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Who is the Canadian Advocacy Council?
The Canadian Advocacy Council (CAC) is a volunteer advocacy council for CFA Societies Canada, representing the 12 Canadian CFA Institute Member Societies and, ultimately, Canadian CFA charterholders. The council includes investment professionals from across the country, who review regulatory, legislative, and standard setting developments affecting investors, investment professionals, and Canadian capital markets. The CAC strives to advance market integrity, transparency, and investor protection, and actively engages Canada’s securities regulators, self-regulatory organizations, industry associations, legislators, and other stakeholders through thought leadership, direct engagement, and the publication of comment letters.
What’s new?
This has been an exciting year for the CAC. Together with the support of CFA Societies Canada, we have explored many innovative opportunities to provide a voice for Canadian CFA charterholders and our 12 member societies. This has meant working on developing a more co-ordinated national advocacy voice, combined with active engagement in opportunities such as proactive dialogue with regulators. Moreover, on the regulatory consultation front, with Q2 of the fiscal year showing no sign of slowing down. Below is a brief summary of commentary letters completed from January and February, and ones in progress at the time of this submission to The Analyst.
Published Comment Letters
CAC favours the CSA’s electronic delivery of documents proposal
The CAC supports the fine balance needed to maintain investor protection in the electronic delivery of documents, while reducing regulatory burden. As such, we backed the CSA’s proposal to create an “access equals delivery” model for the distribution of prospectus documents, financial statements, and MD&A filings, highlighting some concern over the limitations of the current user interface for SEDAR (System for Electronic Document Analysis and Retrieval). Documents must also be posted prominently on the issuer’s website in an easily accessible format to ensure transparency and investor access.
Investor protection is key, says CAC of proposed IIROC rules
We have provided a thorough commentary and series of questions for consideration on the IIROC Proposed Derivatives Rule Modernization, Stage 1. Our commentary is meant to provide guidance on reducing regulatory burden without compromising investor protection. The CAC agrees with the proposal to expand the scope of the definition of a derivative and believes this will act as an additional safeguard for investors. The CAC notes that a Canadian-only focus could be problematic, given Canada’s small percentage of the global derivatives trading market.
Comment letters in progress to be posted/in progress
Overview of CP restrictions on the use of the Deferred Sales Charge Option for Mutual Funds (Due: May 21, 2020 +45 days)
(Proposed OSC Rule 81-502 and 81-502)
The Ontario Securities Commission (OSC) is proposing restrictions on the ability of dealers to sell mutual fund securities with a DSC (deferred sales charge) option. The factors for eligibility that dealers will need to consider before a sale include client age, length of investment time, account size, and whether money was borrowed money to purchase the securities. In addition, dealers could not accept commissions on reinvested distributions and only for new contributions to a client account.
This proposal would also impact term length of the redemption fee schedule, percentage of the value of investment available for redemption without redemption fees, and assurance there is no cross-subsidization of management fees from other classes of unitholders. This rule is expected to take effect on June 1, 2022, to coincide with the ban on DSCs being implemented in all other Canadian jurisdictions.
Overview Of Non-GAAP and Other Financial Measures Disclosure
(Proposed NI 52-112 and 52-112 CP Non-GAAP and Other Financial Measures Disclosure)
(Due March 9, 2020 +45 days)
The Canadian Securities Administrators (CSA) are issuing a revised proposal to require specific disclosure requirements for non-GAAP financial measures, non-GAAP ratios and other financial measures, applying to fewer disclosure documents and classes of issuers than as originally proposed. This scope has been narrowed in response to feedback and regulatory burden reduction considerations, and to better align disclosure requirements for international filing issuers with those of the Securities and Exchange Commission (SEC) in the US. The proposals intend to deal with financial measures lacking standardized meanings and transparency, or context when reviewed outside of the financial statements.
The proposals amalgamate current regulatory guidance statements applying to all issuers that disclose non-GAAP financial measures, but would now exempt investment funds, SEC foreign issuers, and designated foreign issuers. The scope of the term “non-GAAP ratio” has also been narrowed to only include ratios where a non-GAAP financial measure is used.
