Proposed National Policy: NP - 12-201 - Mutual Reliance Review System for Exemptive Relief Applications Implementation

Proposed National Policy: NP - 12-201 - Mutual Reliance Review System for Exemptive Relief Applications Implementation

National Policy Request for Comment

 


NOTICE OF PROPOSED NATIONAL POLICY 12-201
MUTUAL RELIANCE REVIEW SYSTEM
FOR EXEMPTIVE RELIEF APPLICATIONS

 

SUBSTANCE AND PURPOSE OF THE PROPOSED NATIONAL POLICY

The proposed National Policy, attached as Appendix A, establishes a mutual reliance review system forexemptive relief applications ("ERA").

The mutual reliance review system ("MRRS") is an understanding between the Canadian securities regulatoryauthorities (the "CSA") on the principles of mutual reliance and will be implemented by way of a memorandumof understanding (the "MOU"). The draft MOU was published for comment in June, 1998 together withproposed National Instrument 31-101 for the MRRS for Registration (the "registration rule") and proposedNational Policy 43-201 for the MRRS for Prospectuses and Initial AIFS (the "prospectus policy").

It is intended that ERA, upon implementation, become part of the MRRS and the proposed National Policy beadded to Appendix A of the MOU.

BACKGROUND AND TESTING

The proposed National Policy was initially published for comment as a Concept Proposal in January, 1998 withthe comment period ending June, 1998.

Testing of ERA commenced in March, 1998 and will continue until implementation of ERA.

Testing of ERA after publication of the proposed National Policy will be based on the proposed National Policyand not the Concept Proposal.

Eight industry comments were received on the Concept Proposal from:

  • Goodman Phillips & Vineberg
  • Burnet, Duckworth & Palmer
  • Ogilvy Renault
  • Tory Tory DesLauriers & Binnington
  • BCE Inc.
  • Osler, Hoskin & Harcourt
  • Canadian Bar Association - Ontario
  • Canadian Bankers Association.

The CSA would like to thank commentators for providing their comments on the Concept Proposal. The natureof the comments received were very helpful. Copies of the comment letters may be viewed at the office of amember of the MRRS for ERA Committee listed below.

The comments received were generally supportive of ERA and that support continues as evidenced by theincreasing number of filers electing to use ERA as testing continues.

Attached as Appendix B is a summary of industry comments received and a discussion of how the proposedNational Policy differs from the Concept Proposal as a result of both these comments, and the experiencegained through testing.

 

All Canadian securities regulatory authorities and 30 law firms are currently participating in testing. Other lawfirms are included upon request. Any person or company wishing to participate in testing should contact amember of the MRRS for ERA Committee listed below.

To date approximately 90 applications have been filed under ERA and approximately one half of theseapplications have been completed.

SUMMARY OF THE PROPOSED NATIONAL POLICY

The following is a summary of the MRRS principles as they apply to the filing and review of exemptive reliefapplications:

  • As under the Concept Proposal, a filer is eligible to elect to use ERA for any application made to morethan one securities regulatory authority, except for those applications for which the granting ofexemptive relief can be evidenced by a MRRS decision document issued under the prospectus policy orby a certificate of registration;

     

  • The proposed National Policy, like the Concept Proposal, provides that a filer electing to use ERA for anapplication is responsible for selecting a principal regulator for the application in accordance withguidelines set out in the proposed National Policy. These guidelines mirror similar provisions in theregistration rule and the prospectus policy and are generally based on the location of the head office ofthe filer or the connection of the filer to a jurisdiction. The proposed National Policy clarifies theprocedure for changing the principal regulator for an application;

     

  • The proposed National Policy provides a process for pre-filing discussions on applications. If theprincipal regulator determines that the pre-filing discussion is of a routine nature, it will be dealt with bythe principal regulator. If the principal regulator determines that the pre-filing discussion involves anovel and substantive issue or a novel public policy issue, the proposed National Policy provides for aconsultative process between securities regulatory authorities. The process is similar to that providedfor in the prospectus policy and expands the process that was set out in the Concept Proposal;

     

  • The proposed National Policy provides more guidance on the contents of applications and on howapplications should be made by filers electing to use ERA than the Concept Proposal did. As under theConcept Proposal applications with application filing fees should be filed concurrently in all jurisdictions.The proposed National Policy clarifies that if applications are not filed concurrently in all jurisdictions orare incomplete or deficient, the timing of the review may be affected;

     

  • As under the Concept Proposal, a single application document should be drafted referencing therelevant legislative provisions of the principal regulator. The proposed National Policy contains a newprovision that the application should contain footnotes or be accompanied by a table of concordanceclearly referencing all the relevant legislative provisions of all non-principal regulators where theapplication will be made. The application should also contain analysis where the provisions of thelegislation of the non-principal regulators differs from that of the principal regulator;

     

  • The proposed National Policy, like the Concept Proposal, provides that generally only the staff of theprincipal regulator will communicate with the filer on an application;

     

  • As under the Concept Proposal, there will be no surrender of the exercise of discretion by any securitiesregulatory authority under ERA and all securities regulatory authorities will exercise their discretion togrant or deny exemptive relief on an application but non-principal regulators will rely on the review andanalysis of the application by the staff of the principal regulator;

     

  • Under the proposed National Policy, the staff of non-principal regulators will have seven business days(rather than ten business days as in the Concept Proposal) to notify the staff of the principal regulator ofsubstantive issues on an application that in the view of staff may, if left unresolved, cause the non-principal regulator to opt out of ERA for the application. The staff of the principal regulator can abridgethis time period if it feels the circumstances warrant the abridgement.

     

  • As under the Concept Proposal, once the staff of the principal regulator has completed their review of anapplication (having the benefit of the substantive comments of the staff of non-principal regulators), theywill notify the staff of the non-principal regulators of their recommendation and forward therecommendation to the principal regulator for a decision on the application;

     

  • Once the principal regulator has made a decision on an application the staff of the principal regulatorwill forward their staff memorandum and recommendation and the decision of the principal regulator onthe application to the non-principal regulators involved in the application. The staff memorandum mustidentify substantive comments received from the staff of non-principal regulators and the view of thestaff of the principal regulator on these comments;

     

  • Non-principal regulators continue to have seven business days to decide whether to make the samedecision as the principal regulator on an application or whether to opt out of ERA for the application.The principal regulator cannot abridge this time period but only request that the non-principal regulatorsattempt to make their decisions in a shorter period. The proposed National Policy establishes a newprocedure to ensure there is no unintended opting out of ERA on an application due to silence. Staff ofthe principal regulator will send a reminder by facsimile to all non-principal regulators who have notresponded within five business days;

     

  • The proposed National Policy maintains the process established in the Concept Proposal for opting out.A non-principal regulator may opt out of ERA for an application by advising the filer, the principalregulator and the other non-principal regulators of its decision to opt out and its reasons for doing so.The non-principal regulator that has opted out will continue its review of the application, deal directlywith the filer, make a decision with respect to the application and issue its own decision document. Anon-principal regulator that has opted out of ERA can opt back into ERA at any time prior to the end ofthe opting out period set by the proposed National Policy;

     

