Effective June 5, 2016, changes to the Quebec Derivatives Regulation (QDR) came into force. The changes:
- Expand the scope of the standardized derivatives exemption, such that it now affords relief from both the registration as well as qualification requirements of the Quebec Derivatives Act (QDA).
- Streamline the training, education and experience requirements of advising representatives, associate advising representatives or chief compliance officers of derivatives portfolio managers at the time of their derivatives registration with the Quebec Autorité des marchés financiers (Authority).
- Increase the information that qualified persons or persons applying for qualification must send to the Authority and to their counterparties. This information includes the requirement for qualified persons to send to their counterparties the percentage of client accounts that were profitable in the previous fiscal year.
Although the proposed regulation originally contemplated imposing new certification and record-keeping requirements for hedgers, these changes were not brought forward in the amendment package as adopted. The Authority has indicated that it is reconsidering its approach as a result of industry feedback, and intends to publish a new proposed amendment to the QDR later this year. For further discussion of the original proposals, please see our February 2016 Blakes Bulletin: Proposed Changes to Quebec Derivatives Regulation Will Impact Dealers, Advisers and Hedgers.
The regulatory change is concurrent with the revocation of a 2009 blanket decision of the Authority which, as a transitional measure, had afforded relief from both the registration and the qualification requirements of the QDA for activities with accredited investors involving specified futures and options. Importantly, the 2009 blanket decision applied regardless of where the derivatives were primarily offered. While QDR amendments brought into force on June 5, 2016, fill a gap in the standardized derivatives exemption by providing that it covers both registration as well as qualification requirements, that exemption will nonetheless continue to be restricted to exchange-traded derivatives offered primarily outside Quebec. This means that market participants whose activities with Quebec-based clients involve futures or options listed on the Montréal Exchange, who could previously benefit from the relief in the 2009 blanket decision, must now be registered in Quebec as a derivatives dealer or must have made the necessary changes to their systems and procedures so that affected trades are made through a Quebec registrant.