Canadian securities regulators are proposing a series of rule changes that would bring their oversight of credit rating agencies in line with the requirements adopted by global regulators.
The Canadian Securities Administrators (CSA) published on Thursday a set of proposed rule changes, with comments due by Oct. 4. The proposals are intended to align the Canadian regime with the latest version of the code of conduct issued by the International Organization of Securities Commissions (IOSCO), and new European Union (EU) requirements.
“If the proposed amendments relating to EU equivalency and the IOSCO code revision are enacted, investors may benefit from the additional safeguards … that [regulated rating agencies] will be required to follow,” the CSA says in its notice setting out the proposed changes.
In particular, the CSA highlights additional measures to protect the integrity of the rating process, ensure that investors and issuers are treated fairly, and safeguard confidential material information provided by issuers.
“We believe it is important that Canadian rules reflect the high standards of the IOSCO code,” said Louis Morisset, chair of the CSA and president and CEO of the Autorité des marchés financiers (AMF).
The CSA is also seeking revisions to its rules to bring its requirements in line with the EU rules. The goal is to ensure that the EU continues to recognize the Canadian regime as “equivalent”, which would allow Canadian ratings to continue to be used in Europe after the new EU requirements come into effect on June 1, 2018.
“Continued EU equivalency is important for Canadian issuers that pay for such a credit rating and sell their rated securities to EU investors, investment dealers that structure cross-border transactions involving rated securities of Canadian issuers on the basis of EU equivalency, and institutional investors that use such a credit rating for regulatory purposes in the EU,” it says.
The CSA notes that certain rating agencies have already revised their policies and procedures to comply with the latest edition of the IOSCO code, and the EU rules.
At the same time, the CSA is also proposing amendments to certain rules designed to recognize the credit ratings of Kroll Bond Rating Agency, Inc. for issuers of asset-backed securities. “At this time, CSA staff do not anticipate proposing that Kroll be designated as a [regulated rating agency] for purposes of other credit rating provisions in securities rules and policies,” it says.