  • Like the Concept Proposal, the proposed National Policy indicates that silence by a non-principalregulator on an application is deemed to be an opting out of ERA for an application;

     

  • As under the Concept Proposal, the decision of the principal regulator on an application will not bereleased to the filer until the end of the opting out period set by the proposed National Policy unless allnon-principal regulators have communicated their decisions on the application prior to the end of thatperiod;

     

  • The proposed National Policy, like the Concept Proposal, provides that once a decision has been madeby all non-principal regulators, the principal regulator will issue a MRRS decision document evidencingthe decisions of the principal regulator and all non-principal regulators that have not opted out of ERAfor the application. The decisions of all securities regulatory authorities and the MRRS decisiondocument will have the same effective date and the same terms and conditions;

     

  • The proposed National Policy clarifies that if exemptive relief is needed for part of a transaction ormatter the exemptive relief will be granted for the whole transaction or matter and a filer will look to theMRRS decision document for the exemptive relief for the whole transaction or matter and will not relyupon any statutory exemptions for portions of the transaction or matter;

     

  • The proposed National Policy clarifies that the MRRS decision document will reflect the securitieslegislation and securities directions of the principal regulator on an application. This may mean thatsimilar transactions or matters may be subject to different terms and conditions, for example differentresale restrictions, depending on who acts as principal regulator on an application;

     

  • The decisions of all securities regulatory authorities will be evidenced by the MRRS decision document.The Commission des valeurs mobilières du Québec will also send its own decision document on anapplication to filers.;

 

  • The time periods under ERA have been set to ensure that all securities regulatory authorities havesufficient time to exercise their discretion under ERA

Attached as Appendix C is a flowchart showing the operation of ERA.

UNPUBLISHED MATERIALS

In proposing the National Policy, the CSA have not relied on any significant unpublished study, report or otherwritten materials.

ALTERNATIVES CONSIDERED

The CSA did not consider any alternatives to the proposed National Policy.

ANTICIPATED COSTS AND BENEFITS

The proposed National Policy will reduce unnecessary duplication in the review of exemptive relief applicationsfiled in more than one jurisdiction and is an important step towards increasing efficiency. In the long term useof ERA may lead to increased harmonization of approaches taken by securities regulatory authorities on issuesand possibly more harmonization of legislation.

RELATED INSTRUMENTS

The proposed National Policy, the Concept Proposal, the MOU, the registration rule and the prospectus policyare related.

COMMENTS

Interested parties are invited to make written submissions with respect to the proposed National Policy.Submissions received by February 28,1999 will be considered.

Submissions should be made to all Canadian securities regulatory authorities listed below in care of theSaskatchewan Securities Commission in duplicate, as indicated below:

British Columbia Securities Commission
Alberta Securities Commission
Saskatchewan Securities Commission
Manitoba Securities Commission
Ontario Securities Commission
Commission des valeurs mobilières du Québec
Nova Scotia Securities Commission

c/o Dean Murrison, MRRS for ERA Committee Chair
Saskatchewan Securities Commission
800, 1920 Broad Street
Regina, Saskatchewan S4P 3V7
Telephone: 306-787-5879
Fax: 306-787-5899
e-mail:[email protected]

A copy of all submissions should also be forwarded to the Commission des valeurs mobilières du Québec asfollows:

Claude St Pierre
Secretary
Commission des valeurs mobilières du Québec
Tour de la Bourse
C.P. 246, 22nd Floor
Montréal, Québec H4Z 1G3

A diskette containing the submission (in DOS or Windows format, preferably Word Perfect) should also besubmitted to the Chair of the Committee.

Comment letters submitted in response to requests for comments are placed on the public file in certainjurisdictions and form part of the public record, unless confidentiality is requested. Comment letters will becirculated amongst the securities regulatory authorities, whether or not confidentiality is requested. Althoughcomment letters requesting confidentiality will not be placed on the public file, freedom of informationlegislation in certain jurisdictions may require the securities regulatory authorities in those jurisdictions to makecomment letters available. Persons submitting comment letters should therefore be aware that the press andmembers of the public may be able to obtain access to any comment letters.

Questions and/or requests to participate in testing ERA may be referred to the Chair and/or any of the followingmembers of the Committee:

Margaret Sheehy
British Columbia Securities Commission
865 Hornby Street, 2nd Floor
Vancouver, British Columbia V6Z 2H4
Telephone: (604) 899-6650
Fax: (604) 899-6700
e-mail: [email protected]

 

Marsha Manolescu
Alberta Securities Commission
19th Floor, 10025 Jasper Avenue
Edmonton Alberta T5J 3Z5
Telephone: (403) 422-1914
Fax: (403) 422-0777
e-mail: [email protected]

Douglas Brown
Manitoba Securities Commission
1130 - 405 Broadway
Winnipeg, Manitoba R3C 3L6
Telephone: (204) 945-0605
Fax: (204) 945-0330
e-mail: [email protected]

Margo Paul
Ontario Securities Commission
20 Queen Street West, Suite 800 Box 55
Toronto, Ontario M5H 3S8
Telephone: (416) 593-8136
Fax: (416) 593-8244
e-mail: [email protected]

Sylvie Lalonde
Commission des valeurs mobilières du Québec
Tour de la Bourse
C.P. 246, 22nd Floor
Montréal, Québec H4Z 1G3
Telephone: (514) 940-2199 ext. 4555
Fax: (514) 864-6381
e-mail: [email protected]

Shirley Lee
Nova Scotia Securities Commission
1690 Hollis Street, 2nd Floor
Halifax, Nova Scotia B3J 3J9
Telephone: (902) 424-5441
Fax: (902) 424-4625
e-mail: [email protected]

DATED: November 20, 1998

Appendix A

National Policy 12-201
MUTUAL RELIANCE REVIEW SYSTEM FOR
EXEMPTIVE RELIEF APPLICATIONS
1. INTERPRETATION

1.1 Definitions - In this policy

"application" means a request for exemptive relief but does not include a waiver application or pre-filing as defined in theprospectus policy or where a certificate of registration can evidence the granting of exemptive relief;

"CSA committee" means the Exemptive Relief Applications Committee of the Canadian Securities Administrators;

"exemptive relief" means any relief sought under Canadian securities legislation or Canadian securities directions,including approvals, declarations, determinations, exemptions, extensions, orders, rulings, permissions, recognitions,revocations and waivers;

"facsimile" means a facsimile or other form of electronic transmission;

"filer" for the purpose of this policy means any person or company filing an application and includes an agent of the filer;

"materials" means the documents and fees set out in section 5;

"pre-filing" means a consultation with staff of a Canadian securities regulatory authority regarding the interpretation orapplication of Canadian securities legislation or Canadian securities directions to a proposed transaction or matter that willbe the subject of, or will be referred to in, an application, where the consultation is initiated before the filing of theapplication;

"principal decision documents" means the principal regulator's staff memorandum, recommendation and draft MRRSdecision document(s) in the form that the principal regulator will issue after the expiry of the opting out period referred to insection 8 that are circulated to each non-principal regulator with whom an application has been filed under this policy;

"prospectus policy" means National Policy 43-201 or any successor instrument;

"registration rule" means National Instrument 31-101 or any successor instrument;

"requested regulator" means a participating principal regulator, other than the principal regulator determined in accordancewith section 3.2, which a filer requests under section 3.3(1) to act as its principal regulator;

"system" means the mutual reliance review system described in this policy for the review of applications;

1.2 Interpretation

Terms used in this policy that are defined or interpreted in the MRRS MOU or National Instrument 14-101 should beinterpreted in accordance with those instruments.

