The Securities Commission granted an investment dealer (the Filer) exemptive relief from the prospectus requirement for the distribution of contracts for difference (CFDs), over-the-counter (OTC) foreign exchange (FX) contracts, and other similar OTC contracts to investors in certain Canadian jurisdictions. The Filer is registered as an investment dealer and a member of the Investment Industry Regulatory Organization of Canada (IIROC) and is also registered as a derivatives dealer under the Quebec Derivatives Act (QDA) in Quebec.
The relief allows the Filer to distribute OTC Contracts using a clear and plain language risk disclosure document instead of a prospectus. This document contains risk disclosure substantially similar to that required for recognized options under OSC Rule 91-502 and the regime for OTC derivatives contemplated by the unadopted OSC Rule 91-504, as well as the Quebec Derivatives Act.
The relief is consistent with OSC Staff Notice 91-702, which provides guidance on the offering of CFDs and FX contracts to investors in Ontario. The relief is subject to terms and conditions, including a four-year sunset clause, and is contingent upon the Filer’s registration as an investment dealer, membership in IIROC, and compliance with IIROC Rules and Acceptable Practices.
The decision is underpinned by various legislative provisions and rules, including the Securities Act (Ontario), OSC Rule 91-502, OSC Rule 91-503, and the proposed but not adopted OSC Rule 91-504. The Filer’s previous exemptive relief, which was set to expire, has been extended for up to four years with similar terms and conditions. The Filer will not offer OTC Contracts to retail investors in Alberta due to public interest concerns expressed by the Alberta Securities Commission.