Dentons Canada advises on expanded exemptive relief for trading in OTC derivatives – JD Supra

The Ontario Securities Commission, in a passport decision, has granted exemptive relief to Global Reach Financial Solutions Inc., a provider of foreign exchange risk management and payment services, from the dealer registration and prospectus requirements of securities legislation in connection with trades in over-the-counter (OTC) derivatives with permitted counterparties and eligible commercial hedgers (November 16, 2020).

Dentons Canada LLP represented Global Reach Financial Solutions in applying for and obtaining the exemptive relief.

The decision applies in Ontario, Newfoundland and Labrador, Northwest Territories, Nunavut, Prince Edward Island and Yukon, and it complements comparable exemptions that are currently available in British Columbia, Alberta, Saskatchewan, Qu├ębec and New Brunswick. The decision serves as an interim response to current regulatory uncertainty associated with the regulation of OTC derivatives, pending the development of a uniform framework for the regulation of OTC derivatives in all provinces and territories of Canada.

The decision continues a line of exemptive relief decisions relating to OTC derivatives transactions with permitted clients that began with relief granted to Deutsche Bank AG and DB Commodities Canada Ltd. in 2011, and extends the relief to OTC derivatives transactions with eligible commercial hedgers, being non-individual commercial hedgers as defined in proposed derivatives business conduct and registration rules but with a reduced financial threshold based on net assets of at least CA$500,000.

The decision includes terms and conditions of relief that are based on the regulatory framework for derivatives firms set out in the proposed derivatives business conduct and registration rules being developed by the Canadian Securities Administrators, including the requirement to provide clients with a risk disclosure document that explains the transaction and the risks associated with the transaction, business conduct obligations and the maintenance of risk management policies and procedures.