NIN 98/29 - Mutual Reliance Review System Request for Comments on Proposed Memorandum of Understanding [NIN - Rescinded]
| Published Date: | 1998-06-19 |
|---|---|
| Effective Date: | 1998-06-18 |
In 1994, the CSA, recognizing the need to fulfill their legislative mandates in a more efficient manner, constituted the Task Force on Operational Efficiencies in the Administration of Securities Regulation. The mandate of the Task Force was to catalogue and prioritize operational efficiencies that would result in streamlining securities regulation throughout Canada. In June 1995, the Task Force issued its final report. One of the three major recommendations made by the Task Force was to encourage the CSA to extend the concept of a "designated jurisdiction" in the Expedited Review System for Short Form Prospectuses and AIFs ("Expedited Review") to all prospectus filings, mutual fund filings, dealer registration, continuous disclosure filings, applications for discretionary relief and investigations and hearings.
As a consequence of the above initiatives, coupled with increasing demands by industry participants for timely service and increasing pressures on the resources dedicated to securities regulation, the CSA considers it necessary to extend mutual reliance to a number of operational areas.
Principles of Mutual Reliance
Mutual reliance recognizes the need to improve the efficiency of the Canadian capital markets by streamlining the review of filings to reduce costs for filers. Implementing the MRRS will facilitate over time the harmonization of legislative requirements and administrative practices across jurisdictions and will provide consistent treatment of filers in Canada.
Mutual reliance means that, in exercising discretion under securities regulation, a decision maker in a particular Canadian securities regulatory authority is prepared to rely primarily on the analysis and review of staff of another Canadian securities regulatory authority. A mutual reliance system involves no surrender of jurisdiction by any securities regulatory authority; each will retain its statutory discretion with respect to the materials filed under mutual reliance.
The MRRS is an understanding between the Canadian securities regulatory authorities on the principles of mutual reliance and is being implemented by way of an MOU, which is expected to be effective in early 1999. The general principles of the MRRS are described in the MOU and the different policies and rules referred to in the appendix to the MOU describe the detailed procedures for each of the different categories of filings.
The procedures in the MRRS apply to filings submitted in more than one jurisdiction. The MRRS is not a mandatory system; if a filer does not wish to use the system, it can file its documents in each relevant jurisdiction and deal separately with these jurisdictions.
The fundamental features of MRRS are the following:
- A principal regulator is assigned to a filer in accordance with the criteria set out in the policy or rule describing the procedures for the intended category of filing. The "head office" criterion is the principal basis for determining principal regulator. This will enable the principal regulators to develop a greater familiarity with their filers and therefore enhance the efficiency and quality of their review. Changes to the principal regulator are possible in exceptional circumstances.
- The principal regulator is responsible for reviewing the materials and the filer will generally deal with only the principal regulator.
- The non-principal regulator will conduct the review it deems necessary and will advise the principal regulator of any material issues that, if left unresolved, would cause it to opt out of the MRRS.
- A non-principal regulator is entitled to opt out of the MRRS for any particular filing by advising the filer, the principal regulator and the other non-principal regulators of its decision to opt out and its reasons for doing so. The non-principal regulator that has opted out of the MRRS will continue its review of the materials, deal directly with the filer, make a determination with respect to the filing and, where appropriate, issue its own decision document. The non-principal regulator that has opted out of the MRRS can opt back in the MRRS at any time before an MRRS decision document is issued.
- An MRRS decision document is issued by the principal regulator and confirms the determination of the principal regulator and the non-principal regulators that have not opted out with respect to the materials filed. Certain non-principal regulators will also issue their own decision documents.
Other Features of the MRRS
The Canadian securities regulatory authorities agree that in addition to simplifying and facilitating the use of the regulatory system for filers, an objective of the MRRS is to effect a unified approach to many aspects of securities regulation in Canada. In order to achieve this objective, the MOU provides for the following:
1. Staff Development and Training
Staff development and training is an essential component of mutual reliance if filers are to be treated fairly across the country and if quality review procedures are to be maintained. In this regard, the MOU stipulates that the staff of those Canadian securities regulatory authorities that have agreed to act as principal regulator will participate in training seminars organized by the relevant CSA committee to standardize review processes and to develop common approaches to issues.
2. Consultation
Responsibility is given to various CSA committees to promote consistency and communication among the Canadian securities regulatory authorities in the review of materials filed pursuant to the MRRS and to coordinate necessary changes or amendments to the MRRS.
3. Funding
The MOU provides for a commitment by the participating Canadian securities regulatory authorities to participate in and to provide adequate funding for the training seminars or materials that will be needed to support the training and consultation components of the MRRS.
