February 15, 2008 Securities

Montréal – The Autorité des marchés financiers ("AMF") welcomes the findings of the International Monetary Fund (IMF) and the World Bank in their assessment of the Canadian securities framework. The report, which was released publicly this week, shows that Canada has a highly sophisticated securities framework that largely addresses the Principles of the International Organization of Securities Commissions (IOSCO).

The AMF is pleased with the findings of the IMF report on current regulatory frameworks in Canada. The report was prepared following a mission to Québec and Ontario in fall 2007 as part of the IMF's Financial Sector Assessment Program (FSAP). The positive findings clearly indicate that:

• Canada's financial system is mature, sophisticated and well-managed;
• Canada has established a highly effective and nearly unified regulatory and supervisory framework;
• The regulatory framework for the securities market exhibits a high degree of implementation of the IOSCO Principles;
• In the largest provinces, at least, the regulatory authorities are independent and self funded, have sufficient resources and skilled personnel, and are clearly accountable to the government;
• The framework for issuers, self-regulatory organizations (SROs), market intermediaries and secondary markets is robust;
• Significant improvements to the regulatory system have been made as a result of the creation of the Canadian Securities Administrators (CSA), including those that will be brought about by the implementation of the passport system;
• Under the umbrella of the CSA, coordination between the 13 regulatory agencies has significantly improved;
• Issuers, collective investment schemes and registrants are the areas where more progress in coordination and harmonization have been achieved;
• Enforcement has shown positive change in recent years;
• The passport system, which is currently being implemented, will further rationalize the regulatory system for issuers, collective investment schemes and market intermediaries.

The report also notes that the regulatory and supervisory framework for collective investment schemes (CIS) has some gaps because, under the current framework, CIS operators are not subject to a registration regime. However, the report goes on to state that these weaknesses will be corrected with the approval of Regulation 31-103 respecting Registration Requirements, currently under consultation.

It is therefore clear that Canada' regulatory and supervisory securities framework satisfies to a high degree the key objective of the FSAP, which is to ensure compliance with the various international standards for a strong, transparent and well-functioning financial sector.

These findings are similar to those of the 2006 OECD report, which ranked Canada 2^nd in the world for securities regulation quality, and those of the 2006 World Bank and Lex Mundi report, which ranked Canada 3^rd in the world in terms of investor protection.

The report does however take a position in favour of the implementation of a single securities regulator as opposed to the passport system currently in development. Therefore, contrary to its customary practice, the IMF is expressing an opinion on a hypothetical structure. The IMF has, in fact, always assessed the situation as it exists at the time of the assessment, whereas in its report on Canada, it assumes that a national regulator would be an improvement over the passport system, which is currently being implemented. The AMF fully supports the implementation of the passport system and is dedicating extensive resources to its success.

The FSAP was launched by the International Monetary Fund and the World Bank in 1999. The program helps countries improve the efficiency of their financial systems and ensure they function well. The two agencies assign experts to assess the strengths and vulnerabilities of a country’s financial system. Assessments cover the banking framework, the insurance industry, retirement plans and the securities industry. With respect to securities, the methodology consists in assessing whether current regulations and their enforcement comply with the 30 Principles adopted by the IOSCO.

In October 1999, an FSAP review took place in Canada in which the Ontario Securities Commission and the Commission des valeurs mobilières du Québec participated with respect to the securities segment. The findings were positive, with reviewers concluding that the regulatory system generally complied with the Principles established by the IOSCO.

The Autorité des marchés financiers (AMF) is the regulatory and oversight body for Québec’s financial sector.

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