2. OVERVIEW AND APPLICATION

This policy describes the practical application of the mutual reliance concepts set out in the MRRS MOU relating to thefiling and review of applications.

A filer is eligible to elect to use the system for any application made in more than one jurisdiction, with the exception ofthose applications for which the granting of exemptive relief can be evidenced by an MRRS decision document issued underthe prospectus policy or evidenced by a certificate of registration.

Although the filer will generally deal only with the principal regulator regarding an application filed under the system, thesecurities legislation and securities directions in each jurisdiction are applicable to that application. Filers should ensure thatthe exemptive relief sought is both appropriate and necessary in each jurisdiction where the application is made.

Filers should be aware that the MRRS decision document will reflect the securities legislation and securities directions of theprincipal regulator.

 

Filers are reminded that the primary objective of the system is to reduce unnecessary duplication in the review ofapplications. The timelines set out in the system are designed to ensure that the principal regulator and the non-principalregulators have sufficient time to consider the application and exercise their discretion.

3. PRINCIPALREGULATOR

3.1. Participating Principal Regulators

As of the date of this policy, the securities regulatory authorities and regulators of British Columbia, Alberta, Saskatchewan,Manitoba, Ontario, Québec, Nova Scotia and Newfoundland have agreed to act as principal regulator in respect ofapplications filed under this policy.

3.2 Determination of Principal Regulator

A filer is responsible for selecting a principal regulator in accordance with the following guidelines when electing to use thesystem for a particular application:

(1) the filer should select as its principal regulator the same principal regulator that it would select under the prospectuspolicy or the registration rule;

(2) if the filer would not have a principal regulator under the prospectus policy or the registration rule, the filer should selectas its principal regulator the Canadian securities regulatory authority or regulator in the jurisdiction where the filer's headoffice is located;

(3) if the filer does not require exemptive relief in the jurisdiction referred to in (1) or (2) or the Canadian securitiesregulatory authority or regulator in the jurisdiction referred to in (1) or (2) is not a participating principal regulator under thesystem, the filer should select the participating principal regulator in the jurisdiction with which the filer has the next mostsignificant connection to act as the principal regulator; or

(4) if the filer has no significant connection to any Canadian jurisdiction, the filer may select any participating principalregulator to act as the principal regulator.

3.3 Change of Principal Regulator

(1) Application for Change made by Filer

A filer may apply for a change of principal regulator for an application where:

(a) the filer believes its principal regulator is not the appropriate one to act as principal regulator for a particular applicationsuch as where the nature of the exemptive relief sought could result in the selection of more than one principal regulator inrespect of a transaction or matter, or

(b) the filer withdraws its application in the principal regulator's jurisdiction after the principal regulator has commenced itsreview of the application because no exemptive relief is required in that jurisdiction but the filer wishes to remain in thesystem for the application,

by filing a written notice of the request with the principal regulator determined in accordance with section 3.2 and therequested regulator at least 2 business days prior to the filing of the application referred to in (a) or as soon as practicableafter the withdrawal referred to in (b). The written notice should address the basis for the original designation of principalregulator under section 3.2 and the reasons for the requested change.

Requests to change a filer's principal regulator under (a) will generally be granted only where it is significantly moreadministratively efficient for another participating principal regulator to act as principal regulator.

If staff of both participating principal regulators consent to the change in designated principal regulator under (a), staff ofthe requested regulator will promptly notify the filer. Filers are reminded to include notice of any change of principalregulator together with reasons for the change in the application.

If staff of both participating principal regulators consent to the change in designated principal regulator under (b), staff ofthe requested regulator will promptly notify the filer and the non-principal regulators by facsimile of the change and thereasons for the change.

(2) Proposal for Change by the Participating Principal Regulators

For a particular application filed under the system, staff of the participating principal regulators may determine that it wouldbe preferable for a participating principal regulator other than the principal regulator determined under section 3.2 to act as afiler's principal regulator. This determination will generally only be made where changing the principal regulator wouldresult in greater administrative and regulatory efficiencies in the review process for the application such as where the natureof the exemptive relief sought results in the selection of more than one principal regulator in respect of a transaction ormatter.

Where staff of the participating principal regulators propose to change a filer's principal regulator for a particularapplication, staff of the redesignated principal regulator will promptly notify the filer and non-principal regulators byfacsimile of the redesignation and the reasons for the proposed redesignation and will attempt to resolve any objectionsraised by the filer to the redesignation.

3.4 Notification to CSA Committee

The participating principal regulators involved in a proposal to change a filer's principal regulator will promptly advise theCSA committee of all determinations made under section 3.3 and the reasons for the decisions.

4. PRE-FILING DISCUSSIONS

4.1 General

 

The principles of mutual reliance are available to govern the review of pre-filings of applications that will be made to aprincipal regulator and at least one other non-principal regulator. Filers intending to file an application under the systemshould use the system for any pre-filings related to the application.

Filers are reminded to file the pre-filing sufficiently in advance of the filing of the application under the system to avoid anydelays in the issuance of the MRRS decision document and to identify the pre-filing as an MRRS filing.

Filers should also be aware that different review procedures apply to those pre-filings that are routine and those that raisenovel and substantive issues or novel public policy issues.

4.2 Procedure for Routine Pre-Filings

Except as provided in section 4.3, a pre-filing made under the system should be submitted to the principal regulator in theform required by the principal regulator and the filer will deal directly with the principal regulator to resolve the pre-filing.If staff of the principal regulator determines that the pre-filing involves novel and substantive issues or raises novel publicpolicy issues, staff of the principal regulator will advise the filer that the pre-filing would be more appropriately dealt with inaccordance with the procedures described in section 4.3.

4.3 Procedure for Novel and Substantive Pre-Filings

If staff of the principal regulator determines that a pre-filing filed under the system involves a novel and substantive issue orraises a novel public policy issue:

(a) staff of the principal regulator will request that the filer concurrently submit the pre-filing in written form to the principalregulator and all non-principal regulators;

(b) staff of the non-principal regulators will have 7 business days from receipt of the pre-filing to raise with the principalregulator substantive issues that in the view of staff may, if left unresolved, cause the non-principal regulator to opt out ofthe system if an application was filed under the system; and

(c) staff of the principal regulator will notify staff of the non-principal regulators of its proposed approach with respect tothe pre-filing and will give staff of the non-principal regulators a specified reasonable period of time to advise staff of theprincipal regulator of their disagreement with the proposed approach with respect to the pre-filing before notifying the filerof the outcome. Staff of the principal regulator will advise the filer that the outcome of the pre-filing represents theapproach adopted by all non-principal regulators other than those that advised the principal regulator of their disagreementwith the approach within that period of time.

