CAC Comment Letter on CSA Consultation Paper 11-405

January 22, 2009

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CAC Comment Letter on CSA Consultation Paper 11-405

Letter Summary:

We believe that the proper test for any proposed solution is: if the changes were adopted, would this prevent a repeat of the problems? At the present time, we do not believe that the solutions contained in the Proposals meet this test. While the Proposals contain some useful suggestions, unless all the sources of the problems are fully identified, the solutions are not likely to work in

Overview of the Council’s Comments:

We also note that regulation cannot (and should not try to) eliminate all risks. The purpose of the capital markets is to deal with risk and allocate capital to investments appropriately. Without risk, there is no return to any investor. The regulatory focus should be on ensuring the investors who bear the risks have the appropriate information to understand those risks fully. In searching for solutions, we would recommend that the CSA should develop a more general framework for assessing the appropriateness of the regulatory structure for a given product, which might then be useful for assessing other new products in the future. Focusing solely on ABCP and its specific characteristics may not be useful as the market for most ABCP is likely to be impaired for the foreseeable future.