Market Regulation Services Inc. says provincial regulators have approved a series of amendments to trading rules dealing with manipulative and deceptive trading.

Effective Friday, the Alberta, B.C., Manitoba and Ontario Securities Commissions and Quebec’s Autorité des marchés financiers approved a series of revised amendments to the Universal Market Integrity Rules.

The changes will vary the requirements related to manipulative and deceptive activities by:

  • modifying the language to achieve greater clarity and consistency;
  • providing for consistency with the requirements related to manipulative and deceptive activities under provincial trading rules;
  • confirming the “gatekeeper” obligations of market participants and ‘access persons’;
  • introducing a specific requirement to report to RS significant violations of the rules, and;
  • eliminating potential gaps that may be caused by the current rule, which combines both manipulative “effects” and “methods” in a single requirement.



RS published the initial version of the proposed amendments in a notice issued on Jan. 30, 2004. On Aug. 13, 2004, RS published a revised version of the proposed amendments. Based on comments received on the August notice, RS has made a number of changes.

For example, it deleted a reference to “generally accepted industry practice” and will rely instead on a formulation based on the common law. The proposed provision prohibiting a trade between accounts under the direction or control of the same person (other than an internal cross) has been moved so that such a trade would only be prohibited if the trade creates or could reasonably be expected to create a false or misleading appearance of trading activity or interest or an artificial price.

Also, part of the policy has been expanded to confirm that a firm will be able to rely on information contained on a “New Client Application Form” or similar know-your-client record provided the information has been reviewed periodically in accordance with requirements of securities legislation or a self-regulatory entity. The amendments also deleted a number of the rules for which a report of a violation of UMIR would be required; among other things.

As a result of the approval of the amendments, firms will have to review and revise their policies and procedures to specifically address the introduction of the gatekeeper obligation and the obligation to conduct internal reviews and investigations into possible violations of UMIR, to maintain records of all reviews and investigations and to report findings of potential violations; and, certain identified fact situations where manipulative and deceptive activities are most likely to occur.

‘Access persons’ are required to adopt policies and procedures to accommodate the introduction of a more limited gatekeeper obligation. Trades between accounts under the direction or control of the same person may not be completed on a marketplace if the purpose of the trade is to create a false or misleading appearance of investor interest or trading activity or to create an artificial price.

A new rule specifically prohibits the entry of an order or the execution of a trade in circumstances where the participant or access person knew or ought to have known that the order or trade would not be in compliance with various regulatory requirements.