11-405 - Securities Regulatory Proposals Stemming from the 2007-08 Credit Market Turmoil and its Effect on the ABCP Market in Canada [CSA Consultation Paper]

Table of contents

Introduction 3

Summary of proposals 4

Part one - Background 5

U.S. subprime mortgage crisis 5

Spread of the Credit Turmoil to Canada 5

Impact on the ABCP market 5

Global impact of the Credit Turmoil 7

(a) Impact on financial institutions 7
(b) Impact on capital markets 7

Main causes of the Credit Turmoil 8

Update on continuous disclosure reviews 11

Part two - Securities regulatory proposals 12

1. The Rules applicable to CRAs 13
(a) IOSCO Code of Conduct 13
(b) SEC registration regime 14
(c) Other international developments 15
(d) The CRA Framework 16
CSA Proposal #1 16
(e) Jurisdiction 16
(f) Features of the CRA Framework 16
(g) Disclosure of information provided to CRAs 17
(h) Benefits of the CRA Framework 18
(i) Request for comment 19

2. Proposed amendments to the short-term debt exemption 19
(a) Restricting exempt distributions of asset-backed short-term debt 21
CSA Proposal #2 21
(b) Exemption for asset-backed short-term debt 22
(c) Form filing and fee requirements 22
(d) Accredited investor thresholds and $150,000 exemption 22
CSA Proposal #3 22
(e) Broad review of the exempt market regime 23
(f) Resale requirements 23
(g) Disclosure for asset-backed short-term debt 24
(h) Transparency of underlying assets generally 26
(i) Request for comment 28

3. The use of credit ratings in securities legislation 29
CSA Proposal #4 30
(a) Short-form and shelf prospectus eligibility 30
(b) Guaranteed debt exemption 31
(c)  Alternative credit support 31
(d) Request for comment 32

4. The role of intermediaries 33
CSA Proposal #5 33
(a) Know-your-client and suitability obligations 33
(b) Conflicts of interest for intermediaries 34
CSA Proposal #6 34

5. Investments by mutual funds in ABCP 35
CSA Proposal #7 35
(a) Money market funds 35
(b) Cash cover and investment of cash collateral 36
(c) Statement of investment portfolio 36
(d) Request for comment 36

Factors that the CSA will continue to monitor 37

Request for comments 38