Securitisation Reforms Endanger Canada’s Exempt Market

Rick Fullerton

Oct 13, 2011

By Danielle Myles, International Financial Law Review (

Canadian regulators’ proposal for stricter securitisation standards similar to the U.S. could close parts of the private market, industry participants have warned.

The protectionist reforms outlined in the national instrument, proposed by the Canadian Securities Administrators (CSA) earlier this year, include enhanced reporting and disclosure standards, and narrower authorised investor classes.

“A large majority of private placements of long-term securitised products are heavily negotiated deals between sophisticated parties,” said Rick Fullerton, a banking and finance partner with Osler, Hoskin & Harcourt. “The additional cost and time delays that will be imposed by these requirements are not warranted in these circumstances,” he added.

A fundamental problem with the proposal is its concern with the originate-to-distribute model. While protectionism in this area is considered worthy, Canada has not seen the esoteric structures like those used in US securitisations.

“Those that issue securitised products in Canada have never been originate-to-distribute issuers; they do ultimately end up with some ‘skin in the game’,” Fullerton said.

Industry participants consider the CSA’s move as a disproportionate and misguided response to the collapse of the country’s $30 billion asset-backed commercial paper (ABCP) market at the onset of the financial crisis in August 2007.… “They seem to be targeting events of the past as opposed to the current state of the securitisation market. They are trying to protect investors from something that is unlikely to occur again in the Canadian securitisation market,” Fullerton said.