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Canadian Securities Laws News

Fiduciary Duty for Dealers: Upcoming CSA Panel Discussion

The CSA announced on Monday the discussion topics for its panel session on July 23, 2013 from 10:00 a.m. to 12:00 p.m. on the 22nd floor of the OSC’s offices, located at 20 Queen Street West, Toronto, Ontario. The session will be moderated by James E.A. Turner, Vice-Chair of the OSC.

The panel discussion will focus on the following two topics:

  1. Should dealers (and their representatives) be subject to a best interest standard when providing advice to retail clients? What would the consequences be of introducing such a standard?
  2. What other policy options could securities regulators consider in addition, or as alternatives, to a statutory best interest standard?

Any interested parties wishing to attend the roundtable are asked to send an email with full contact details to [email protected] by July 18, 2013. Space at the event is limited and it is anticipated that a transcript will be posted to the OSC website following the panel session.

IIROC Issues Final Guidance on Stop Loss Orders

IIROC issued final guidance late last week on the use and management of stop loss orders. The guidance comes in the wake of certain anomalous trades last month which prompted IIROC to take regulatory action when automatic triggering of stop loss orders apparently resulted in pricing distortions of Inter Pipeline Fund stock.

A stop loss order is a standing order to sell a security when the price of that security reaches a certain minimum level. Stop loss orders are a method of risk management and are frequently handled by way of automated technology solutions.

IIROC regulated dealers have "best execution" obligations when managing stop loss orders. Technology solutions used for the management of stop loss orders must be designed such that orders are not being entered on marketplaces that would execute at "clearly erroneous" prices.

Some key IIROC guidance on stop loss orders:

  • When a stop loss order is triggered, the participant must ensure that the resulting execution does not interfere with a fair and orderly market.
  • All stop loss orders without a reasonable limit price are inherently risky in fast moving markets.
  • Participants are encouraged to require limit prices on all stop loss orders, particularly when the handling of stop loss orders is automated.
  • If a Participant continues to permit the use of market stop loss orders, the use should be limited to orders for the purchase or sale of a particular security which meets all of the following conditions:
    • the security is very liquid and displays relatively low historic price volatility; and
    • the market stop loss order has a trigger price that is near the prevailing market price for the particular security at the time of entry or acceptance of the stop loss order; and
    • the market stop loss order has a volume that is not appreciably greater than the average trade size for the particular security.

Canadian Securities Regulators Release Three-Year Business Plan

Last week, the CSA released its three-year business plan for the period April 1, 2013 through to March 31, 2016.

The plan is designed to reflect CSA members’ commitment towards enhancement of the Canadian regulatory framework, with particular emphasis on the implementation of investor protection initiatives. The key CSA priorities include:

  • retail investor protection;
  • capital raising by small and medium sized enterprises and review of available prospectus exemptions;
  • shareholder democracy and protection;
  • market regulation; and
  • enforcement effectiveness.

Should you have any questions on these matters, please contact any of the members of our Securities Regulation & Investment Products Group.

Michael Nicholas
Partner
[email protected]

Sean Sadler
Partner
[email protected]

Rene Sorell
Partner
[email protected]

Cristian Blidariu
Associate
[email protected]

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