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CSA NI 93-101 Derivatives Business Conduct and Proposed CP

Letter Summary:

As noted in the proposed companion policy, a senior derivatives manager is primarily responsible for a particular derivatives business unit, and they will manage or have significant influence over its activity on a day-to-day basis, including with respect to the conduct of the unit. Any such, broad exemption provides an opportunity for significant counterparty damage, particularly for lesser sophisticated parties that transact without close supervision from experienced personnel. While the macroprudential considerations relating to these changes made in the Proposed Instrument from prior iterations are certainly important, the gatekeeper function performed by roles such as a senior derivatives manager cannot be overlooked, as it may lead to conduct and oversight failures and loss of market and counterparty confidence in smaller derivatives dealers and related less liquid derivatives markets.

Overview of the Council’s Comments:

The CSA agrees that the provisions of NI 31-103 that were amended to implement the Client Focused Reforms should be considered in order to determine how they can best be adapted in the OTC derivatives context, though would urge that the top priority is that this Proposed Instrument is first implemented expeditiously, should the necessary changes in response to the CFRs be significant enough to either demand republication or substantive delays to the ultimate implementation of the Proposed Instrument. We were (and are) strongly supportive of many of the CFR initiatives that fundamentally shifted the advisor/client relationship, and believe it is important that these be considered in future but that the implementation of the Proposed Instrument not be held up as a result.