Proposed Derivatives Registration Rule (NI 93-102) and Business Conduct Rule (NI 93-101) Overview and commentary Lisa Mantello February 2019

Overview of Proposed Registration Rule Proposed Derivatives Registration Rule (NI 93-102) and Business Conduct Rule (NI 93-101) Overview of Proposed Registration Rule Registration categories and requirements Exemptions Firm registration categories Derivatives dealers Derivatives advisers Dealer registration exemption Total notional < $ 250M in last 24 months OSFI/AMF regulated FIs and IIROC members (promptly notify securities regulator of each material breach of equivalent OSFI/AMF/ IIROC rules) Individual registration categories Derivatives dealing representative Derivatives advising representative Derivatives ultimate responsible person Derivatives chief compliance officer Derivatives chief risk officer Adviser registration exemption Advising generally (not tailored for recipient) Dealers on transaction being advised Key registrant compliance requirements Maintain excess capital Control and supervision system over risk management and regulatory compliance programs/functions Counterparty trade confirmation, valuation and dispute resolution processes Annual portfolio reconciliation Foreign dealers and advisers exemptions Licensed in and complies with requirements of foreign jurisdiction May not advise, solicit or transact with or for a non-eligible derivative party in Canada (i.e. non-sophisticated investors) Promptly notifies the securities regulator each instance of material non-compliance in the foreign jurisdiction

Industry concerns about Proposed Registration Rule Proposed Derivatives Registration Rule (NI 93-102) and Business Conduct Rule (NI 93-101) Industry concerns about Proposed Registration Rule Proposed non-compliance self-reporting requirements will Conflict with federal statutory requirements on sharing supervisory information Greatly exceed most home jurisdiction requirements for foreign firms Greatly exceed self-reporting requirements for securities firms Proposed registration exemptions may not be feasible nor available to some foreign firms Extra-territorial effects of registration requirements may be significant and differs from CFTC’s newly proposed approach towards foreign parties All derivatives dealers and advisers that are appropriately registered or exempt from registration in any foreign jurisdiction should be exempt (with limitations) from registration in Canada

Overview of Proposed Business Conduct Rule Proposed Derivatives Registration Rule (NI 93-102) and Business Conduct Rule (NI 93-101) Overview of Proposed Business Conduct Rule Obligations and duties Exemptions Owed to all derivative parties Fair dealing Establish, maintain and apply conflicts of interest policies Know your derivative party (KYDP) Foreign derivative dealers and advisers Similar to Proposed Registration Rule, however not clear if substitute compliance jurisdictions and rules will be the same May not advise, solicit or transact with non-EDPs Promptly notify securities regulator of any material non-compliance in foreign jurisdiction Owed to non-Eligible Derivative Parties (non-EDPs) Assess counterparty suitability Restrictions on referrals Ban on tied selling Pre-trade disclosures Segregation of counterparty assets Certain post-trade disclosure (e.g. confirmations, quarterly statements) Other exemptions Substituted compliance for IIROC members and OSFI/AMF regulated FIs Providers of general advice (not tailored to needs of recipient) Trades on trading facilities exempt from KYDP and certain post-trade disclosures Other duties Assign one derivatives senior manager to supervise each derivatives business unit Reporting all instances of material non-compliance to the regulator

Industry concerns about Proposed Business Conduct Rule Proposed Derivatives Registration Rule (NI 93-102) and Business Conduct Rule (NI 93-101) Industry concerns about Proposed Business Conduct Rule Proposed Business Conduct Rule may apply even when a firm is not required to register under the Proposed Registration Rule Substituted compliance criteria may be different from the Proposed Registration Rule

Proposed Derivatives Registration Rule (NI 93-102) and Business Conduct Rule (NI 93-101) Thank you and Q&A Lisa Mantello Partner Osler, Hoskin & Harcourt LLP 100 King Street West Toronto, Ontario M5X 1B8 Tel: 416.862.6790 Fax: 416.862.6666 Email: lmantello@osler.com