To accelerate the resolution of a pre-filing that involves a novel and substantive issue or raises a novel public policy issue,the filer is encouraged to concurrently submit the pre-filing in written form to the principal regulator and all non-principalregulators.

4.4 Disclosure in Related Application

In any application filed under this system, the filer should describe the subject matter of any pre-filing and the approachtaken on the pre-filing by staff of the principal regulator and, if applicable, staff of any non-principal regulator that disagreedwith the approach adopted by the principal regulator and had an alternative approach for the pre-filing.

5. FILING OF MATERIALS UNDER MRRS

5.1 Election of MRRS and Identification of Principal Regulator

A filer wishing to use the system is responsible for selecting a principal regulator in accordance with the criteria set out insection 3 and identifying the non-principal regulators from whom exemptive relief is sought.

5.2 Materials to be Filed

Materials to be filed concurrently in each jurisdiction where exemptive relief is sought consist of:

(1) a written application drafted in accordance with the procedures of the principal regulator as to format and content inwhich the filer:

(a) states that the application is being filed under the system and identifies the jurisdictions in which the application is beingfiled;

(b) identifies the principal regulator(s) selected and the basis for that selection (i.e. whether in accordance with the guidelinesin section 3.2 or the criteria in section 3.3);

(c) describes any pre-filing discussions under sections 4.2 and 4.3;

(d) sets out under separate headings all of the exemptive relief sought, including any request for confidentiality, and clearlyidentifies the jurisdictions in which each head of relief is sought and all of the relevant provisions of the securities legislationand securities directions of the principal regulator and each non-principal regulator, including an analysis where theprovisions of the securities legislation or securities directions of a non-principal regulator differs from those of the principalregulator. These provisions may be set out in a footnote or table of concordance. Examples to illustrate how the heads ofrelief should be organized are set out below:

Example 1: If in connection with a reorganization, a filer requires exemptive relief from the prospectus and registrationrequirements in all jurisdictions and wishes to be designated as a reporting issuer in only three jurisdictions (jurisdictions"A", "B" and "C"), the filer would

  • select a principal regulator in accordance with section 3.2 - in this case the filer selects jurisdiction "A" as theprincipal regulator for each head of relief
  • set out the relief sought under 2 separate headings - in this case one for the registration and prospectus relief and asecond for the reporting issuer designation
  • prepare and file with the application one draft MRRS decision document dealing with the registration and prospectusrelief for all jurisdictions and the reporting issuer designation for jurisdictions "A", "B" and "C"

Example 2: If, however, the filer in this example wished to be designated as a reporting issuer in only jurisdictions "B" and"C", the filer would ordinarily file a separate application for each head of relief, but under the system, the filer would

  • combine the requests for exemptive relief in one application
  • select another principal regulator in accordance with section 3.2 for the reporting issuer designation head of relief asthat relief is not required in jurisdiction "A" and
  • prepare and file with the application two MRRS decision documents, one dealing with the registration andprospectus relief for which jurisdiction "A" is the principal regulator and the second dealing with the reporting issuerdesignation for which either jurisdiction "B" or "C" would act as the principal regulator

Example 3: If registration and prospectus relief is required in a number of jurisdictions for a multi-trade transaction (such asan amalgamation or reorganization) but the trades that require relief differ from jurisdiction to jurisdiction (due to theavailability of statutory exemptions or blanket relief), the MRRS decision document will provide registration and prospectusrelief for the entire transaction.

 

(2) supporting materials;

(3) draft form(s) of MRRS decision document(s) with terms and conditions, including resale restrictions, based on thesecurities legislation and securities directions of the jurisdiction of the principal regulator; and

(4) the appropriate fees payable in each jurisdiction under Canadian securities legislation.

Filers are advised to submit their applications sufficiently in advance of any deadlines to ensure that staff of the principalregulator has a reasonable opportunity to complete their review of the application and make recommendations to theprincipal regulator and all of the non-principal regulators for a decision on the merits of the application.

Filers must ensure that the exemptive relief sought is both appropriate and necessary in each jurisdiction where theapplication is made.

Filers are reminded that the Commission des valeurs mobilieres du Québec ("CVMQ") will require that a French languageversion of the draft MRRS decision document be filed in Quebec when the CVMQ is acting as principal regulator.

5.3 Filing

Materials are filed with the principal regulator and concurrently with each non-principal regulator. Applications cannot befiled electronically through SEDAR as the materials under the system are not a mandated filing under SEDAR. Thisprocedure will remain in place until the electronic filing of all applications through SEDAR is mandated.

Until applications can be filed through SEDAR, filers are encouraged to file the application both by facsimile and in paperformat to ensure the timely delivery of materials to all non-principal regulators. Failure to file the application concurrently inall jurisdictions may affect the timing of the review and the issuance of the MRRS decision document.

5.4 Incomplete or Deficient Material

If the materials filed under the system are deficient or incomplete, staff of the principal regulator may direct that the filer filean amended application with the principal regulator and each non-principal regulator. Upon confirmation from the filer thatan amended application has been filed with the principal regulator and all non-principal regulators, the principal regulatorwill provide the filer and the non-principal regulators with a new acknowledgment of receipt referred to in section 5.5 whichwill trigger a new seven business day review period referred to in section 6.2.

5.5 Acknowledgment of Receipt of Filing

Promptly upon receipt of an application, the principal regulator will provide by facsimile an acknowledgment of receipt ofthe application to the filer and non-principal regulators, which will identify the staff member who has been assigned toreview the application and the end date of the review period referred to in section 6.2.

On receipt of the acknowledgement, each non-principal regulator will promptly notify the principal regulator by facsimile ofthe name, phone number, fax number and e-mail address of the staff member assigned to the application in that jurisdictionand confirm receipt of the application.

If a non-principal regulator has not received the application, the filer will be directed by staff of the principal regulator todeliver the application to all non-principal regulators from whom exemptive relief is being sought. When the principalregulator is satisfied that each non-principal regulator is in receipt of the application, the principal regulator will provide thefiler and the non-principal regulators with a new acknowledgement of receipt referred to in this section which will trigger anew seven business day review period referred to in section 6.2.

5.6 Withdrawal or Abandonment of Application

If an application is withdrawn at any time during the process, the filer is responsible for notifying by facsimile the principalregulator and all non-principal regulators and providing an explanation for the withdrawal.

 

If at any time during the review process staff of the principal regulator determine that an application has been abandoned bya filer, staff of the principal regulator will promptly notify by facsimile the filer and all non-principal regulators that the filehas been closed.

6. REVIEWOF MATERIALS

6.1 Reliance on Principal Regulator

Staff of the principal regulator is responsible for reviewing any application filed under this system in accordance with itsusual review procedures, analysis and precedents together with the benefit of comments, if any, from staff of the non-principal regulators. The filer will generally deal only with staff of the principal regulator, who will be responsible forissuing comments to and receiving responses from the filer. In exceptional circumstances, staff of the principal regulatormay refer the filer to staff of a non-principal regulator.

6.2 Review Period for Non-Principal Regulators

Staff of the non-principal regulators will have seven business days from receipt of the acknowledgment referred to in section5.5 to review the application.

