The Autorité des marchés financiers (AMF) is issuing this statement to inform the industry and the general public of the key regulatory and supervisory initiatives planned for this year.
These initiatives are part of the implementation of the AMF’s 2017-2020 Strategic Plan (pdf - 4 MB)This link will open in a new windowUpdated on 29 May 20172017-2020 Strategic Plan and the vision the organization has adopted: A proactive regulator bolstering confidence in a healthy and dynamic financial sector.
Strengthening our role as a local regulator close to its markets
- The AMF will add to its Registrant Governance and Compliance Guide (pdf - 6 MB)This link will open in a new windowUpdated on 14 March 2018Registrant Governance and Compliance Guide (under the Act respecting the distribution of financial products and servicesThis link will open in a new window) to reflect recent legislative and regulatory changes. The AMF will then tour several regions of Québec in order to train and support registrants in implementing those changes. The AMF will also develop an Internet portal to help current and future securities registrants easily identify the various applicable regulatory requirements, thereby facilitating internal control over regulatory compliance
- As a contributor to the Governmental Action Plan to Counter Mistreatment of Older Adults 2017-2022 This link will open in a new window, the AMF recently published a guide entitled Protecting vulnerable clients (pdf - 688 KB)This link will open in a new windowUpdated on 3 June 2019A PRACTICAL GUIDE FOR THE FINANCIAL SERVICES INDUSTRY, PROTECTING VULNERABLE CLIENTS. The guide provides tools to firms and representatives in the financial sector so that they can play a key role in helping people in a vulnerable situation protect their financial well-being. The next steps will be to distribute a quick reference for detecting financial mistreatment to those firms and representatives and to hold information sessions on how to detect, prevent and intervene in such situations.
Along the same lines, the AMF, together with the other members of the Canadian Securities Administrators (CSA), will publish for comment proposals to incorporate some good practices into the regulatory framework applicable to registrants.
Information systems upgrade
The AMF is fully engaged in work to redevelop the national securities systems, which will see the System for Electronic Document Analysis and Retrieval (SEDAR), the System for Electronic Disclosure by Insiders (SEDI), the National Registration Database (NRD), the National Cease Trade Order (CTO) Database and the Disciplined List (DL) replaced by a more secure, efficient and integrated system.
Initiatives related to financial institutions and the distribution of financial products and services
Regulatory and normative developments in insurance and the distribution of financial products and services
- Following the recent publication of the Regulation respecting alternative distribution methods This link will open in a new window, the AMF will continue its work to support the industry in implementing the new regulatory framework.
The AMF will also continue its pre-consultation work and launch a public consultation with a view to adopting a regulatory framework that will complement the new legislative provisions passed in respect of the damage insurance brokerage sector.
- The AMF will launch a consultation on the regulatory and normative framework with a view to implementing the recommendations of the Canadian Council of Insurance Regulators This link will open in a new window (CCIR) aimed at harmonizing the frameworks for segregated funds and mutual funds.
- The AMF intends to develop a statistical portrait of insurance sales incentives. The quantitative data gathered will serve to guide the AMF’s regulatory and supervisory activities in this area and enable it to play a leadership role as a member of various pan-Canadian committees.
- Further to the updating of the International Association of Insurance Supervisors’ Insurance Core Principles, particularly ICP 19 Conduct of Business (or sound commercial practices), and in order to reflect the work done across Canada on the fair treatment of consumers, the AMF will be updating its Sound Commercial Practices GuidelineThis link will open in a new window this year.
User-friendly prudential guidelines for financial institutions
The AMF is continuing its initiative to help financial institutions better understand and use the guidelines relating to its prudential and normative framework. Based on an analysis of the results of a survey conducted in 2018, the AMF has identified avenues for improvement and made recommendations, which will be implemented during the year.
New Guideline on margin requirements for derivative contracts not cleared by a central counterparty
As part of the G20 program of financial reforms to reduce systemic risk at the global level, the Basel Committee on Banking Supervision and the International Organization of Securities Commissions (IOSCO) published a framework presenting international best practices for margin requirements for non-centrally cleared derivatives. In order to provide consistent regulation across all the institutions under its supervision and ensure harmonization, the AMF will develop a Guideline on margin requirements for derivative contracts not cleared by a central counterparty for insurers and deposit institutions.
Supervision of mortgage brokerage activities
The AMF will continue to prepare for May 1, 2020, when it will integrate the mortgage brokerage sector, which is currently regulated by the Organisme d’autoréglementation du courtage immobilier du QuébecThis link will open in a new window (OACIQ). The AMF will develop an initial qualification program in cooperation with mortgage brokerage sector participants and will establish a professional development framework for this new clientele. At the same time, the AMF will continue its discussions with sector participants in order to incorporate the requirements to be met by mortgage brokerage firms and representatives into the body of regulations under the Act respecting the distribution of financial products and servicesThis link will open in a new window.
New guidelines for the regulation of professional liability insurance funds and authorized reciprocal unions
An Act mainly to improve the regulation of the financial sector, the protection of deposits of money and the operation of financial institutionsThis link will open in a new window contains provisions specific to the regulation of professional liability insurance funds (Funds) and authorized reciprocal unions (URs). The AMF will implement new guidelines for the purpose of ensuring that the Funds maintain sound and prudent management practices in the financial management of their insurance business and that the mandataries of URs maintain adequate assets to meet the liabilities contracted by the persons in the union as part of their insurer activities, as and when they become due.