4. Human Resources
The Canadian securities regulatory authorities may endeavour to coordinate the utilization of personnel among themselves by effecting arrangements between two or more securities regulatory authorities under which the staff of one may be utilized by another in fulfilling its obligations as principal regulator.
Scope of the MOU
The categories of filings that are presently included in the MRRS are set out in the instruments referred to in Appendix A to the MOU: proposed National Policy 43-201, entitled Mutual Reliance Review System for Prospectuses and Initial AIFs (the "prospectus policy"); proposed National Policy 12-201, entitled the Mutual Reliance Review System for Applications (the "applications policy"); and proposed National Instrument 31-101 and Companion Policy 31-101CP, entitled the Mutual Reliance Review System for Registration (the "registration instrument").
I. Prospectus Policy
The procedures in the prospectus policy apply to the filing of prospectuses (including mutual fund prospectuses), prospectus amendments, waiver applications, pre-filing discussions and initial AIFs for issuers eligible to participate in the prompt offering qualification system. Since the prospectus policy includes the procedures for short form prospectuses, the current Expedited Review system will be replaced by the prospectus policy. Moreover, Expedited Review will no longer be available for renewal AIFs as it was decided that renewal AIFs are considered to be continuous disclosure documents and will therefore be included in a future MRRS instrument dealing with continuous disclosure documents.
A summary of the procedures relating to the filing and review of materials contemplated in the prospectus policy can be found in the Notice of Proposed National Policy 43-201 (see NIN#98/30).
II. Applications Policy
The CSA published for comment at the end of January 1998 the "Concept Proposal for a National Application System" (the "concept proposal") which describes the procedures for clearing an application filed in more than one jurisdiction (see CSA Request for Comment 12-401). The comment period ended June 1, 1998 but testing of the concept proposal continues.
Once the comments received on the concept proposal have been addressed and the results of the testing have been assessed, the concept proposal will be converted into a policy (to be known as National Policy 12-201), which will be published for comment.
III. Registration Instrument
The registration instrument is intended to establish a voluntary, national system for the approval of applications for registration, renewal of registration and reinstatement of registration, as well as the filing of certain annual delivery documents, by eligible registrants. The system is available to dealers that are members of a recognized self-regulatory organization ("SRO") in each jurisdiction in which they are registered or registration is sought, to advisers that do not hold client assets and to individual registrants of those dealers and advisers. These dealers and advisers may apply in more than one jurisdiction by using the forms and meeting the initial registration requirements of the regulator in the principal jurisdiction only, rather than those of all jurisdictions in which they apply for registration.
The registration instrument was derived in part from draft National Policy Statement No. 54 ("Draft NP 54"), which was first published for comment by the CSA in April 1995. The registration instrument expands the proposed system under Draft NP 54 to include SRO member dealers and foreign-based advisers.
A description of the procedures relating to the MRRS for Registration can be found in National Instrument 31-101 and Companion Policy 31-101CP. See also NIN#98/31.
IV. Future Intiatives
It is anticipated that the MRRS will be extended to other categories of filings such as continuous disclosure documents and rights offering circulars and related documents.
Comments
Interested parties are invited to make written submissions with respect to the Request for Comments on the MRRS MOU. Submissions received by September 19, 1998 will be considered.
Submissions should be made to all of the Canadian Securities Administrators listed below in care of the Commission des valeurs mobilières du Québec in duplicate, as indicated below
British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Securities Commission
Manitoba Securities Commission
Ontario Securities Commission
Commission des valeurs mobilières du Québec
Nova Scotia Securities Commission
c/o Rosetta Gagliardi, Mutual Reliance Committee Chair
cc: Claude St Pierre, Secretary
Commission des valeurs mobilières du Québec
800 Square Victoria
Stock Exchange Tower
P.O. Box 246, 17th Floor
Montréal, Québec H4Z 1G3
Telephone: 514-873-5009 ext. 252
Fax: 514-864-6381
e-mail: rosetta.gagliardi@cvmq.gouv.qc.ca
A diskette containing the submission (in DOS or Windows format, preferably Word) should also be submitted to the Chair of the Committee.
Comment letters submitted in response to requests for comments are placed on the public file in certain jurisdictions and form part of the public record, unless confidentiality is requested. Comment letters will be circulated among the securities regulatory authorities, whether or not confidentiality is requested. Although comment letters requesting confidentiality will not be placed on the public file, freedom of information legislation in certain jurisdictions may require the securities regulatory authorities in those jurisdictions to make comment letters available. Persons submitting comment letters should therefore be aware that the press and members of the public may be able to obtain access to any comment letters.