If staff of a non-principal regulator identify substantive issues that in the view of staff may, if left unresolved, cause the non-principal regulator to opt out of the system for that particular application, staff will forward these comments to staff of theprincipal regulator by facsimile prior to the expiration of the seven business day review period or the abridged periodreferred to in section 6.3.

If staff of a non-principal regulator are of the view that no relief is required under the securities legislation of thatjurisdiction, staff of the non-principal regulator will notify the filer and the principal regulator by facsimile and request thatthe application be withdrawn in that jurisdiction.

6.3 Abridgement of Review Period for Non-Principal Regulators

Where staff of the principal regulator considers it appropriate, they can abridge the seven business day review period bynotifying each of the non-principal regulators by facsimile. Such abridgements will generally be made only in exceptionalcircumstances. Filers requesting an abridgement must satisfy the staff of the principal regulator that the application hasbeen concurrently filed in all jurisdictions and that immediate attention to the application is necessary and reasonable underthe circumstances.

6.4 Review and Processing of Application by Principal Regulator

Following the expiration of the seven business day referred to in section 6.2 or abridged period referred to in section 6.3,staff of the principal regulator will:

(1) complete their review of the application;

(2) prepare a staff memorandum that

(i) provides an analysis of the application and the exemptive relief sought;

(ii) identifies a request by the filer for the application and/or the MRRS decision document to be held in confidence beyondthe effective date of the MRRS decision document and the basis for the request; and

(iii) identifies any substantive issues raised by staff of the non-principal regulators and the view of staff of the principalregulator on such issues;

 

(3) make a recommendation to grant or deny the exemptive relief sought by the filer and concurrently notify staff of eachnon-principal regulator by facsimile of the recommendation;

(4) where there is a recommendation to grant the exemptive relief sought, prepare a draft MRRS decision documentfollowing the form described in section 11.2. The draft MRRS decision document should also reference any request forconfidentiality of materials and/or the MRRS decision document beyond the effective date of the MRRS decision document.

 

7. DECISION OFPRINCIPAL REGULATOR

Upon completion of the review process and after considering the recommendation of its staff, the principal regulator willdetermine whether to grant or deny the exemptive relief sought.

7.1 Decision to Grant Exemptive Relief

If the principal regulator makes a decision to grant the exemptive relief sought, the principal regulator will immediatelycirculate by facsimile the principal decision documents to the non-principal regulators.

 

Two business days prior to the expiry of the opting out period referred to in section 8, the principal regulator will follow-upby facsimile with a reminder to each non-principal regulator that has not provided the confirmation referred to in section 8.

The principal regulator will not communicate its decision to the filer until after the opting out period referred to in section 8has elapsed except where all non-principal regulators have made their decisions prior to the expiry of the opting out period,in which case the principal regulator may communicate the decision to the filer as soon as it receives all of the confirmationsreferred to in section 8.

7.2 Potential Denial of Exemptive Relief

Where the principal regulator is not prepared to grant the exemptive relief sought based on the facts before it, the principalregulator will notify the filer and the non-principal regulators by facsimile that it intends to deny the exemptive relief sought.

7.3 Right to the Opportunity to be Heard on a Potential Denial

Where a filer has a right to a hearing as a result of a potential denial of the exemptive relief sought and exercises that right,the principal regulator will promptly notify by facsimile the non-principal regulators with whom the application was filed thatthe filer has requested a hearing and circulate their staff memorandum and recommendation. The principal regulator mayhold a hearing, either solely, jointly or concurrently with other interested non-principal regulators. The non-principalregulators with whom the application was filed may make whatever arrangements they deem appropriate, includingconducting a hearing contemporaneously with the hearing held by the principal regulator.

After the hearing, the principal regulator will promptly circulate by facsimile the principal decision documents to the non-principal regulators.

8. DECISION OF NON-PRINCIPAL REGULATORS

Each non-principal regulator, other than a non-principal regulator that has held a hearing and made a decision, will haveseven business days from receipt of the principal decision documents to confirm to the principal regulator by facsimilewhether it has made the same decision as the principal regulator or is opting out of the system for that application.

Where staff of the principal regulator considers it appropriate, staff may only request, but cannot require, that the non-principal regulators abridge the seven business day time period where possible. Filers requesting an abridgement will beasked to satisfy staff of the principal regulator that the abridgement is necessary and reasonable in the circumstances.

Each non-principal regulator may document for its own purposes the decision made on each application in its jurisdiction inaccordance with its own procedures.

After the opting-out period has elapsed, the principal regulator will issue a MRRS decision document evidencing that adecision to grant or deny the exemptive relief sought has been made by the principal regulator and each non-principalregulator that has not opted out of the system for that application.

If the MRRS decision document evidences a denial of the exemptive relief sought, reasons for the denial will be provided inthe MRRS decision document.

 

9. OPTING OUT OF THE MRRS

A non-principal regulator electing to opt out of the system on any particular application within the opting out period referredto in section 8 will promptly notify the filer, the principal regulator and other non-principal regulators by facsimile and brieflyindicate reasons for opting out.

In opting out of the system for a particular application, a non-principal regulator is not making a decision on the merits ofthe application.

A filer is entitled to deal directly with a non-principal regulator that has opted out of the system to resolve outstanding issuesand obtain a decision in respect of that particular application. If the filer and non-principal regulator are able to resolve alloutstanding issues, the non-principal regulator may opt back into the system for that application by notifying the principalregulator and all other non-principal regulators by facsimile within the opting out period referred to in section 8.

Reasons for opting out will be forwarded by the non-principal regulator to the CSA committee.

10. EFFECT OF SILENCE

Silence on the part of a non-principal regulator at the end of the opting out period referred to in section 8 will mean that thenon-principal regulator will be deemed to have opted out of the system for that particular application.

11. MRRS DECISIONDOCUMENT

11.1 Effect of MRRS Decision Document

The MRRS decision document evidences that a decision has been made by the principal regulator and each of the non-principal regulators that has not opted out of the system in respect of the application.

The MRRS decision document will reflect the securities legislation and securities directions of the principal regulator. Thismay mean that similar transactions or matters may be subject to different terms and conditions, for example resalerestrictions, depending on who acts as the principal regulator for an application.

The MRRS decision document provides exemptive relief for the entire transaction or matter which is the subject of theapplication. This ensures that the exempt transaction or matter is treated in a uniform manner in all jurisdictions named inthe MRRS decision document. Consequently, where the transaction or matter is a composite transaction or mattercomprised of a series of trades, the filer will look to the MRRS decision document for all trades in the series and not rely onstatutory exemptions for some trades and on the MRRS decision document for other trades.

11.2 Form of MRRS Decision Document

Except as described below, the MRRS decision document will be in the form of the MRRS decision document attached asSchedule A. Where the decision is a denial of the relief sought, the MRRS decision document will set out reasons for thedecision.

If the MRRS decision document is in a form other than the form set out in Schedule A, the MRRS decision documentshould contain wording to the effect that the MRRS decision document evidences the decisions of each relevant Canadiansecurities regulatory authority or regulator, as the case may be, and that the decision sets out the decisions of such Canadiansecurities regulatory authorities or regulators, as the case may be.

