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John W. Carson
Compliax Consulting Inc.
July 23, 2010

Prepared for:
Canadian Foundation for Advancement of Investor Rights (FAIR Canada)
161 Bay Street, 27th Floor
Toronto, ON
M5J 2S1

Acknowledgement
The author would like to thank The Toronto Stock Exchange (TSX) for its cooperation in providing information for purposes of this Report.

Managing Conflicts of Interest in TSX Listed Company Regulation

1. Introduction
1.1 Background to Report
FAIR Canada has repeatedly expressed concerns about the inherent conflict of interest
between the “for profit” status of the TSX, and the TSX acting as a regulator of listed
companies where it has a responsibility to act in the public interest. FAIR Canada has
advocated for regulators to address this conflict of interest in a way that is consistent
with international standards.
Recently the Ontario Legislature’s Standing Committee on Government Agencies called
on the Ontario Securities Commission to “review the potential for conflicts of interest
between the regulatory and commercial functions at the TSX and [that it] take the steps
necessary to address any problems identified.”
FAIR Canada commissioned this review of TSX’s management of conflicts of interest in
the Exchange’s role as a regulator of listed companies. This Report reviews the conflicts
of interest that arise when exchanges that are commercial businesses also act as
regulators and supervisors of issuers. The Report sets out several policy options that
would improve TSX’s management of conflicts of interest in regulating listed issuers.
The purpose of the Report is not to make specific recommendations, but to stimulate
debate on the issue with a view to encouraging the TSX and its supervising regulators to
address the issue.
This Report briefly outlines how the conflicts in listing regulation have been addressed in
several important developed markets, including the US (both NYSE and Nasdaq), the UK,
Scandinavia, Australia, Japan and Hong Kong. The exchanges reviewed are all self‐listed,
commercial enterprises with strong listing businesses.
1.2 Conclusions
The listings business function is a major commercial function of an exchange. The
listings regulation function is an important regulatory or standard‐setting role that has a
significant impact on market integrity and investor protection.
The Report finds that the seven other major exchanges reviewed for this Report have
addressed the conflicts of interest that arise between their listings business operations
and listings regulation responsibilities by implementing specific and sound mechanisms
to manage those conflicts. The responses vary, and include a combination of changes in
corporate governance, organizational structure, corporate policies and internal
procedures. The three main approaches used to address conflicts of interest in listings
regulation are:
Managing Conflicts of Interest in TSX Listed Company Regulation

1) The exchange establishes a regulation subsidiary with independent governance
to perform listings regulation.
2) The exchange establishes a listings regulation department that is separate from
the business operations of the Exchange (including listings business
development) to perform listings regulation.
3) The statutory regulator performs listings regulation.
The TSX is the only exchange among this group that has not implemented specific
measures to manage its listings conflicts (other than direct conflicts involved in its own
self‐listing). The TSX carries out listings regulation as part of a unified Listings
Department that is responsible for both listings regulation and the listings business.
This Report advocates that the TSX implement measures to better manage those
conflicts, and sets out several alternative approaches that the Exchange might take.
1.3 Terminology
Terms
“Listings” refers to both the business of listing the securities of issuers on an exchange,
and the related regulatory functions of setting and administering the requirements to
qualify for listing and the administration of continued listing rules. Listings includes the
function of “admission to trading” at exchanges that use that term.
“Listings regulation” refers to the regulatory responsibilities of an exchange related to
Listings, including the functions of setting and administering:
• the requirements to qualify for initial listing
• the continuing requirements to remain listed
• the continued listing rules that listed issuers must comply with.
“Continued listing rules” refers the provisions of the listing rules on matters such as
disclosure, corporate governance, additional issues of securities, corporate actions and
shareholder rights that listed issuers must comply with. These are also referred to as
“ongoing obligations” by some exchanges.
“Market regulation” refers to the regulation of trading activity, and includes market
conduct rules and market surveillance.
“Member regulation” refers to the regulation of investment dealers’ operations,
business conduct, dealings with clients and financial compliance.
Abbreviations
In this Report the following abbreviations are used:
ASX – Australian Securities Exchange
Managing Conflicts of Interest in TSX Listed Company Regulation
CSA – Canadian Securities Administrators
HKEx – Hong Kong Exchanges and Clearing Inc.
LSE – London Stock Exchange
MX – Montreal Exchange (a unit of TMX Group)
Nasdaq – The Nasdaq Stock Market
NYSE – New York Stock Exchange
OSC – Ontario Securities Commission
RS – Market Regulation Services (merged into IIROC in 2007)
SEHK – Stock Exchange of Hong Kong (a unit of HKEx)
TSE – Tokyo Stock Exchange
TSX – Toronto Stock Exchange (a unit of TMX Group)
TSXV – TSX Venture Exchange (a unit of TMX Group)
TSX Group – The name of the holding company of TSX and other operating units at the
time of self‐listing.
TMX Group – The current name of the holding company for operating units, including
the TSX, TSXV and MX.
Footnotes
See the References section at the end of the Report for citation details on source
documents referred to in the footnotes.
Managing Conflicts of Interest in TSX Listed Company Regulation

2. Exchanges’ Roles in Listings and Issuer Regulation
It is vital to differentiate the twin pillars of exchanges’ listings functions for purposes of
this Report. Exchanges’ listings businesses are significant sources of revenue. In many
cases exchanges face intensive competition for listings business. At the same time,
exchanges have a responsibility to administer their listings rules, including both detailed
requirements to qualify for listing on an exchange and a wide range of rules or “ongoing
obligations” that an issuer must comply with once it is listed.
The listings business function is a major commercial function of an exchange. The
listings regulation function is an important regulatory or standard‐setting role that has a
significant impact on market integrity and investor protection.
2.1 Listings Business Services
Listing is a major business line for most traditional exchanges. As the IOSCO Technical
Committee has stated, “The range and quality of listings and other services on an
exchange and the ability of an exchange to attract and retain quality listings is critical in
determining the level of total operating revenues”.1
However, from an international perspective, exchanges’ revenues from listings services
are declining. According to the World Federation of Exchanges (WFE), listings revenues
fell from 18% of total revenues in 1995 to only 6% in 2008.2 As pointed out by Lee
(2010), competition for trading services has reduced the market share in trading of the
“primary markets”. (NYSE and TSX are examples of primary markets within their
national markets.) As the market share of the traditional exchanges declines, the
justification for charging high listing fees is reduced because the listing exchanges
cannot guarantee that they will provide the highest liquidity in their listed securities.3
Nevertheless, the listings business is obviously vital to the trading services business,
especially in markets where exchanges do not trade products without listing them.
1 IOSCO (2001)
2 WFE (2009) Includes derivatives and other non‐cash securities revenues.
3 Ruben Lee (2010)
Managing Conflicts of Interest in TSX Listed Company Regulation

Source: WFE Cost and Revenue Survey 2008, p. 35
Annual listings fees accounted for 58% of listings revenues and initial (new) listings fees
for 28%, in large part due to reduced primary market activity in 2008 compared to 2007.
2.2 Listings Regulation
In a large majority of markets, exchanges are responsible for two major listing regulation
roles:
1) Determining whether an issuer qualifies to be listed based on exchange
listing requirements; and
2) Applying a range of rules and requirements on listed companies in areas
such as disclosure, protection of minority shareholders’ interests, and
corporate governance.
The IOSCO Technical Committee has specifically referred to listings as a “regulatory
function”.4 Others see listing regulation as akin to a quality control function. Steil has
written that “Listing is fundamentally a quality control function” comparable to that of
ratings in the bond market.5 Either way, most exchanges and their supervising
regulators treat the administration of listing requirements and ongoing obligations of
listed issuers as a self‐regulatory function. Usually listings regulation is grouped with
4 IOSCO (2001), p. 4. The Technical Committee Report asked, “What conflicts of interest are
created or increased where a for‐profit entity also performs the regulatory functions that an
exchange might have, especially primary market regulation (listing and admission of companies),
secondary market regulation (trading rules) and member regulation?”
5 Steil (2002) at page 72
Managing Conflicts of Interest in TSX Listed Company Regulation
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other SRO functions such as market regulation. This is in spite of the fact that listings is
not self‐regulatory in nature because listed companies are not regulating themselves
through the governance of the exchange, as member brokers traditionally did. Listings
regulation is a form of private regulation by contract carried out by exchanges. Issuers
agree to comply with exchange rules as a condition of listing.
The reason that exchanges treat listings regulation this way is that listings requirements
and rules are undeniably regulatory in nature. New listings requirements must be met
for a listing to be approved, and applications are subject to rigorous review. Ongoing
obligations or rules that listed issuers must comply with are akin to securities
regulations. They typically include disclosure requirements, investor protection
requirements, transaction approval requirements and so on. Exchanges also monitor
issuers’ compliance with listing rules. So exchanges that adopt such rules and supervise
companies’ compliance with them are performing a regulatory function.
Listings regulation is an important part of an exchange’s role in establishing standards to
support the integrity of their markets. Statutory regulators, investors, dealers and other
market participants rely on exchanges’ performance of these roles.
In discussing listings regulation, it is important to recognize the difference between the
functions of 1) approving an issuer’s prospectus and the right to sell securities to the
public and 2) the listing or “admission to trading” of an issuer’s securities on an
exchange.6 In the great majority of markets these functions are separate. Regulators
generally perform the former function and exchanges perform the latter.
The precise division of responsibilities for listings functions between the statutory
regulator and the exchange varies around the world, especially for ongoing obligations
of listed issuers – regulations that a listed issuer must comply with as a public company.
In some countries, exchanges traditionally performed the job of approving prospectuses
too, but this function has migrated to regulators around the world. The regulator sets
the main disclosure standards for issuers in most countries as well, although exchanges
may impose additional requirements and often have specific rules on publication of
material news (continuous disclosure). Many exchanges also retain an important in role
in setting corporate governance standards for listed issuers.
According to the WFE Regulation of Markets Survey in 2004, 79% of respondent
exchanges established quantitative listing standards, and 69% established corporate
governance standards. 86% monitored compliance such standards, and a large number
6 Listing is referred to as “admission to trading” standards in the EU and some other
jurisdictions, to differentiate the exchange’s standards from the regulator’s requirements to
authorize public trading of a security.
Managing Conflicts of Interest in TSX Listed Company Regulation
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of exchanges enforced such standards.7 Government regulators often shared these
responsibilities with exchanges, as illustrated by the chart below.
Source: WFE Regulation of Markets Survey 2004, p. 11
In addition, at the time of the survey, 77% of responding exchanges established and
monitored compliance with some disclosure standards, including annual and periodic
disclosure, although in many cases the function was shared with statutory regulators.
Even in the UK, where the FSA’s “Listing Authority” determines whether an issuer
qualifies for the “official list”, the LSE still has procedures for admission to trading on the
Exchange that must be met.
In Europe, European Commission regulations transferred many of exchanges’ traditional
responsibilities in the area of listings regulation and disclosure by issuers to statutory
regulators (referred to as “competent authorities”).8 The Markets in Financial
Instruments Directive (MiFID) requires that exchanges (referred to as “regulated
markets” in the MiFID) have clear and transparent rules on the admission of financial
instruments to trading. It also requires a regulated market to establish and maintain
effective arrangements to verify that issuers comply with their admission to trading
requirements and their disclosure requirements. As a result, an exchange may impose
7 WFE (2005)
8 Specifically, the Prospectus Directive and the Transparency Directive.
Managing Conflicts of Interest in TSX Listed Company Regulation
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listings and disclosure rules that exceed the requirements mandated by the EU
directives. However, this is an option that many do not use.
In spite of a general global trend towards reduced SRO roles at exchanges, exchanges
want to retain control over listings regulation. The main reason for this is obviously that
listings is an important business, but the UK model shows that listings revenues are not
necessarily tied to performance of listings regulation. However most exchanges believe
that many aspects of issuer regulation are important to the competitive positioning of
their listings business, to controlling the attributes of their listings services, as well as to
maintaining market integrity and thus the exchange’s reputation.
For example, the quality of an exchange’s stock list, and therefore the positioning of its
listings business, is largely defined through minimum standards for initial and continued
listing. The continued listings rules on subjects like disclosure, corporate governance,
shareholder rights and corporate actions protect investors and market integrity. An
exchange can differentiate itself from competing markets by setting higher regulatory
standards for listings.
Listings requirements vary widely across different markets. Of course standards are the
differentiating factor between TMX’s two equities exchanges, the TSX and TSXV. Many
countries have junior markets that occupy a distinct market segment. The NYSE has
historically differentiated itself from both domestic and international competition by
imposing much higher listings standards. These standards are clearly observable by
market participants, including investors, and are an important part of an exchange’s
“brand”.
Managing Conflicts of Interest in TSX Listed Company Regulation
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3. TSX Listings Role and Functions
3.1 Regulatory Status and Supervision of TSX
TSX’s Self‐Regulatory Responsibilities
As described in section 6.1, the TSX transferred or outsourced its member regulation
and market regulation functions in 1997 and 2002 respectively. IIROC now performs
both functions. However, under the Ontario Securities Act the TSX remains responsible
for all regulatory functions that are not being performed by IIROC, according to the
terms of its recognition order issued by the OSC.9 The TSX must also monitor IIROC’s
performance of market regulation functions for TSX under their regulation services
agreement.