Questions may be referred to the Chair and/or any of the following members of the Committee:
Brenda Benham
British Columbia Securities Commission
(604) 899-6635
Or 1-800-373-6393 (in B.C.)
Glenda Campbell
Alberta Securities Commission
(403) 297-4230
Ian McIntosh
Saskatchewan Securities Commission
(306) 787-5867
Bob Bouchard
Manitoba Securities Commission
(204) 945-2555
Kathryn Soden
Ontario Securities Commission
(416) 593-8149
Bill Slattery
Nova Scotia Securities Commission
(902) 424-7768
DATED at Vancouver, British Columbia, on June 18, 1998
Douglas M. Hyndman
Chair
REF: National Policy 43-201
National Policy 12-201
NI 31-101 and 31-101CP
CSA Request for Comment 12-401
NIN#98/30
NIN#98/31
MUTUAL RELIANCE
REVIEW SYSTEM
1. PURPOSE
The investor protection regimes contemplated by Canadian securities legislation and commodity futures legislation are substantially similar. Consequently, filings are often made in several jurisdictions under provisions of Canadian securities legislation and commodity futures legislation that are the same or substantially similar. In most cases, the Canadian securities regulatory authorities apply similar review and approval processes to these filings.
The Canadian securities regulatory authorities recognize the need to improve the efficiency of the Canadian capital markets by streamlining the review of filings to reduce costs for issuers, registrants, applicants for discretionary relief and Canadian securities regulatory authorities through a more effective use of resources. Accordingly, the Canadian securities regulatory authorities have agreed to create a Mutual Reliance Review System ("MRRS") for filings made in multiple jurisdictions, which system will reduce unnecessary duplication in the review of such filings. Implementing the MRRS will facilitate over time the harmonizaton of legislative requirements and administrative practices across jurisdictions and will provide consistent treatment of filers in Canada.
Mutual reliance means that, in exercising discretion under Canadian securities legislation and commodity futures legislation, the decision-maker in a particular Canadian securities regulatory authority is prepared to rely primarily on the analysis and review of the staff of another Canadian securities regulatory authority.
The Canadian securities regulatory authorities have reached the understanding set out in this Memorandum of Understanding ("MOU") with respect to the procedures they will follow for the review of filings made in more than one jurisdiction in Canada. Under the MRRS, a filer will file certain documents with each relevant jurisdiction, will generally deal with only one Canadian securities regulatory authority and will receive a document from that Canadian securities regulatory authority that will confirm the decision of all relevant jurisdictions that have not opted out of the MRRS for that filing.
2. INTERPRETATION
(1) Definitions - In this MOU
"CSA committees" means the committees identified in each policy or rule as being responsible for the MRRS for that category of filing;
"commodity futures legislation" means The Commodity Futures Act in Manitoba, the Commodity Futures Act in Ontario, and any other legislation in Canada concerning commodity futures or exchange contracts;
"filer" means a person or company that is required to file materials;
"MOU" means this Memorandum of Understanding dated ******·, 1998;
"MRRS" means the Mutual Reliance Review System established by this MOU;
''MRRS decision document'' means the document issued by the principal regulator that confirms that a determination with respect to materials filed under the MRRS has been made by the principal regulator and the non-principal regulators that have not opted out;
''materials'' means the documents and fees required to be sent by a filer under each system referred to in the policies or rules listed in Appendix A;
''non-principal regulator'' means, in respect of a particular filing, a Canadian securities regulatory authority or regulator, as the context requires, with which materials are filed other than the principal regulator;
"participating principal regulator" means, in respect of each system referred to in the policies or rules listed in Appendix A, a Canadian securities regulatory authority or regulator, as the context requires, of a province or territory that has agreed to act as principal regulator;
"policy" means each of the policies listed in Appendix A to this MOU which describe the procedures for each category of filing, and which are collectively referred to as "policies";
"principal regulator" in respect of a filer means the Canadian securities regulatory authority or regulator, as the context requires, designated in accordance with Section 9;
"rule" means each of the rules listed in Appendix A to this MOU and which are collectively referred to as "rules";
(2) Interpretation
Terms used in the MOU that are defined or interpreted in National Instrument 14-101 should be interpreted in accordance with that instrument.
3. RETENTION OF DISCRETION
The MRRS involves no surrender of jurisdiction by any Canadian securities regulatory authority. Each Canadian securities regulatory authority retains and will exercise its statutory discretion with respect to all materials filed pursuant to the MRRS.
4. SCOPE
This MOU sets out the principles governing the implementation and operation of the MRRS. The MRRS applies to materials referred to and procedures described in the policies or rules listed in Appendix A, as amended from time to time.