11.3 Issuance of MRRS Decision Document

The principal regulator will not issue a MRRS decision document with respect to an application until:

(1) the principal regulator has received all of the confirmations referred to in section 8 or

(2) the opting out period referred to in section 8 has expired.

The principal regulator will then promptly send the MRRS decision document by facsimile to the filer and non-principalregulators.

11.4 Effective Date of MRRS Decision Document

The decisions made by each of the principal regulator and the non-principal regulators with respect to an application willhave the same effective date as the MRRS decision document, which will be no earlier than the end of the opting out periodreferred to in section 8 unless each of the principal regulator and the non-principal regulators have made their decisions priorto the end of the opting out period. Where that is the case, the effective date of the MRRS decision document will be thedate on which the principal regulator has received all of the confirmations referred to in section 8.

11.5 Local Decision

Notwithstanding the issuance of the MRRS decision document, the CVMQ will concurrently issue its own local decision ineach case. The CVMQ local decision will have the same terms and conditions as the MRRS decision document. No otherCanadian securities regulatory authority or regulator will issue a local decision.

 

SCHEDULE A

IN THE MATTER OF
THE SECURITIES LEGISLATION
OF (list by name those jurisdictions where the application was filed that have not opted out of the system for thisapplication)
AND
IN THE MATTER OF
THE MUTUAL RELIANCE REVIEW SYSTEM FOR EXEMPTIVE RELIEF APPLICATIONS
AND
IN THE MATTER OF _____________________ (name(s) of filer/relevant parties)

MRRS DECISION DOCUMENT

WHEREAS the Canadian securities regulatory authority or regulator (the "Decision Maker") in _____________________(list by name the jurisdictions where the application was filed that have not opted out of the system for this application)(the"Jurisdictions") have received an application from _____________________ (Name(s) of filer(s) and relevant parties) ("Definitions as required", collectively the "Filer") for a decision pursuant to the securities legislation of the Jurisdictions (the"Legislation") that the requirement contained in the Legislation to _____________________ (Describe in words - do not use statutory references) shall not apply to _____________________ (State who or if a transaction is involved brieflydescribe the transaction in question - do not break down into parts - do not use statutory references - includeappropriate defined term)

AND WHEREAS pursuant to the Mutual Reliance System for Exemptive Relief Applications (the "System"), the _____________________ (Name of the principal regulator) is the principal regulator for this application;

AND WHEREAS the Filer has represented to the Decision Makers that:

(Insert numbered representations disclosing all facts relevant to the granting of the relief. Do not use statutoryreferences.)

AND WHEREAS pursuant to the System this MRRS Decision Document evidences the decision of each Decision Maker(collectively, the "Decision");

AND WHEREAS the Decision Makers are of the opinion that it would not be prejudicial to the public interest to make theDecision;

The Decision of the Decision Makers pursuant to the Legislation is that the requirement contained in the Legislation to ___________________ (Describe in words - do not use statutory references) shall not apply to ___________________ (State who or, if applicable, the transaction using the appropriate definition) provided that:

(Insert numbered terms and conditions. These should be generic and without statutory references to the Legislationof the Jurisdictions where this application was filed and have not opted out of the System for this application)

DATED at ___________________ , ___________________ on ___________________ , 199____ .

 

___________________ (Name)

 

___________________ (Title)

Appendix B

MRRS FOR EXEMPTIVE RELIEFAPPLICATIONS ("ERA")

SUMMARY OF COMMENTS AND CHANGES

The following summarizes industry comments received onthe concept proposal and discusses how the policy differsfrom the concept proposal as a result of both thesecomments, and the experience gained through testing.

General Comments

All but one of the comments received were supportive ofthe mutual reliance concept and of ERA. Onecommentator liked the concept of testing ERA prior toimplementation and suggested this approach should beused more often.

One commentator indicated ERA fell short of a "virtualnational securities commission" and did not offer the"efficiency and consistency that might be expected ofadministration by a single jurisdiction".

Response: The CSA feels there is general support forERA as evidenced by the increasing number of filerselecting to use ERA for an increasing variety ofapplications.

SEDAR

Three commentators strongly encouraged mandating theuse of SEDAR for applications as soon as practicable.

Response: The CSA supports the use of SEDAR forapplications and for ERA.

This will create efficiencies in the processing ofapplications under ERA by facilitating the concurrentfiling of applications with all securities regulatoryauthorities, the payment of fees and the communicationwith applicants and among securities regulatoryauthorities.

The MRRS for Exemptive Relief Applications Committee(the "Committee") will prepare a proposal for mandatingthe use of SEDAR for applications and ERA for theSEDAR Working Group to review.

Fees

Three commentators suggested that ERA should result inreduced fees given the reduced level of review required bynon-principal regulators. They also suggested that feesshould be standardized across jurisdictions with possibly aflat principal regulator and non-principal regulator fee.

Response: The CSA has noted these comments. TheCSA cannot consider this issue in the context of ERAalone.

Format

The format of the policy has been drafted to conform asmuch as possible to the format of the Memorandum ofUnderstanding - Mutual Reliance Review System ( the"MOU") and the instruments for the MRRS forRegistration (the "registration rule") and MRRS forProspectuses and Initial AIFS (the "prospectus policy")published for comment by the CSA. Also, the order inwhich various sections of the policy appear and the titlesof those sections have been changed to more closelyreflect other MRRS instruments. Information on theongoing operations of the CSA and training have beenmoved to the MOU as the information is applicable to allMRRSs.

Authority

One commentator stated that the authority to adopt ERAwas unclear. The commentator suggested that adiscussion of the authority of each securities regulatoryauthority to enter into an agreement regarding ERA beincluded in the request for comment published with thepolicy. It was felt this would lead to legal certainty.

One commentator does not support the retention ofdiscretion by all securities regulatory authoritiescontemplated by ERA. The commentator also suggestedthat non-principal regulators should not be able to optout, at least not on all types of applications.

Response: It is not felt that ERA will create legaluncertainty. This has not been an issue during testingERA.

As Canadian securities legislation does not allowCanadian securities regulatory authorities to delegatedecision making power to other Canadian securitiesregulatory authorities, ERA does not contemplate that asecurities regulatory authority give up the exercise of itsdiscretion. Each securities regulatory authority will makeits own decision on an application based on the merits ofthe matter.

All securities regulatory authorities currently haveprocesses for processing applications. This does notcreate legal uncertainty. Writing the process down oragreeing to use the same process as another regulator if itproves to be good process does not change this.

ERA only sets out a process that each securitiesregulatory authority intends to follow in exercising itsdiscretion. As long as the principles of natural justice areadhered to, each securities regulatory authority is entitledto determine the process to be followed in exercising itsdiscretion. ERA does not offend the principles of naturaljustice. Relying on the work of qualified and trained staff(even staff not in your direct employ) does not offendthese principles or the provisions of the legislation of anyjurisdiction as long as the decision is made by thesecurities regulatory authority .

As ERA is not mandatory, a filer electing to use ERAwould be indicating acquiescence to the process in anyevent.

Part 1 of the Policy "Interpretation"

Definitions in the policy have been drafted to reflect thoseused in other MRRSs. Some definitions of a more generalnature now appear in the MOU instead of the policy.

