ASC Amends Proposed New Derivatives Rule

Author:Mr Keith Chatwin
Profession:Stikeman Elliott LLP

In our blog post of March 11, 2011, we discussed the proposed repeal by the Alberta Securities Commission of Blanket Order 91-503 and its replacement with Rule 91-505 Over-the-Counter Derivatives. At the time, and in the context of ongoing efforts by the  Canadian Securities Administrator to bring the regulation of OTC derivatives within the four corners of securities legislation to comply with G20 commitments, the proposed Rule 91-505 would have resulted in OTC derivatives and commodity futures contracts being considered "futures contracts" under the Securities Act (Alberta). Historically, under BO 91-503, such OTC derivatives and commodity futures contracts were exempted from the definition of "futures contract" and thereby not considered "securities" under the Securities Act. 

In the context of the sea change in regulatory philosophy being undertaken by the CSA and reflected in proposed Rule 91-505, only a narrow registration exemption was proposed for OTC physical commodity contracts. The proposed Rule would have abandoned the current concept of prospectus and registration relief for a broad array of OTC transactions and commodity contracts between qualified parties.

In response to a number of comment letters and pursuant to ongoing attempts to harmonize the approach to derivatives regulation across Canada, the ASC on October 15, 2012 posted a revised Rule 91-505. While retaining the concept of bringing the regulation of futures contracts within the Securities Act and the exemption for physically settled OTC commodity contracts...

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