The National Instruments are a comprehensive set of rules and regulations that apply to the securities industry in Canada. They are issued by the Canadian Securities Administrators (CSA), an umbrella body representing each province and territory’s securities regulators. The National Instruments are intended to strengthen investor protection and promote efficient capital markets.
The National Instruments encompass a vast array of topics, such as the registration and regulation of market participants, the disclosure of information by issuers, the trading of securities, and the oversight of market activity. The following are examples of National Instruments:
National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations: This instrument sets out the registration requirements and exemptions for market participants, including investment dealers, advisers, and mutual fund dealers. In addition, it imposes ongoing obligations on registered firms, such as the duty to maintain specific documents and adhere to specific conduct standards. This instrument’s registration requirements are designed to ensure that market participants are qualified and competent to engage in their activities, and that they have the required systems, controls, and processes in place to protect investors. The exemptions from the registration requirement, on the other hand, are intended to facilitate access to the capital markets for certain categories of market participants, such as start-up companies and closely held issuers.
National Instrument 45-106 Prospectus and Registration Exemptions: This instrument sets out the exemptions from the prospectus requirement and the registration requirement for the distribution of securities. It streamlines the capital-raising process for businesses by exempting them from the Act’s full regulatory obligations. The purpose of the Act’s prospectus requirement is to ensure that investors obtain full and complete information about the securities being offered, including risks, rewards, and other material facts. The exemptions from the prospectus requirement are intended to allow companies to raise money more efficiently and cost-effectively, provided that the exemptions are applied appropriately and investor risks are reduced. The exemption from registration, on the other hand, is intended to provide companies access to the capital markets without having to comply with the Act’s complete registration requirements.
National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings: This instrument requires issuers to attest that their financial statements and accompanying disclosure documents are accurate and complete. It aims to improve the quality and reliability of issuers’ financial disclosure. The certification requirement is designed to hold issuers accountable for the accuracy and completeness of the information that they provide to investors. It requires the issuer’s chief executive officer and chief financial officer to personally certify to the financial statements’ accuracy and completeness. In addition, the issuer’s auditor is required to give an opinion on the issuer’s financial statements in order to provide investors with independent assurance that the financial statements have been presented accurately and in line with generally accepted accounting principles.
National Instrument 23-103 Electronic Trading and Order Handling: This instrument regulates the use of electronic trading systems and the handling of orders by market participants. It aims to foster fair and orderly markets and safeguard investors. The electronic trading provisions of this instrument are intended to ensure that electronic trading systems are managed fairly, transparently, and efficiently, and are subject to the appropriate controls and safeguards. The order handling features of this instrument are intended to guarantee that orders are handled fairly and in the investors’ best interests.
The CSA routinely reviews and revises the National Instruments in order to stay up with advances in the securities sector and adapt to shifting market conditions. Participants in the market are expected to be conversant with the National Instruments applicable to their activity and to ensure compliance with the pertinent regulations. The CSA may take enforcement action, such as fines, sanctions, and other penalties, for noncompliance with the National Instruments.
In addition to the National Instruments, the CSA also publishes guidance documents, staff notices, and other publications that give further information and interpretation on the National Instruments’ application. The purpose of these materials is to help market players in comprehending their obligations under the National Instruments and to promote compliance with the regulatory framework.
The CSA is also authorized to conduct reviews and investigations in order to enforce the regulatory framework and monitor compliance with the National Instruments. This includes the authority to compel market participants to disclose information and documents, to attend hearings, and to be examined under oath. In addition to administrative penalties such as fines and sanctions, the CSA can also refer matters to the courts for additional action.
The National Instruments are a comprehensive set of laws and regulations applicable to the Canadian securities industry. The CSA routinely reviews and revises them to ensure that they continue to promote fair and efficient capital markets and increase investor protection. Participants in the market are expected to be conversant with the National Instruments applicable to their activity and to ensure compliance with the pertinent regulations. In order to enforce the regulatory framework, the CSA has the jurisdiction to undertake evaluations and investigations, as well as apply administrative fines for noncompliance with the National Instruments.