Part 2 of the Policy "Overview and Application"

One commentator indicated that networking and sellingarrangement applications should be dealt with under ERA.

There have been inquiries from staff of some securitiesregulatory authorities as to whether ERA should beavailable for applications for relief from the provisions ofNational Policy No. 39 "Mutual Funds" ("NP 39").

Response: ERA could work for applications for relieffrom the provisions of NP 39 but this would require achange to NP 39 (which is presently being reformulatedby the CSA Mutual Funds Committee). We understandthe CSA Mutual Funds Committee is currently reviewingthis issue in the context of this reformulation.

The policy has been drafted to clarify the types ofapplications which may be filed under ERA. ERA can beused for any application for exemptive relief unless theissuance of a certificate of registration or a prospectusreceipt can evidence the granting of the relief.

Part 3 of the Policy "Principal Regulator"

One commentator indicated that a filer should be able toredesignate a principal regulator where it is determinedthat the relief is not required from the principal regulatorand deal with the remaining securities regulatoryauthorities without having to reapply. The commentatorsuggested it should be clear in the policy which securitiesregulatory authorities have agreed to act as principalregulators under ERA.

Response: The CSA agrees with the commentator and thechanges suggested have been made.

Other additions have been made to the policy to allow forthe changing of the principal regulator in certain situationsand to make ERA consistent with the MOU.

Part 4 of the Policy "Pre-filing Discussions"

One commentator suggested that a method should be builtinto the process for pre-filing discussions under ERA toascertain the views of securities regulatory authoritiesother than the principal regulator on a matter. Thecommentator felt it was important to ascertain these viewsearly in the process to avoid issues arising later.

Response: The CSA agrees with the commentator. Aspre-filing discussions on exemptive relief applications andprospectuses for a particular matter often take place at thesame time, we have drafted Part 4 "Pre-filing Discussions"of the policy to mirror the prospectus policy to the extentappropriate for applications. This change would addressthe above comment as well.

Part 5 "Filing of Materials Under MRRS"

One commentator supported the elimination of therequirement to draft an application for each securitiesregulatory authority but suggested the application and thefee be forwarded to the principal regulator who wouldthen circulate the application to all securities regulatoryauthorities involved and divide the fee amongst them.

Response: The CSA feels that the use of SEDAR wouldaddress this comment. Until the use of SEDAR ismandated for applications it is felt that the circulation ofapplications and collection of fees by principal regulatorswould be an undue burden on principal regulators. Asapplications will be made in one document for allsecurities regulatory authorities, the forwarding ofapplications with fees to securities regulatory authoritiesby filers would not be an undue burden on filers. It is alsouncertain whether all securities regulatory authoritiescould collect fees on behalf of other securities regulatoryauthorities without legislative changes.

Two commentators supported the removal of all statutoryreferences from the application except for those of theprincipal regulator while one commentator did not as itfelt this would lead to decisions with no statutoryreferences, uncertainty and little use of ERA.

Response: The policy requires an application containstatutory references to the legislation of all jurisdictionswhere the application is made, not just those of theprincipal regulator. Statutory references to the legislationof non-principal regulators may be set out in footnotes tothe application or in a table of concordance accompanyingthe application. The application should also contain ananalysis of how the legislation of all the non-principalregulators involved differs from that of the principalregulator. This analysis can also be put in footnotes to theapplication.

Some of the applications filed under ERA during testinghave contained this information. Filers must carry out areview of all jurisdictions' legislation in any event andstaff have indicated that it is very helpful to have thisinformation for the efficient review of applications due todifferences in legislation.

Five commentators requested clarification on thetranslation to French of applications filed under ERA.

There have been comments from filers during testing thatthe requirements for the translation into French ofapplications using ERA were not consistent with, andwere more onerous than, the requirements for applicationsmade outside ERA.

Response: The Commission des valeurs mobilières duQuébec (the"CVMQ") will require that a French versionof the draft MRRS decision document be filed with it inall cases where it is the principal regulator.

One commentator suggested there should be clarificationon how novel or complex applications will be dealt withunder ERA such as those types of applications, if any,where the use of ERA is not appropriate as well asaddressing how to make applications where not all therelief, or not the same degree of relief, is required from allsecurities regulatory authorities. The commentatorsuggested it should still be possible to use ERA and makethe application for all the relief needed in one document.

Response: More guidance has been provided in the policyand including examples to clarify to filers when and howapplications should be made under ERA.

Applications which could lead to the designation of morethan one principal regulator, for example when not allheads of relief are required from the securities regulatoryauthority that would otherwise be designated the principalregulator, have been discussed.

A filer should still be able to use one application documentfor this type of application and the designation of twoprincipal regulators has worked during testing. It wouldresult in two MRRS decision documents and the filerdealing with two securities regulatory authorities.

The policy makes it clear that where there is an efficiencyto be gained by designating a different principal regulatorfor an application the filer may apply for a change ofprincipal regulator or the securities regulatory authoritiesmay decide to change the principal regulator for theapplication.

The policy provides information on the consequences offiling incomplete or deficient applications or notconcurrently filing the application with all securitiesregulatory authorities involved (which has been aconsistent problem during testing).

One commentator suggested there should be time lines forthe principal regulator's acknowledgement of the receiptof applications to the non-principal regulators similar tothe time lines for issuing preliminary receipts.

Response: It was not felt this was necessary as theexample cited occurred early in testing and thecircumstances that prompted the inquiry have notoccurred since. The use of SEDAR for applicationswould also address this concern.

Part 6 of the Policy "Review of Materials"

Five commentators were concerned about the length oftime it would take for an application to be processedunder ERA. For some applications it was suggested itmight be longer than it takes currently outside ERA andthe commentators questioned whether ERA would beused for urgent matters such as applications involving takeover bids. One commentator supported ERA not beingmade mandatory especially for such urgent matters. Onecommentator suggested it would take longer to reviewapplications because there is no input from the actual non-principal regulators until late in the process. Onecommentator suggested ERA would not shorten thereview time for applications. The commentatorssuggested that a time line should be imposed on the staffof the principal regulator's review of an application. Onecommentator suggested that this period be 5 business daysafter the staff of the non-principal regulators' commentsare received. One commentator suggested that this periodbe ten business days after the staff of the non-principalregulators' comments are received which could beabridged or extended. The commentators felt this wouldprovide some certainty for filers.

One commentator objected to the principal regulator nothaving to forward the comments of non-principalregulators to filers. It was felt that this erects a barrierbetween filers and non-principal regulators that is contraryto all other systems the CSA has developed whereprincipal regulators act as conduits between filers andsecurities regulatory authorities and precludes filers fromknowing of problems until late in the process when thereis an opt out.

Response: The policy :

  • allows the staff of the principal regulator to referthe filer to the staff of a non-principal regulator inexceptional circumstances;
  • reduces the staff of the non-principal regulator'sreview time from ten business days to 7 businessdays;
  • clarifies the type of comments the staff of a non-principal regulator should make to be consistentwith other MRRSs;
  • clarifies the process where an application is madeto a securities regulatory authority where no reliefis needed (an issue which arose several timesduring testing); and
  • clarifies when the staff of the non-principalregulator's review time can be abridged by thestaff of the principal regulator.

