September 1, 2017

Alberta Securities Commission
Autorité des marchés financiers
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Financial and Consumer Affairs Authority of Saskatchewan)
Manitoba Securities Commission
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Office of the Superintendent of Securities, Northwest Territories
Office of the Yukon Superintendent of Securities
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Re: Comments with respect to Proposed National Instrument 93-101 Derivatives: Business Conduct and Proposed Companion Policy 93-101CP Derivatives: Business Conduct

The Asset Management Group of the Securities Industry and Financial Markets Association (“SIFMA AMG” or “AMG”)1 appreciates the opportunity to provide comments to the Canadian Securities Administrators (“CSA”) on Proposed National Instrument 93-101 Derivatives: Business Conduct (the Instrument) and Proposed Companion Policy 93-101CP Derivatives: Business Conduct (the CP and, collectively with the Instrument, the Proposed Rule). The Proposed Rule was published on April 4, 2017 and contemplates a harmonized business conduct regime for OTC derivatives across Canada.

The Proposed Rule would have a significant impact on AMG members, including many that provide asset management services to Canadian clients on a cross-border basis. The full impact of the Proposed Rule is hard to assess absent further details on the proposed registration regime for derivatives advisers which has not yet been released for comment2. Given the overlap between business conduct standards and registration, SIFMA AMG may have additional feedback on the Proposed Rule once the CSA’s registration proposal for derivatives advisers is made available for public comment.

A. General Comments:

1. Most Business Conduct Requirements Should Only Apply to Dealers

SIFMA AMG strongly believes that most of the requirements in the Proposed Rule that apply to both derivatives dealers and derivatives advisers should only apply to derivatives dealers. When an adviser enters into an OTC derivatives transaction on behalf of a client, the transaction is between the client and the executing derivatives dealer. Given that the client is facing the derivatives dealer as principal, there is no need for additional and duplicative business conduct requirements to apply in respect of the transaction simply because the counterparty is represented by an adviser. In particular, we think dealers alone should be subject to the requirements with respect to fair dealing (especially sections 8(1) and (2)), disclosure regarding borrowed money and leverage (section 16), daily reporting (section 22) and statements (section 30). Dealers are best positioned to undertake these responsibilities and the imposition of the same requirements on asset managers would create a duplicative and unnecessary compliance burden.

2. Broad Foreign Adviser Exemption is Required to Minimize Overlapping Rules

SIFMA AMG supports the exemption in section 44 of the Proposed Rule for foreign derivatives advisers whose head office or principal place of business is not in Canada. In the case of the United States, we submit that advisers that are registered with either the Securities and Exchange Commission or the Commodity Futures Trading Commission to provide advice in respect of securities or derivatives or which are otherwise authorized under applicable United States law to provide such advice to persons in the United States should be eligible for the exemption contemplated in section 44.

Subsection 44(3)(a) of the Proposed Rule makes the foreign adviser exemption unavailable unless the adviser is registered in the foreign jurisdiction in which it has its head office or principal place of business. SIFMA AMG submits that the exemption should be available to foreign derivatives advisers that are either exempt from registration or are not required to be registered to act as an adviser in their home jurisdiction. We also submit that these foreign advisers should not have to obtain a separate Canadian exemption from registration in order to be exempt from the business conduct standards in the Proposed Rule. We recommend that the CSA amend Section 44 to reflect this approach and allow foreign firms that comply with the applicable rules of their home jurisdiction to take advantage of the exemption in Section 44 even if they are not registered in the foreign jurisdiction.

We note that the exemption for foreign advisers in Section 44 of the Proposed Rule is not available where the adviser is in the business of trading in derivatives on an exchange or a derivatives trading facility designated or recognized in a Canadian jurisdiction. We submit that this restriction should not be necessary and ask the CSA to explain why trading on such an exchange or derivatives trading facility (as an adviser on behalf of clients or otherwise) should make the adviser ineligible for the foreign adviser exemption.

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1 SIFMA AMG brings the asset management community together to provide views on policy matters and to create industry best practices. SIFMA AMG’s members represent U.S. and multinational asset management firms whose combined global assets under management exceed USD $39 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds.

2 Proposed National Instrument 93-102 Derivatives: Registration (the “Registration Proposal”).