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Canadian Advocacy Council

CANADIAN ADVOCACY COUNCIL QUARTERLY UPDATE

What’s new with the CAC?

Advancing investor protection, industry professionalism, and market integrity across Canada, the CAC works to focus attention on pressing advocacy files dominating the regulatory agenda. Ensuring fair, equitable, and sustainable outcomes for stakeholders is more important than ever, and through our growing relationships with policymakers and regulators, we are working on several important initiatives. Below is a summary of three areas where we have recently provided comment letters to the consultation processes. To see the comprehensive catalogue of our commentary letters, visit us online

Published Canadian Advocacy Council of CFA Societies Canada (the “CAC”) comment letters

Ontario - Draft Capital Markets Act

The CAC is supportive of several recommendations made by the Capital Markets Modernization Taskforce (the “Taskforce”) to modernize securities legislation and rules in Ontario and their inclusion in the draft Capital Markets Act. The inclusions relating to the regulation of benchmarks, cryptocurrency, and derivatives in the legislation itself provide important legislative direction and structure for additional future regulatory initiatives.

Additional investor-friendly defining principles for the Act, including an expanded legislative best interest standard to registrants with discretionary authority over client assets, would make the proposed Act of greater value, given the prospective effort of implementation for capital market participants, investors, and regulators.

Given that a new Act was the chosen course of action in response to the recommendations of the Taskforce (versus substantive revision to or combination of the existing acts), publication of the cost–benefit analysis prepared in connection with this decision would be of interest for stakeholder review. There may be room for additional forward-thinking policy innovation (as “facilitating innovation” is one of the stated principles of the Consultation Draft) and additional legislative provisions in securities regulation, such as sustainability and diversity. Consideration should be given to including these important concepts in securities legislation, while providing meaningful guidance as to how the regulator should balance them with the other purposes of the Consultation Draft, including protecting investors from unfair, improper, or fraudulent practices.

The CAC encourages legislative support for a wider definition of diversity and more robust action on diversity, equity, and inclusion in the capital markets. The capital markets have a role to play in the realization of Indigenous reconciliation, and this may need to be addressed in legislation to then be effectively disseminated into regulatory initiatives.

Several important topics were left either partially or wholly unaddressed in the Consultation Draft that, taken collectively, could be seen as the meaningful step forward for Ontario investors that would justify the introduction of a new Act. The first and most important of these topics is the introduction of an expanded legislative best interest standard.

CSA Proposal to Establish an Investor Advisory Panel

The CAC supports the Canadian Securities Administrators’ (CSA) proposal and efforts to gain insights from an investor perspective through the creation of an Investor Advisory Panel (IAP). As one of the more active investor-minded commenters in Canada on securities policy matters, we welcome additional informed and resourced advocates for the interests of investors and fairer markets. Assuch, the CACapplauds the CSA for the major step in that direction that this Staff Notice represents.

As investor protection is a primary purpose of securities legislation and attendant regulation, it is incumbent upon regulators to develop robust sources of investor-related information and inputs, both qualitative and quantitative. The proposed CSA IAP would be well-positioned to inform and potentially partially direct such development and to contribute to solving the collective action problem of the diffuse beneficial interests of retail investors in improved securities regulation.

The CAC noted prior proposals and discussions relating to formalized investor advisory mechanisms for the Investment Industry Regulatory Organization of Canada and the new self-regulatory organization and encourages formalized communication and coordination with such a body. The IAP could be improved through additional resourcing and consideration of an expanded mandate.

The CAC supports greater resourcing of the IAP relating to in-person IAP meetings to strengthen relationships within the IAP and with the CSA Secretariat and Chairs, particularly in its formative stages, as the degree of engagement in and efficacy of longer-form strategic and governance-oriented meetings in virtual/electronic formats is limited.

CSA Notice and Request for Comment - Proposed National Instrument 51-107 Disclosure of Climate-related Matters (the “Proposed NI”)

The CAC strongly supports setting consistent standards for the disclosure of climate-related matters for reporting issuers. Given worldwide commitments to achieve net-zero portfolios by 2050, it is incumbent on issuers to provide comparable information on carbon emissions. Even absent regulatory intervention, there will be increasing pressure on issuers to provide the type of information discussed in the proposed National Instrument.

We support regulatory efforts to further develop issuer disclosure of climate-related matters in Canada. While it may be incrementally costly for issuers to be mandated to provide Scope 1 and Scope 2 emissions information, the global commitments made by governments and coalitions of both issuers and investors will require such information to be provided in the near-term. It is important that any such information be provided using standardized methodologies and formats for comparability and consistency.

The disclosures as set out are consistent with the Task Force on Climate-related Financial Disclosures’ recommendations that are global best practice, together with requirements to calculate greenhouse gas (GHG) emissions in accordance with the GHG Protocol. However, rather than allowing issuers wide discretion in the choice to implement scenario analysis, it is necessary to segment certain groups of issuers that should be required to provide scenario analysis in the near term. The CAC suggests the exclusion of venture issuers from the requirements at this time and the segmentation of industries to require scenario analysis in the near term from those issuers in industries with either high carbon-emission intensity or where the effects of climate change or transition will have material effects on the value of the company and/or the viability of its business(es). Scenario analysis is key for these industries to better understand their own risks and to communicate these risks to investors.

We strongly encourage the CSA to adopt a nimble policy footing relating to these matters, such as through the formation of a standing and dedicated CSA policy committee. CFA_Toronto_RGB Milly

Other Letters Filed:

· Financial Services Regulatory Authority of Ontario Complaints Resolution Guidance

· CSA Notice and Third Request for Comment – Proposed National Instrument 93-101 Derivatives: Business Conduct; Proposed Companion Policy 93-101CP Derivatives: Business Conduct


Have your say

If you would like to participate in advocacy activity related to these letters or future policy and regulatory initiatives, provide comments on ongoing initiatives, or learn more about volunteer opportunities in advocacy or as a part of the CAC, please contact cac@cfacanada.org.

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Who is the Canadian Advocacy Council?

The Canadian Advocacy Council (CAC) is a volunteer advocacy council for CFA Societies Canada, representing the twelve Canadian CFA Institute Member Societies and, ultimately, Canadian CFA charterholders. The council includes investment professionals from across the country who review regulatory, legislative, and standard-setting developments affecting investors, investment professionals, and Canadian capital markets. The CAC strives to advance market integrity, transparency, and investor protection, and actively engages Canada’s securities regulators, self-regulatory organizations, industry associations, legislators, and other stakeholders through thoughtful leadership, direct engagement, and the publication of comment letters.

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