New statements from the Canadian Securities Administrators (CSA), the Investment Industry Regulatory Organization of Canada (IIROC), and the Office of the Superintendent of Financial Institutions (OSFI), all made April 9, address recent moves the regulators have made to help market participants manage challenges created by COVID-19.

The CSA has announced that all proposals currently out for comment will have their comment periods extended by 45 days. The CSA says it will also stop publishing any new proposals for comment until at least May 30, 2020.

CSA and IIROC monitor volatility and short-selling

In a separate joint announcement, issued by both the CSA and IIROC, both organizations say they will continue to monitor developments in other jurisdictions, including decisions by some countries to introduce short-selling restrictions. “IIROC’s data shows that short-selling activity continues to represent a low percentage of total market activity and remains consistent with short selling activity prior to the pandemic. There is no evidence that short-selling activity has been the driver of recent market declines,” they write.

“We recognize that many investment and risk management strategies rely on the ability to take both long and short positions,” they add. “These strategies benefit a wide range of retail and institutional investors both directly and indirectly. Any changes or restrictions to short-selling could negatively impact these benefits. These negative impacts were observed in research conducted after the 2008 short sale bans were implemented on financial sector securities.”

The CSA and IIROC go on to remind dealers to reasonably ensure that clients initiating short sales have the securities available for delivery. “The CSA and IIROC will continue to examine new information from market participants, including issuers and the public, regarding suspected instances of abusive short selling and other forms of market manipulation. If warranted, we will consider limiting short selling on particular securities.”

OSFI adjusts LICAT requirements

Further to its March 27 letter, meanwhile, OSFI has issued another letter to all federally-regulated insurers to announce further regulatory adjustments “to support the financial and operational resilience of federally regulated banks and insurance companies. The measures focus primarily on capital adequacy requirements for these institutions, as well as changes in their reporting requirements.”

Key measures announced for insurers, announced in its letter to all federally-regulated insurers, include changes to the Life Insurance Capital Adequacy Test (LICAT). OSFI says insurers granting payment deferrals due to COVID-19 will not be subject to increased capital requirements for related mortgages, loans and leases. Life, property and casualty mortgage insurers that approve premium payment deferrals to policy holders will also not be subject to increased capital requirements related to those deferred premiums. OSFI has also introduced a smoothing technique to the LICAT interest rate risk requirements to reduce increased and unwarranted volatility in required capital. Finally, the regulator will also grant extensions and will not apply late filing penalties on a case-by-case basis when institutions facing significant operational or technical challenges.