Copyright 2010, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Securities Regulation, October 2010

In connection with the coming into effect of the Quebec Derivatives Act (QDA) on February 1, 2009, the Quebec Autorité des marchés financiers (Authority) adopted a blanket decision (the Blanket Decision) carving out certain kinds of derivatives, principally certain specified options and futures (Specified Derivatives) previously regulated by the Quebec Securities Act (QSA), from regulation under the QDA where offered to accredited investors (AIs) in compliance with National Instrument 45-106 — Prospectus and Registration Exemptions (NI 45-106).

The Blanket Decision thus exempts persons conducting dealer or adviser activities involving Specified Derivatives from the registration requirements of the QDA provided such activities are conducted exclusively with AIs.

The Blanket Decision also grants relief from the qualification requirements of the QDA to persons creating or marketing such derivatives where the activities are conducted exclusively with AIs. As noted in our January 2009 Blakes Bulletin on Securities Regulation — Quebec Derivatives Legislation in Force as of February 1, 2009, the Blanket Decision was intended to preserve the status quo pending the development of a harmonized position of the Authority and Canadian securities regulators on the offering of derivatives to the public.

The Authority subsequently issued a notice in October 2009 stating that the dealer registration exemption afforded by the Blanket Decision would cease to have effect on March 27, 2010, at the same time as the dealer registration exemptions contained in NI 45-106 would cease to have effect. Then, on March 26, 2010, the Authority issued a notice stating that the dealer registration exemption afforded by the Blanket Decision would remain in effect as a transitional regime, despite the repeal of the dealer registration exemptions under NI 45‑106, until September 28, 2010.

On September 24, 2010, the Authority issued a notice indicating that the Blanket Decision will remain in effect until further notice, implicitly revoking the previously indicated sunset date of September 28, 2010. Thus, both the dealer registration and the qualification exemptions afforded by the Blanket Decision remain available with no stipulated expiry date.

The Specified Derivatives covered by the Blanket Decision are the following:

  • stock futures
  • stock index futures
  • currency futures
  • Treasury bond futures
  • financial futures
  • commodity futures
  • equity options
  • options on commodity futures
  • options on financial instrument futures.

Derivatives dealers authorized to carry on business as such outside Quebec may also benefit from a separate registration exemption applicable to standardized derivatives only, where such products are offered primarily outside Quebec (the Standardized Derivatives Exemption). In order for the Standardized Derivatives Exemption to apply, the dealer or adviser must restrict its activity to accredited counterparties (ACs), a category of counterparties defined under the QDA. For a discussion of the interaction between the Blanket Decision and the Standardized Derivatives Exemption, please see our August 2009 Blakes Bulletin on Securities Regulation — New Registration Exemption for Foreign Dealers and Advisers Trading or Advising in Standardized Derivatives in Quebec.

Highlights

  • Continuance of blanket order exempting dealers and advisers from registration under Quebec Derivatives Act (QDA) in connection with derivatives transactions involving specified options and futures where counterparty is accredited investor under securities legislation
  • Separate exemption available to non-Quebec dealers and advisers involving standardized derivatives where counterparty is accredited counterparty under QDA

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