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

2. Overview of Proposed Registration Rule
Proposed Derivatives Registration Rule (NI ) and Business Conduct Rule (NI )
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

3. Industry concerns about Proposed Registration Rule
Proposed Derivatives Registration Rule (NI ) and Business Conduct Rule (NI )
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

4. Overview of Proposed Business Conduct Rule
Proposed Derivatives Registration Rule (NI ) and Business Conduct Rule (NI )
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

5. Industry concerns about Proposed Business Conduct Rule
Proposed Derivatives Registration Rule (NI ) and Business Conduct Rule (NI )
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

6. 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:
Fax: