On June 15, 2023, the Canadian Securities Administrators (“CSA”) announced the extension of relief from the exception reporting requirement (“Exception Reporting Requirement”) in National Instrument 24-101 Institutional Trade Matching and Settlement (“NI 24-101”) for registered dealers and advisers. The extension aligns with ongoing initiatives to shift the Canadian investment industry’s settlement cycle to one day after the date of a trade (“T+1”).

Effective July 2, 2023, the CSA extended relief from the Exception Reporting Requirement (the “2023 Moratorium”). The previous, three-year moratorium expired on July 1, 2023.

The 2023 Moratorium is expected to expire with the coming into force of proposed amendments to NI 24-101 (the “Proposed Amendments”), published last December, which would permanently eliminate the Exception Reporting Requirement. The Proposed Amendments are intended to support the shortening of Canada’s standard settlement cycle for equity and long-term debt market trades from two days after the date of a trade (“T+2”) to T+1. Such changes would harmonize Canada’s settlement cycle with that of the U.S., where new Securities and Exchange Commission rules will shorten the settlement cycle to T+1 by May 28, 2024. If approved, the Proposed Amendments will likely come into force on a date that corresponds with Canada’s transition to T+1, currently expected to be May 27, 2024.

The 2023 Moratorium is the most recent of several developments to facilitate Canada’s transition to T+1. This spring, the Canadian Investment Regulatory Organization (“CIRO”) (formerly, the New Self-Regulatory Organization of Canada) proposed related amendments to the Universal Market Integrity Rules and the Investment Dealer and Partially Consolidated Rules. Along with the Proposed Amendments, the CSA had also published, last December, a staff notice in which they did not propose amending National Instrument 81-102 Investment Funds to shorten the settlement cycle for mutual funds, but instead suggested that funds settle on T+1 voluntarily.

Alternatively, if the Proposed Amendments do not come into force within the next 18 months (i.e., by January 2, 2025), the 2023 Moratorium will expire, unless extended further.

We continue to monitor these important developments and will keep our clients and readers apprised as they unfold. For more information, please review CSA Notice Regarding Coordinated Blanket Order 24-930 Exemption from Certain Filing Requirements of National Instrument 24-101 Institutional Trade Matching and Settlement.