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What’s new with the CAC?
Advancing investor protection, industry professionalism, and market integrity across Canada, the CAC works to focus attention on pressing advocacy files dominating the regulatory agenda. Ensuring fair, equitable, and sustainable outcomes for stakeholders is more important than ever, and through our growing relationships with policymakers and regulators, we are working on several important initiatives. Below is a summary of three areas where we have recently provided comment letters to consultation processes. To see the comprehensive catalogue of our commentary letters, visit us online at cfacanada.org/advocacy.
Published Canadian Advocacy Council of CFA Societies Canada (the “CAC”) comment letters
The Ombudsman for Banking Services and Investments (OBSI) sought input from stakeholders and the public on their approach to calculating investor losses in cases involving unsuitable sales of illiquid exempt market securities.
The CAC generally agreed with OBSI’s assigning zero value to such securities and requiring investors to return them to the firm, while calling for exceptions where necessary. The CAC emphasized the need for clarity on how OBSI determines the end value, as firms could unintentionally benefit from selling the securities later, where conditions allowed. The CAC stressed that investors should not be able to misuse OBSI’s position as a safeguard against normal market losses.
The CAC highlighted the need for OBSI to consider cases involving captive dealers with limited investment options and to clarify their methodology for evaluating alternative investments. This would help ensure fair outcomes for both consumers and firms involved in disputes concerning these securities.
CSA – Proposed Amendments to Mandatory Central Counterparty Clearing of Derivatives
The CAC submitted comments on the Canadian Securities Administration’s (CSA’s) consultation regarding proposed amendments to National Instrument 94-101 related to mandatory central counterparty clearing of derivatives.
The proposed amendments aim to update the list of mandatory clearable derivatives to reflect the transition to a new interest rate benchmarks regime based on overnight risk-free interest rate benchmarks. Specifically, the Proposed Amendments reflect the cessation of certain inter-bank offered rates (IBORs) and the Canadian dollar offered rate (CDOR) interest rate benchmarks. The Proposed Amendments also contemplate adding credit default swaps (CDS) referencing certain indexes as mandatory clearable derivatives.
The CAC agreed with the proposed amendments and appreciated the inclusion of a cost-benefit analysis. However, the CAC requested more detailed information to facilitate better stakeholder engagement and understanding of the decision-making process behind the proposed changes.
Specifically, the CAC sought clarification on the thresholds used to determine which derivatives require clearing, including any factors beyond trading activity, and how international harmonization was considered. The CAC believes stakeholder engagement would be enhanced through availability and review of the analysis and criteria behind selecting certain derivatives for mandatory clearing and why some were excluded.
The CAC responded to the Canadian Investment Regulatory Organization’s (CIRO) request for comment on its initiative to distribute disgorged funds to harmed investors. The CAC commended CIRO for its transparency, stakeholder engagement, and policy leadership in this area as an important mechanism to enhance investor protection, market integrity, and confidence.
The CAC:
- Acknowledged CIRO’s clarification that the program will operate using its existing resources and structure, with the General Counsel’s Office acting as Administrator
- Recognized that CIRO has conducted an impact assessment and concluded that the benefits to investors outweigh administrative costs
- Supported CIRO’s plan to conduct regular reviews to assess the program’s effectiveness and encouraged the publication of these findings to enhance transparency and inform stakeholders
Noted that the Administrator has discretion to forgo distributions if costs exceed benefits, based the amount of funds collected, number and value of claims, claimant locations, and feasibility of payment processing. The Council encouraged CIRO to publish the reasons behind such decisions to maintain transparency.
- Sought clarification on whether residual funds from non-pursued distributions will remain within the CIRO Restricted Fund exclusively for future claims or be available for other purposes
- Appreciated CIRO’s responsiveness to feedback, and remains open to further engagement
Other letters filed:
Have your say
If you would like to participate in advocacy activity related to these letters or future policy and regulatory initiatives, provide comments on ongoing initiatives, or learn more about volunteer opportunities in advocacy or as a part of the CAC, please contact cac@cfacanada.org.
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Who is the Canadian Advocacy Council?
The Canadian Advocacy Council (CAC) is a volunteer advocacy council of CFA Societies Canada, representing the twelve 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 thoughtful leadership, direct engagement, and the publication of comment letters.
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