5. CHANGES IN A PARTICIPATING PRINCIPAL REGULATOR'S REVIEW
The Canadian securities regulatory authorities acknowledge that the MRRS is premised on the review procedures in place in each of the participating principal regulators at the time of signature of this MOU. A participating principal regulator may thereafter adopt and implement different review procedures that would apply to filings under the MRRS. Any participating principal regulator making substantive changes to its existing review procedures agrees to notify in advance the relevant CSA committee and any other Canadian securities regulatory authority that do not have membership on such CSA committee prior to amending its procedures and will provide sufficient time and information to the relevant CSA committee for it to assess the proposed changes and to determine the appropriate way to resolve any resulting issues.
Alternatively, a participating principal regulator may lose personnel such that it is no longer able to discharge its responsibility as a principal regulator under the MRRS. Where through the loss of personnel a participating principal regulator is unable to discharge its responsibility as a principal regulator, it shall notify the relevant CSA committee of this situation.
6. CONSULTATION
The CSA committees will be responsible for promoting consistency and communication among the Canadian securities regulatory authorities in their review of materials and coordinating any changes or amendments to the MRRS. In addition, each relevant CSA committee will meet at least semi-annually to review and enhance as necessary the operation of the MRRS and to identify and discuss issues that have arisen during that period. The relevant CSA committee will report to the CSA Chairs on an annual basis on the operation of the MRRS.
7. STAFF DEVELOPMENT ANDTRAINING
Each participating principal regulator is responsible for ensuring that it has staff with adequate expertise to review materials filed under the MRRS.
In order to support the MRRS, it will be necessary to provide an opportunity for staff of each Canadian securities regulatory authority to acquire, maintain and upgrade skills, standardize review processes and develop common approaches to issues. To this end, the relevant CSA committee will be responsible for monitoring the MRRS and developments under Canadian securities legislation, Canadian securities direction and commodity futures legislation and will co-ordinate appropriate training seminars or materials, as needed. Staff of the participating principal regulators will participate in the seminars. Training seminars will also be available to staff of other Canadian securities regulatory authorities.
To give recognition to the objectives of MRRS to effect a unified approach to many aspects of securities regulation in Canada so as to simplify and facilitate the use of the regulatory system and to more effectively employ the human and other resources of the CSA, the Canadian securities regulatory authorities may endeavour to coordinate the utilization of personnel among the Canadian securities regulatory authorities. This may be effected by arrangements between two or more Canadian securities regulatory authorities whereby the staff of one Canadian securities regulatory authority may be utilized by another Canadian securities regulatory authority in fulfilling its obligations as principal regulator. Such arrangements may assist in maintaining staff expertise in all participating principal regulators and enhancing experienced human resources availability to the participating principal regulators.
8. FUNDING
Each Canadian securities regulatory authority agrees to provide adequate funding to support the consultation and training components of the MRRS. Costs would include but not be limited to travel and related costs, preparation of materials for and participation in initiatives contemplated by this MOU.
9. PRINCIPAL REGULATO
9.1 Assigning the principal regulator
The participating principal regulators referred to in the relevant policy or rule have agreed to act as principal regulator in respect of materials filed pursuant to the MRRS. The principal regulator in respect of particular materials filed under the MRRS will be determined by the filer in accordance with the criteria set out in the relevant policy or rule.
In respect of a particular filing under MRRS, where the filer has incorrectly identified a non-principal regulator as the principal regulator, such non-principal regulator will decline to act as principal regulator.
9.2 Applications by Filer for a Change of Principal Regulator
A filer may apply for a change of principal regulator where it believes that its principal regulator is not the appropriate Canadian securities regulatory authority to act as principal regulator. The application must be made to the filer’s principal regulator and the Canadian securities regulatory authority which the filer is requesting to act as principal regulator (the "requested regulator"). The principal regulator and the requested regulator will consider the application in accordance with the relevant policy or rule and will notify the filer in writing of the disposition of the application.
9.3 Redesignation of Principal Regulator
Where, in respect of a filer, either:
(a) the designation of the principal regulator is unclear;
(b) the principal regulator determines that another Canadian securities regulatory authority should act as principal regulator; or(c) another Canadian securities regulatory authority proposes that it act as principal regulator;
the filer shall be advised of the proposed designation which was determined by the relevant Canadian securities regulatory authorities as more appropriate and shall be given an opportunity to make submissions with respect to the proposed designation.
9.4 Notification to CSA Committees
The relevant CSA committee will be responsible for establishing and monitoring the procedures for changing a filer’s principal regulator and for promoting consistency of decisions. To this end, the Canadian securities regulatory authorities will advise the relevant CSA committee of all decisions rendered pursuant to this section and the reasons for such decisions.