Continuation of work to adapt IFRS 17 for the regulation of insurers of persons and damage insurers
Since 2017-2018, the AMF has held various consultations, sent out questionnaires and submitted the initial draft capital oversight standards for insurers of persons and damage insurers adapted to IFRS 17. The results of these initiatives will inform the research and development work to be carried out in 2019-2020 in collaboration with various stakeholders, including the Office of the Superintendent of Financial Institutions, Assuris, the Canadian Institute of Actuaries, the Canadian Life and Health Insurance Association, and the Insurance Bureau of Canada. This work will make it possible to monitor IFRS 17 implementation by insurers, adjust regulatory disclosure forms and adapt capital oversight standards for such insurers.
Supervision of commercial practices
- As announced when the Group disability insurance cross-sectional analysis report This link will open in a new window was published on March 14, 2019, the AMF, as part of its supervision mandate, will follow up individually with the insurers concerned in order to verify the implementation of the good practices recommended in the report. In particular, the AMF will ensure that the proposed action plans and time frames are adequate.
- The AMF will also continue to participate with its provincial counterparts in supervising commercial practices under the Framework for Cooperative Market Conduct Supervision in Canada This link will open in a new window, published by the CCIR. Moreover, the AMF will help develop a cooperative supervision plan and participate in joint interventions with specific insurers.
- Lastly, during the year, the AMF will pay special attention to insurers’ commercial practices regarding the offering of certain products such as critical illness insurance that have features that are more complex because of the restricted nature of the coverage offered or the technical language used in contracts.
The AMF will continue to hold meetings with various stakeholders to present the results of its insurer survey on the offering of earthquake risk coverage as well as possible solutions it has developed based on mechanisms it has identified elsewhere in the world that have been implemented to foster the resilience of populations, financial markets and governments.
Framework adapted to crypto assets
Given that platforms, depending on how they operate and the crypto assets they make available for trading, may be subject to securities or derivatives regulation, or both, the AMF and the CSA are continuing their efforts to implement a regulatory framework adapted and scalable to the issues related to crypto assets and the platforms they are traded on.
Modernization of the regulation of individuals registered in the securities sector
- The AMF and the CSA plan to wind up the major regulatory consultation on client- focused reforms, which are primarily intended to better align the interests of securities advisers, dealers and representatives with the interests of their clients, improve outcomes for clients, and make clearer to clients the nature and the terms of their relationship with these registrants.
Based on the comments received and discussions held in connection with the regulatory consultation that took place in the fall of 2018, the AMF and the CSA intend to publish revised versions of the Regulation to Amend Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations and the Policy Statement to Regulation 31-103 respecting Registration Requirements, Exemptions and Ongoing Registrant Obligations.
The AMF and the CSA will also issue their policy direction on the regulatory response required to address the issues surrounding the use of embedded commissions governed by Regulation 81-105 respecting Mutual Fund Sales Practices.
Specifically, the objectives of the draft amendments issued in this regard, published on September 13, 2018, were to prohibit, for members of the organization of publicly-offered mutual funds:
- the payment of upfront sales commissions by fund organizations to dealers, and in so doing, discontinue sales charge options that involve such payments, such as all forms of the deferred sales charge option, including low-load options (collectively, the DSC option);
- trailing commission payments by fund organizations to dealers who do not make a suitability determination, such as order-execution-only (OEO) dealers.
Regulatory framework for benchmarks
Following the implementation of IOSCO’s Principles for Financial Benchmarks, the AMF and the CSA will continue to work on establishing a regulatory framework for benchmarks that is consistent with best practices. Accordingly, in 2019-2020, the AMF will conclude the public consultation initiated in March 2019 on the draft regulation respecting designated benchmarks and benchmark administrators. Based on the comments received, the AMF will determine whether a revised draft regulation will need to be published for comment.
Derivatives registration and business conduct regime
The AMF and the CSA will continue to develop a registration and business conduct regime, much like the one for the securities sector, for persons in the business of trading or advising on derivatives. Public comment periods are planned for this fall with respect to the business conduct requirements and for early 2020 with respect to registration and the related requirements. The AMF is also continuing its work to make optimal use of OTC derivatives data for reporting compliance purposes, in its internal systems, and in the outsourcing services it provides to other Canadian regulators.
Streamlining or simplification of certain administrative formalities and regulatory requirements applicable to investment funds
The AMF and the CSA will issue regulatory amendments in order to implement a first series of measures to identify, adjust or eliminate, where possible, administrative formalities or regulatory requirements that may hamper the creation and marketing of investment funds.
Liquidity risk management and implementation of investment objectives and strategies by investment funds in a volatile macroeconomic environment
As part of its investment fund oversight program, the AMF will conduct issue-oriented reviews with a continued special focus on the match between the liquidity of portfolio securities and the redemption features of certain types of investment funds and on compliance with investment objectives and strategies, as disclosed in the various disclosure documents.
Disclosure regarding the use of non-GAAP financial measures
The AMF and the CSA will continue their work to introduce requirements for the disclosure of non-GAAP and other financial measures with a view to improving the quality of information provided to investors. Following the comments received regarding Draft Regulation 52-112 respecting Non-GAAP and Other Financial Measures Disclosure, which was published for comment in September 2018, they intend to publish the draft regulation for a second comment period.