Thepolicy does not set time lines for the review ofapplications by the principal regulator as it is impossible toknow what length of time is needed by the principalregulator to do a full review of an application . The timerequired will vary depending on the type and thecomplexity of the application.

It is felt that the time lines set for an application to beprocessed through ERA are practical for mostapplications. Testing has shown that there is flexibilityand the ability to deal with most applications under ERAincluding those that are unusually complex or urgent.

There was discussion on whether comments of the staff ofthe non-principal regulators on an application should becommunicated to the staff of the principal regulator afterthe staff of the principal regulator has commented on anapplication to the staff of the non-principal regulators asopposed to before.

No changes were made to the policy as it is important thatthe review of an application begin concurrently in alljurisdictions. There are benefits to the filer and the staffof the principal regulator having the comments from thestaff of the non-principal regulators' sooner rather thanlater. Issues can be identified earlier and communicated tofilers. Staff of principal regulators can draft theirmaterials with the benefit of these comments rather thanrisk the possibility of having to redraft materials should acomment be raised by the staff of a non-principalregulator after the completion of the review by the staff ofthe principal regulator which could lengthen theapplication review process.

To require the staff of the principal regulator to act as aconduit and forward the comments of the staff of non-principal regulators to the filer is contrary to the mutualreliance concept.

Part 7 of the Policy "Decision of Principal Regulator"

The policy requires the staff of the principal regulator tosend a reminder to those securities regulatory authoritieswho have not informed the principal regulator of theirdecision within 5 business days. Experience with testinghas indicated that this would be useful.

Part 8 of the Policy "Decision of Non-principalRegulators"

One commentator suggested that non-principal regulatorsshould only have 5 business days to make their decisionafter receiving the principal determination documents as afiler could be seriously disadvantaged by an opt out whichcould occur late in the process.

One commentator suggested that the 7 business days fornon-principal regulators to make a decision should beabridgeable at the option of the principal regulator.

Response: No changes were made to shorten the opt outperiod for non-principal regulators as the time linescurrently provided are the minimum required for non-principal regulators to exercise their discretion.

The policy has not been drafted to make the opt outperiod abridgeable by the principal regulator as this wasseen as fettering the discretion of the non-principalregulators.

The principal regulator can only request but not require ashorter opt out period and the experience in testing hasbeen that when a shorter opt out period has been requirednon-principal regulators have obliged.

Part 9 of the Policy "Opting Out of the MRRS"

One commentator suggested the fact that the non-principal regulators make their decision after the principalregulator creates unease or uncertainty until later in theprocess than is the case under the process used now todeal with applications. It was suggested this perceptionmay be created by the fact that there is no communicationbetween filers and non-principal regulators.

Response: It is not felt that there should be uncertainty asstaff of the non-principal regulators will have raised anysubstantive issues on an application with the staff of theprincipal regulator early in the review process and it islikely the filer will be aware of it.

One commentator suggested it was unclear who wasmaking the decision to opt out of ERA on an application.The commentator went on to say it should be made clearthat if a securities regulatory authority opts out a filerdoes not have to reapply and pay additional fees tocontinue the application with that securities regulatoryauthority. It was felt a securities regulatory authorityshould not have to opt out of ERA just because all therelief was not required from that securities regulatoryauthority.

Response: The CSA agrees with the commentator and thepolicy has been clarified where required.

One commentator felt that the policy should be clear thatif asecurities regulatory authority opts out of ERA on anapplication that the filer should be able to deal with thesecurities regulatory authority directly on the application.

Response: The CSA agrees that this is the intention andthe policy has been clarified.

Part 10 of the Policy "Effect of Silence"

Five commentators suggested silence should be deemed tobe opting into the decision as opposed to opting out of adecision. One suggested this would be an incentive fornon-principal regulators to consider applications in atimely manner. One felt opting out is a serious matter andshould require a positive act. One commentator felt thereshould be a differentiation between when the decisionmaker is a securities regulatory authority or a regulator.Three commentators commented on the serious confusionof an unintentional opting out through silence. Onecommentator suggested there should be a specialprovision in the policy for any securities regulatoryauthority which has difficulties with this approach.

Response: The policy has been drafted to retain theconcept that silence is a deemed opting out of ERA for aparticular application and given the nature of the reliefgranted, a positive act indicating an exercise of discretionis felt to be the wisest course. MRRS decision documentsare not standardized like registration certificates orprospectus receipts. Each decision is quite unique and apositive indication that the decision reflects each non-principal regulator's decision is felt necessary. It appearsthat more harm could come from deeming a securitiesregulatory authority to have opted in through silence if thesecurities regulatory authority has not actually exercisedits discretion to opt in than from deeming a securitiesregulatory authority to have opted out through silence ifthe jurisdiction has actually exercised its discretion to optin. In the former case there is a decision made available tothe filer that represents a decision not actually made and inthe latter the securities regulatory authority could simplyissue its own decision to remedy the situation.

Testing has not shown this approach to be a problem.

Part 11 of the Policy "MRRS Decision Document"and "Schedule A" to the Policy

One commentator indicated decisions should not be sogeneric that they have no precedential value.

One commentator suggested decisions should make itclear what relief is being granted and more importantlywhat relief is not being granted by each securitiesregulatory authority. One commentator cautioned thatgeneric MRRS decisiondocuments might lead touncertainty and would like legislative references of allsecurities regulatory authorities involved in the MRRSdecision document. The commentator inquired as to howamendments of MRRS decision documents will be dealtwith especially if the amendment is required from only onesecurities regulatory authority. One commentator doesnot support the issuing of local decisions.

Response: The CSA has clarified the policy and thesample form of MRRS decision document in Schedule Ato deal with these comments. This has not been a problemduring testing ERA.

All securities regulatory authorities will make their owndecision on an application under ERA. There has beendiscussion about which securities regulatory authoritiesare required by their legislation to issue their own writtenform of the decision on an application under ERA.

The CVMQ will always issue its own written form of adecision on an application under ERA. The written formof the decision of the CVMQ on an application underERA will always have the same effective date and thesame terms and conditions as the MRRS decisiondocument on the application and the CVMQ will alwaysbe named in the MRRS decision document.

The securities regulatory authorities of all otherjurisdictions will not issue their own written form of adecision on an application under ERA and the filer canrely on the MRRS decision document as evidence of thedecisions of these securities regulatory authorities on theapplication.

The policy has been drafted to reflect that if exemptiverelief is needed for part of a transaction or matter theexemptive relief will be granted for the whole transactionor matter. Therefore, a filer will look to the MRRSdecision document for the exemptive relief for the wholetransaction or matter and will not rely upon any statutoryexemptions for portions of the transaction or matter.

The MRRS decision document will reflect the securitieslegislation and securities directions of the principalregulator on an application. This may mean that similartransactions or matters may be subject to different termsand conditions, for example different resale restrictions,depending on who acts as principal regulator on anapplication.

MRRS decision documents will use the words "decisionmaker" to address the fact that in some jurisdictions thedecision making authority rests with the staff and in otherswith the securities regulatory authority.

APPPENDIX C

To view a larger image of AppendixC

 

Appendix C