10. MRRS PROCEDURE
10.1 Filing
The materials shall be filed with the principal regulator and each of the non-principal regulators in accordance with the procedures contained in the relevant policy or rule.
10.2 Review
The principal regulator is responsible for reviewing the materials in accordance with its Canadian securities legislation, Canadian securities direction and commodity futures legislation, review procedures, analysis and precedents. The non-principal regulators may conduct a review intended to identify any material concerns with respect to the materials. In the event a non-principal regulator has identified specific material issues with respect to materials filed under the MRRS, which, if left unresolved, would cause the non-principal regulators to opt out of the MRRS in respect of such materials, it shall advise the principal regulator of the issues.
10.3 Opting Out
Each non-principal regulator is entitled to opt out of the MRRS in respect of particular materials prior to the issuance of a MRRS decision document and in accordance with the procedures contained in the relevant policy or rule. Any non-principal regulator choosing to opt out of the MRRS will notify the filer, the principal regulator, and all other non-principal regulators. The non-principal regulator that has opted out shall provide written reasons for its decision to opt out to the filer. The non-principal regulator that has opted out shall also advise the principal regulator and the other non-principal regulators of its reasons for opting out. The non-principal regulator that has opted out of the MRRS will conduct its own review of the materials, deal directly with the filer, make a determination with respect to the materials and, when appropriate, issue its own decision document.
A non-principal regulator that has opted out of the MRRS for a particular filing may opt back in to the MRRS in accordance with the procedures contained in the relevant policy or rule and by notifying the filer, the principal regulator, and the other non-principal regulators.
Reasons for opting out shall be forwarded to the relevant CSA committee.
10.4 MRRS Decision Document
Once a decision has been made to issue a MRRS decision document, it is the responsibility of the principal regulator to do so.
Notwithstanding the issuance of a MRRS decision document, certain non-principal regulators will issue their own decision document in respect of materials filed under the MRRS.
A Canadian securities regulatory authority may withdraw from the understanding set out in this MOU by providing 60 days written notice to the other Canadian securities regulatory authorities.
12. APPENDIX A
Appendix A to this MOU provides a list of the relevant policies or rules for each category of filing. Amendments to the policies or rules may be made or policies or rules may be added to the list in Appendix A upon the written confirmation by the regulators of each of the jurisdictions. Where a proposed amendment or addition may have a significant impact on the MRRS or on the filer, the relevant CSA committee will recommend to the Canadian securities regulatory authorities that the proposed amendment or addition be published for comment.
13. COUNTERPARTS
This MOU may be executed in several counterparts, each of which when so executed shall be deemed to be an original, and such counterparts together shall constitute one and the same instrument.
This MOU supersedes the Memorandum of Understanding for Expedited Review of Short Form Prospectuses and Renewal AIFs dated December 18, 1996.
14. EFFECTIVENESS
This MOU will be effective on ******, 1999.
SIGNED, AS OF ******, 1998.
"Jean Martel"
Jean Martel
Président, Commission des valeurs mobilières du Québec
"David A. Brown"
David A. Brown
Chair, Ontario Securities Commission
"Robert B. MacLellan"
Robert B. MacLellan
Chairman, Nova Scotia Securities Commission
"Donne W. Smith Jr."
Donne W. Smith Jr.
Administrator, Office of the Administrator of Securities, New Brunswick
"Donald G. Murray"
Donald G. Murray
Chairman of the Commission, Manitoba Securities Commission
"Douglas M. Hyndman"
Douglas M. Hyndman
Chair, British Columbia Securities Commission
"Edison Shea"
Edison Shea
Registrar of Securities, Department of Community Affairs and Attorney General,
Prince Edward Island
"William L. Hess"
William L. Hess, Q.C.
Chair, Alberta Securities Commission
"Marcel de la Gorgendiere"
Marcel de la Gorgendiere, Q.C.
Chairperson, Saskatchewan Securities Commission
"Anthony Patey"
Anthony Patey
Director of Securities, Securities Division, Department of Government Services and Lands
Government of Newfoundland and Labrador
"Richard Roberts"
Richard Roberts
Registrar of Securities, Government of Yukon
"Gary I. MacDougall"
Gary I. MacDougall
Registrar of Securities, Government of Northwest Territories
APPENDIX A
1. National Policy 43-201 entitled Mutual Reliance Review System for Prospectuses and Initial AIFs
2. National Policy 12-201 entitled the Mutual Reliance Review System for Applications
3. National Instrument 31-101 and Companion Policy 31-101CP entitled the Mutual Reliance Review System for Registration