Oversight of Exchanges
Exchanges and similar institutions, such as SROs and clearing agencies, are licensed and
subject to ongoing supervision by regulators because they provide essential
infrastructure for the operations of the capital markets. In most cases it is vital for a
market participant – whether an investor, issuer or intermediary – to obtain access to
this infrastructure in order to participate in the market. The fact that many exchanges
are de facto monopolies in their national markets reinforces the importance of licensing
and supervision.
IOSCO stated on the role of exchanges:
Most jurisdictions regard the proper functioning of their exchanges as critical to
the efficient operation of their capital markets. They therefore see a strong
public interest in exchanges operating their markets in a way that promotes
market efficiency and commands market confidence… The fair and efficient
functioning of an exchange is of significant benefit to the public. The efficiency of
the secondary market in providing liquidity and accurate price discovery
facilitates efficient raising of capital for commercial enterprises, benefiting both
the wider corporate sector and the economy as a whole. The failure of an
exchange to perform its regulatory functions properly will have a similarly wide
impact.10
IOSCO has formally recognized the importance of supervision – also referred to as
oversight – of all types of exchanges and similar institutions in its Principles of Securities
Regulation.11 IOSCO Principle 26 states, “There should be ongoing regulatory
9 Paragraph 13 (d) of the amended recognition order
10 IOSCO (2006)
11 IOSCO Objectives and Principles of Securities Regulation (2003)
Managing Conflicts of Interest in TSX Listed Company Regulation
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supervision of exchanges and trading systems which should aim to ensure that the
integrity of trading is maintained through fair and equitable rules that strike an
appropriate balance between the demands of different market participants”. Principle 7
states: “SROs should be subject to oversight of the regulator and should observe
standards of fairness and confidentiality when exercising powers and responsibilities”.
Securities regulators supervise exchanges primarily for the purpose of ensuring that
they meet their “public interest responsibilities”. Two significant objectives of oversight
are to ensure that an exchange operates in a neutral manner and does not create
unreasonable barriers to access to its services, including listings services.
Oversight of TSX
The OSC has the statutory power to recognize stock exchanges and register commodity
futures exchanges. Recognition is akin to a license that permits an exchange to
operate, and sets out the terms and conditions of its operation. The OSC has issued
several recognition orders to the TSX over the last 10 years which reflect changes in the
terms and conditions of operation due to changes in the TSX’s corporate status,
beginning with its demutualization.
In Canada, all organizations considered to be SROs have a responsibility to act in the
“public interest”. The Ontario Securities Act requires that SROs must regulate “with a
view to promoting the protection of investors and the public interest”.12 For example,
the new recognition order that the OSC issued to approve TSX’s demutualization
requires the Exchange to ensure at least half of its directors are independent of member
dealers “…in recognition that the protection of the public interest is a primary goal of
the TSX”.
TSX’s recognition order was revised in 2002 when the OSC approved the self‐listing of
TSX Group shares on the Exchange. The revised order added several conditions to
address the conflicts of interest involved in self‐listing, which are discussed in section 6.4
below.
3.2 TSX Listings Business
The TMX Group dominates the listings business in Canada through its TSX and TSXV
exchanges. Currently it has only one minor competitor, which focuses mainly on
competing with TSXV in the junior issuer market. Alpha Group, the operator of an ATS
that competes for trading in TMX Group stocks, has announced a proposed new
exchange that will compete for listings business in the near future. But at the present
time very little competition exists for listings services in Canada. However, TSX has
12 Clearing agencies and stock exchanges are not SROs as defined in the Act but in practice the
OSC’s recognition orders for these entities impose the same public interest responsibilities on
them.
Managing Conflicts of Interest in TSX Listed Company Regulation
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faced major competition from US exchanges for listings for decades and a large number
of TSX’s biggest listed companies are also listed on the NYSE or Nasdaq. In addition,
stronger competition from US OTC markets for listing of junior issuers has emerged
recently.
TSX had 1,465 listed issuers with 2,014 listed securities as of March 2010. The total
market capitalization of these issues was $1.845 trillion.13 In 2009 total financings raised
through the TSX were $60 billion, a new record.
The TSX’s listing business is of major importance to the TMX Group, as it accounts for a
much higher share of the company’s revenue than the global average. The TMX Group
website promotes its status as one of the biggest listing businesses in the world: It is the
2nd largest exchange group by number of listed companies, and the 8th largest by
domestic market cap.
