Portfolio Manager

October 16, 2014

 

New Registration

Open Avenue Inc.

Exempt Market Dealer

October 16, 2014

 

Voluntary Surrender

Selective Asset Management Inc.

Portfolio Manager

October 17, 2014

 

Consent to Suspension (Pending Surrender)

TD Sponsored Companies Inc.

Investment Fund Manager

October 17, 2014