in conjunction with the other CSA members consider not requiring audited
financial statements if an issuer has been
in existence for less than a fiscal year.
5. Is there information that the OSC
provides to market participants that could
be provided more efficiently?
Consultation Prior to Publishing
Draft Rules
We suggest the OSC and CSA hold consultations before putting rules out for
comment. We note that the Exempt Market
Advisory Committee (if re-established) and
the Registrant Advisory Committee could
be used as sources of market participant
input. We believe obtaining input from
market participants before creating a new
rule could result in rules that better reflect
industry practice and may be less expensive to implement which ultimately benefits
investors.
Cost Benefit Analysis
Similarly, the Exempt Market Advisory
Committee (if re-established) and the
Registrant Advisory Committee could be a
source of quantitative information for
undertaking a cost benefit analysis of
proposed rules or amendments. As the
OSC and CSA have the dual mandate of
fostering efficient capital markets and
protecting investors, it is important that
the regulators examine the quantitative
impacts to registrants as well as the
qualitative impacts to investors resulting
from changes in regulation.
Registration Exemptions
As noted under question 2, a list of
proficiency exemptions granted would be
useful for market participants.
Access to National Instruments
We suggest the OSC website have the most
current version of the law on top, followed
by the various notices of changes. This is
also the practice of the British Columbia
Securities Commission. One can also easily
view past law or changes in the law, but for
many market participants, just having an
easy and direct way to view the current law
would be greatly appreciated and helpful.
6. Are there requirements under OSC
rules that are inconsistent with the rules
of other jurisdictions and that could be
harmonized?
Late Filing Fees
The OSC is one of the few jurisdictions that
imposes late filing fees for OBAs. As noted
above, this can have adverse consequences
on investors and registered dealing
representatives.
Ontario Securities Act and
National Instruments
The replacement of many sections of
National Instruments with sections of the
Ontario Securities Act is confusing at best.
However, when OSC staff are also confused,
they can provide information that is
contradictory to the National Instrument
and then it is burdensome. The OSC
should follow the harmonized National
Instruments rather than the odd patchwork created through the Ontario Securities Act applying in some instances and the
National instruments in others.
7. Are there specific requirements that no
longer serve a valid purpose?
IIROC Rules Relating to Exempt
Market Dealer Ownership
The OSC approves the rules and regulations of IIROC. During the time of Limited
Market Dealer registration there was
concern with regulatory arbitrage between
Investment Dealers and Limited Market
Dealers due to the lesser regulatory
requirements for Limited Marker Dealers.
For this reason, IIROC implemented rules
and regulations prohibiting IIROC
members or their parent firms or any
affiliated person from owning a Limited
Market Dealer and later an Exempt Market
Dealer.
The implementation of NI 31-103 brought
about national, robust regulation for
Exempt Market Dealers. The Exempt
Market Dealer registration and compliance
regime has the same requirements as
Investment Dealers and Mutual Fund
Dealers with the exception of the SRO
membership. However, IIROC continues to
have rules about cross-ownership which is
not required given that the Exempt Market
Dealer category has now been effectively
regulated for 10 years. This is no longer
needed and it is burdensome. Firms that
wholly-own or are related to an Investment
Dealer and want to register an Exempt
Market Dealer are prohibited from doing
so or face an additional layer of regulatory
review from an SRO than does not regulate
Exempt Market Dealers. The PCMA is
aware of cases where firms have been told
to obtain registration in additional (and
unnecessary) categories of registration for
IIROC to accept the Exempt Market Dealer
registration. This requirement is
anti-competitive and serves no regulatory
purpose.
Part-time Chief Compliance
Officers
The OSC and CSA have not accepted the
possibility of part-time Chief Compliance
Officers. We recommend that this position
be reconsidered by the OSC and CSA.
There are a number of business models
where daily supervision is not required.
For example, Exempt Market Dealers that
are also issuers and only raise capital
infrequently or a small private equity
manager. The dearth of CCOs is making it
necessary to have some type of ability to
have a part time CCO who is assisted by
other compliance or operating staff. The
OSC and CSA can look to the IIROC model
which allows for Chief Financial Officers to
service more than one registrant.
Closing Remarks
The PCMA would like to thank to the CSA
for their efforts in drafting the consultation
questions and for soliciting feedback from
various stakeholders.
