Focus On
Philippe Tardif, Borden Ladner Gervais LLP

Regulators came together on co-ordinated response to COVID-19 financial challenges, lawyer says

Wednesday, May 27, 2020 @ 3:06 PM | By Ian Burns

An international association of legal professionals has released a report analyzing the responses by securities administrators across the globe to the COVID-19 pandemic, and observers are noting the Canadian response has shown a significant amount of co-operation among the provinces and territories to ensure the market performs properly as it navigates largely untested waters.

The International Bar Association (IBA)’s securities law committee survey is meant to assist lawyers as they advise their clients when dealing with the markets. Canada, unlike many other nations, does not have a national securities commission, but Philippe Tardif of Borden Ladner Gervais, who sits on the committee, noted the provincial and territorial bodies, under the guidance of the Canadian Securities Administrators (CSA) umbrella group, have largely been on the same page in terms of their response.

Philippe Tardif, Borden Ladner Gervais

“The focus was really to ensure none of the market participants defaulted simply because of the circumstances triggered by the pandemic, such as working remotely, auditors not being as available to conduct audits and ensuring liquidity of mutual funds,” he said. “And of course, there were the restrictions regarding annual general meetings and shareholders meetings. The regulators were really good at anticipating the concerns and providing relief.”

That relief involved regulators working together to extend deadlines, provide additional time for filings and giving guidance on how to conduct digital AGMs and shareholder meetings. Tardif said there was a feeling among some that the COVID-19 pandemic “had all the markings” of a crisis such as the 2008 financial crisis.

“I would say the response by the CSA is a good example of co-operation among members to really act in the best interests of the market to really co-ordinate their response,” he said. “It is not always the case where the provinces get along — sometimes they have differences on policy issues, but here they really did come together and provided a co-ordinated response.”

And a number of regulatory organizations, such as the Investment Industry Regulatory Association of Canada (IIROC), which oversees investment dealers, and the Mutual Fund Dealers Association (MFDA), each came up with its own response where it indicated it was willing to grant exemptions on a case-by-case basis to make sure that dealers are able to meet their filing deadlines. Tardif noted what was important for market participants was knowing securities commissions were attentive and willing to entertain case-by-case relief.

“Typically, when you need an exemption from a securities commission process that takes weeks, sometimes months, but here there was a willingness to act in days if the issue merited a response,” he said. “That was the case for relief provided to certain mutual funds and there are also one-off applications that were made to address particular issues. So, the willingness to address the issues is probably what the market needed to know is that the regulators were on their side.”

Eric Brousseau, Ross Barristers

Eric Brousseau of Ross Barristers said the response by markets to COVID-19 was largely “the show must go on.” He noted markets remained open and trading wasn’t halted even during the market decline of late March and early April of this year.

“A lot of trading is done algorithmically and online anyway, but they do face a number of challenges — they are trying to advise reporting issuers and companies how to meet their obligations in what is an unprecedented situation,” he said. “And they are obviously trying to keep the public safe too because there have been reports of coronavirus-related scams.”

Brousseau said the function of the CSA is always to co-ordinate among the 13 provincial and territorial jurisdictions in Canada but noted “in times like these it is sort of more important to make sure everyone is one the same page going through a storm like this.”

“I think the issue of co-ordination has become more front and centre in an era where there was a federal attempt to float a trial balloon for a national securities regulator,” he said. “So, the need for a unified national response is kind of out there, and of course this particular situation calls for it so that market participants and reporting issuers aren’t taking advantage of differences between regulatory regimes to game the system.”

Tardif said he thinks market participants realize the response by regulators is going to be short term, so there have been no real concerns raised that any relaxation of reporting deadlines would impair investor protection in any way. But he said, although the regulatory environment concerning filing and disclosure requirements will eventually return to normal, what the market will want, and what regulators are likely going to try to do, is promote greater disclosure by issuers about their outlook for the future.

“The market and investors are going to say we can’t guess what the future will bring based on historical results because we’ve had a paradigm shift in so many industries and business measures, so what we really want is for business to try and give us a longer-term outlook,” he said. “You have seen Air Canada come out saying how long they think this is going to last is going to be measured in years, and not months. I think that it is not going to be easy for companies to predict the impact of the pandemic and possible recession on their businesses, but I think the regulators have started to guide them and encourage them to do more of that.”

And Brousseau said he thinks the biggest issue facing market participants will be dealing with the speed at which changes have come to every sector of the economy over the past few months.

“There are continuous disclosure obligations, and ordinarily it is cumbersome enough to keep up with them,” he said. “But markets and just the day-to-day reality of the world changing very frequently and at a very fast pace, and there is a lot of volatility and unpredictability and the prospect of government interventions having major impacts on industries or economies. It has been hard for reporting issuers to meet those continuous disclosure obligations and file material change reports in a timely manner — I think there is a lot of catching up to do.”

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