The Saskatchewan Securities Commission recently updated regulations under The Securities Act, 1988, to align with Multilateral Instrument (MI) 93-101, which focuses on business conduct in the derivatives market. These regulatory changes, implemented through the Commission Order issued on August 20, 2024, and the Minister’s Order from September 24, 2024, aim to strengthen oversight of derivatives transactions. The amendments emphasize fair dealing, compliance, and risk management standards, primarily impacting derivatives advisors, dealers, and associated parties.

To clarify compliance expectations, the regulations introduce key definitions for stakeholders involved in derivatives. A “derivatives firm” refers to entities acting as advisors or dealers in derivatives, while a “derivatives party” describes entities or individuals who interact with these firms for advice or transactions. The instrument further distinguishes between “eligible” and “non-eligible” derivatives parties, identifying eligible parties as financial institutions, certain government entities, and large corporations with assets exceeding $25 million. Additionally, “commercial hedgers” are businesses using derivatives to hedge risk, such as managing assets or liabilities, rather than for speculative purposes.

MI 93-101 applies to derivatives firms, advisors, and individual derivatives dealers, regardless of their registration status, covering transactions across Canadian jurisdictions. It includes special provisions for short-term foreign exchange derivatives managed by dealers handling high transaction volumes. Certain exemptions are provided for transactions involving affiliated entities, government bodies, and organizations like the Bank of Canada, recognizing their specific roles in financial markets.

Under MI 93-101, derivatives firms must adhere to obligations centered on fair dealing, conflict of interest management, and complaint handling. Firms are expected to establish strong compliance and record-keeping practices, especially when transacting with or advising derivatives parties. Additionally, firms must segregate client assets to ensure transparency and protect client interests. Exemptions are available for transactions involving “eligible derivatives parties,” such as government agencies, financial institutions, and large commercial entities. These exemptions reduce compliance burdens when firms deal with sophisticated parties capable of independently managing derivatives-related risks. Eligible individuals or commercial hedgers may waive certain protections through a written waiver, though essential obligations, transaction transparency, and asset segregation requirements remain in effect.

Special conditions apply to short-term foreign exchange derivatives under MI 93-101. Only specific provisions, including fair dealing, conflict management, and compliance requirements, apply to these derivatives, ensuring baseline protections for derivatives parties engaged in frequent, high-value transactions within Canada’s financial institutions. These standards are especially relevant when transactions surpass a notional monthly value of $500 billion.

Saskatchewan (78/2023) October 4, 2024