The Canadian Depository for Securities Limited and CDS Clearing and Depository Services Inc. – s. 144
Headnote
Section 144 of the Securities Act (Ontario) -- application for an order varying the Commission's order recognizing The Canadian Depository for Securities Limited and CDS Clearing and Depository Services Inc., as clearing agencies -- requested order issued.
Applicable Legislative Provisions
Securities Act, R.S.O. 1990, c. S.5, as am., ss. 21.2(0.1), 144.
IN THE MATTER OF THE SECURITIES ACT R.S.O. 1990, c. S.5, AS AMENDED (Act) AND IN THE MATTER OF THE CANADIAN DEPOSITORY FOR SECURITIES LIMITED AND CDS CLEARING AND DEPOSITORY SERVICES INC.
VARIATION ORDER (Section 144 of the Act)
WHEREAS the Ontario Securities Commission ("Commission") issued an order dated July 4, 2012, as varied and restated on December 21, 2012 and as varied on December 7, 2012, May 1, 2013, June 25, 2013, June 24, 2014, January 27, 2015, March 27, 2015, December 20, 2016, February 28, 2018, and September 25, 2018 pursuant to section 21.2 of the Act continuing the recognition of The Canadian Depository for Securities Limited ("CDS Ltd.") and CDS Clearing and Depository Services Inc. (together with CDS Ltd., "CDS") as clearing agencies (the "Clearing Agency Recognition Order");
AND WHEREAS CDS has filed an application ("Application") with the Commission to vary the Clearing Agency Recognition Order pursuant to section 144 of the Act to delete paragraph 4.2(c) of Schedule "B" of the Clearing Agency Recognition Order (the "Unaffiliated Marketplace Director Requirement") for the limited purpose of removing the requirement that one director of the CDS Board be a representative of a marketplace unaffiliated with Maple Group Acquisition Corporation (now TMX Group Limited) and nominated by the marketplaces unaffiliated with Maple Group Acquisition Corporation;
AND WHEREAS CDS requests that the Commission vary the governance term and condition in paragraph 4.2(c) of Schedule "B" of the Clearing Agency Recognition Order to replace the Unaffiliated Marketplace Director Requirement with the requirement that a CDS director must be either independent or a representative of an entity that uses CDS services or is connected to CDS and is not an affiliate of Maple Group Acquisition Corporation (the "New Unaffiliated Director Requirement");
AND WHEREAS CDS requests that the Commission vary the governance terms and conditions in Schedule "B" of the Clearing Agency Recognition Order to include new paragraphs 4.4.1 and 4.5.1 (the "Unaffiliated Marketplace Committee Requirement") to provide for a new requirement for the use of an unaffiliated marketplace committee by CDS;
AND WHEREAS CDS requests that the Commission vary the governance term and condition in paragraph 4.6 of Schedule "B" of the Clearing Agency Recognition Order to include that CDS shall obtain prior Commission approval before making changes to the unaffiliated marketplace committee's structure or its mandate;
AND WHEREAS the Commission is of the opinion based on the Application and representations made by CDS that it is not prejudicial to the public interest to vary the Clearing Agency Recognition Order to replace the Unaffiliated Marketplace Director Requirement with the New Unaffiliated Director Requirement, to add the Unaffiliated Marketplace Committee Requirement and to include that CDS shall obtain prior Commission approval before making changes to the unaffiliated marketplace committee's structure or mandate;
IT IS HEREBY ORDERED that, pursuant to section 144 of the Act,
Paragraph 4.2(c) of Schedule "B" of the Clearing Agency Recognition Order referring to the Unaffiliated Marketplace Director Requirement is replaced with the following:
Paragraph 4.2:
(c) one director who is (i) independent; or (ii) a representative of an entity that is unaffiliated with Maple and uses services offered by, or is connected to, the recognized clearing agency, such as a transfer agent or a marketplace, or is a service provider to Participants, such as a technology service provider or a custodian;
And the following is added as paragraph 4.4.1 and paragraph 4.5.1 of Schedule "B" of the Clearing Agency Recognition Order:
Paragraph 4.4.1
The recognized clearing agency governance structure shall provide for the use of an unaffiliated marketplace committee to provide advice, comments and recommendations to management and the board of directors of the recognized clearing agency and such committee shall meet the following requirements:
(a) membership is open to all marketplaces unaffiliated with Maple that access the services provided by the recognized clearing agency;
(b) the unaffiliated marketplace committee may advise on any matters that the marketplace committee deems appropriate, and shall if requested by the Commission, report directly to the Commission without first requiring board approval or notification of such reporting; and
(c) a staff representative of the Commission may attend any meetings of the unaffiliated marketplace committee as an observer.
Paragraph 4.5.1
The recognized clearing agency's board of directors shall:
(a) as required by the Commission and in any event annually, provide a written report to the Commission that contains:
(i) the recommendations made by the unaffiliated marketplace committee and whether and why any of the recommendations were rejected or only partially implemented, and
(ii) a response from the unaffiliated marketplace committee regarding whether and why they agree or disagree with the recognized clearing agency's report; and
(b) file such report and the unaffiliated marketplace committee's response with the Commission within 45 days after each fiscal year-end of the recognized clearing agency or within 60 days of a request made by the Commission.
And paragraph 4.6 of Schedule "B" of the Clearing Agency Recognition Order is varied to add "unaffiliated marketplace committee" as shown below:
Paragraph 4.6
The recognized clearing agency shall obtain prior Commission approval before making changes to the structure of its board of directors, changes to the structure of any of its board committees and their mandates, changes to the structure of any of its Participant committees and its unaffiliated marketplace committee or their mandates, or changes to its constating documents.
DATED at Toronto this 4th day of December 2019.