CSA NI 93-101 Derivatives Business Conduct

September 17, 2018

Download PDF:

CSA NI 93-101 Derivatives Business Conduct

Letter Summary:

The proposed National Instrument will apply to any person or company who meets the definition of “derivatives adviser” or “derivatives dealer” for OTC derivatives, unless an exemption applies. The instrument takes a two-tiered approach to regulation by tailoring many requirements according to the nature of the party whom the derivatives firm is interacting. Some obligations (e.g., relating to fair dealing, conflicts of interest, segregation of assets and KYC) will apply regardless of the derivatives party’s sophistication or financial resources.

Overview of the Council’s Comments:

The council was supportive of more harmonized standards for listed derivatives and OTC derivatives, particularly with respect to the reporting and disclosure by derivative parties. While there is room for debate on the scope of the Registration Proposals, we agree that all derivatives advisers and dealers should be subject to minimum standards, even if their activity does not trip the business trigger for registration. Among other recommendations, the council believes the CSA should consider specifying exemption from the adviser registration for portfolio managers utilizing OTC derivatives occasionally or for currency hedging in their managed investment funds/segregated portfolios. Registrants who meet their obligations under NI 31-103 may struggle with the Business Conduct Proposals without targeted, specific information around the additional policies and procedures expected of them under the new regime for OTC derivatives. Given the complexity and magnitude of these regulations, the council suggested that registrants would benefit from additional tools and explanations, by way of guidance notices, registrant outreach, staff notices or otherwise, to help meet their new obligations