Canada tightens derivatives disclosure regulation

The Canadian Securities Administrators (CSA) has approved new rules designed to more adequately cover certain derivatives transactions.

The regulatory body said the rules will come into effect on February 28 2004, pending ministerial ratification. Of particular concern were regulations on equity monetisation transactions, where investors 'cash out' an equity position without formally selling the securities making up the position. The new rules will ensure that insiders involved in such activities publicly disclose details, said the CSA. In some instances this would include transactions entered before the rules come into effect that continue to affect an insider’s publicly reported holdings.

“While the current rules capture most of these types of transactions, this rule removes any doubt that may have existed,” said Stephen Sibold, chairman of the CSA.

Assuming the regulation receives ministerial approval it will come into effect throughout Canada with the exception of British Columbia. Although the state contributed to the development of the rule, it will implement equivalent regulation by amending the existing British Columbia Securities Act.