Draft Initial Regulations for the Co-Operative Capital Markets Regulatory System

December 18, 2015

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Draft Initial Regulations for the Co-Operative Capital Markets Regulatory System

Letter Summary:

As a general comment and notwithstanding the chosen governance structure, we generally hold the view that harmonizing securities legislation, to the extent possible, would benefit all market participants. We note that the proposed approach to transitioning market participants in each of the participating jurisdictions has recently been published. We look forward to reviewing the draft interface plans with the non-participating jurisdictions, as careful and effective implementation of this mechanism will be critical to minimizing market disruption and will also potentially strongly impact the efficacy of capital markets
and investor protection. We also note that the Initial Regulations, once implemented, will be interpreted and applied by many different types of market participants, some of whom may not appreciate some of the nuanced amendments from existing regulation. It could be helpful for all market participants if the regulations could avoid, for example, the use of double negatives and other constructions which make it more difficult to read and/or interpret, particularly as it relates to the framework for derivatives. In addition, outreach efforts across different segments of affected market participants are strongly encouraged.

Overview of the Council’s Comments:

We would support the inclusion of a statutory best interest standard on all registrants providing advice in the initial regulations. Such a standard would help ensure that investments are in fact in a client’s best interests, and would help mitigate concerns relating to potential conflicts of interest. Investor protection is best enhanced by providing clear risk and conflict disclosures, taking steps to verify eligibility to participate in the exempt market (as applicable), and implementing a best interest standard on all registrants.