In 2009 TMX reported that issuer services accounted for 26% of total revenue or $ 142.1
million. This number includes both the TSX and TSXV. TSX listings fees accounted for
68% of total, TSXV fees 24% and other services 8%.14 TSX has three main sources of
listings revenues: 1) initial listings fees for newly‐listed issuers, 2) additional listings fees
for securities issued by existing listed companies, and 3) annual sustaining fees that are
paid by all listed issuers to remain listed.
3.3 TSX Listings Regulation
The CSA relies extensively on self‐regulation by the TSX, other exchanges, IIROC and
similar bodies. As the CSA described in its 2006 report on the oversight of SROs:15
The Canadian regulatory regime employs government regulation together with
self‐regulatory organizations and market infrastructure entities such as
exchanges and clearing agencies to protect investors and to promote fair,
efficient and competitive capital markets. Canadian securities legislation enables
securities commissions to recognize self‐regulatory organizations, exchanges and
clearing agencies, and encourages reliance on SROs.
TSX’s listings regulation plays a significant part in regulating the quality of equity
securities and certain other types of securities that investment dealers sell to investors.
The TSX’s continued listings rules also play an important role in protecting investors.
13 TMX Group website
14 TMX Group 2009 Annual Report, page 20. TMX subsidiary The Equicom Group Inc. provides
other issuer services – “a leading provider of investor relations and related corporate
communication services to public companies”.
15 CSA – Review Of Oversight Of Self‐Regulatory Organizations And Market Infrastructure Entities
Report of the CSA SRO Oversight Project Committee, December 2006
Managing Conflicts of Interest in TSX Listed Company Regulation
15
TSX’s listings rules extend well beyond setting requirements to obtain a listing; a range
of rules apply to subjects such as disclosure, notices to shareholders, issuance of
securities and changes in capital, stock options and so on. TSX listing rules impose
requirements in several areas that US exchanges do not regulate. TSX listings regulation
responsibilities are quite extensive, in spite of the expansion of the CSA’s role in
regulating listed issuers in the last two decades, and the CSA’s assumption of
responsibility for the corporate governance guidelines in 2005.
TSX listings rules cover the following matters:16
1) Requirements to qualify for initial listing on the Exchange, covering minimum
standards for earnings, assets, working capital, operating history, corporate
governance, distribution of securities, etc.
2) Continued listings requirements that listed issuers must meet on an ongoing
basis to remain listed on the Exchange.
3) Filing requirements with TSX and notice to shareholders requirements for
matters such as corporate disclosure, shareholder meetings, dividends, etc.
These rules address certain rights of shareholders.
4) Timely disclosure policy requiring prompt announcement of material news.
5) Continued listings rules applicable to additional issues of existing listed securities
by a listed issuer and other changes in its capital structure. The rules address
listing of the new securities (if applicable), and impose specific requirements for
additional issues by prospectus, private placements, warrants, convertible
securities and so on. These rules cover approval of new issues of securities by
TSX. The rules also require the approval of minority shareholders in certain
cases, including:
• Issuances to acquire public companies if existing shareholders’ equity would
be diluted by over 25%;
• Change of control transactions that are based on issuances of securities from
treasury;
• Private placements if insiders may receive over 10% of outstanding shares, or
if price discounts exceed specified levels.
6) Continued listings rules to protect the rights and interests of existing
shareholders. For example, “disinterested” shareholders must approve
acquisitions if insiders may receive more than 10% of the outstanding securities;
and security‐based compensation arrangements if more than 10% may be
16 See the TSX Company Manual, which contains the TSX listing rules.
Managing Conflicts of Interest in TSX Listed Company Regulation
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issuable to insiders. Special rules apply to early‐stage or more junior issuers
(“non‐exempt issuers”) on transactions involving insiders.
7) Rules on issuances of, and disclosure requirements for, restricted voting shares.
8) Rules applicable to other transactions in listed securities by control persons,
insiders and the issuer itself, including issuer bids and sales from control
positions.
9) Rules on security‐based compensation plans, such as stock options, including the
structure of plans, disclosure, and shareholder approval.
10) Disclosure of compliance with CSA corporate governance guidelines.
The TSX does not employ formal disciplinary actions with hearing procedures to enforce
its listings rules, along the lines of the enforcement procedures it regularly used in the
past to enforce its rules against member investment dealer firms. It does not have the
power to fine listed issuers or their officers and directors. However, under the terms of
TSX’s recognition order, the OSC requires the TSX to ensure that “… its listed issuers are
appropriately sanctioned for violations of the Rules”. In addition, the Exchange must
notify the Commission of any violations of securities legislation of which it becomes
aware.
The TSX has advised that it uses a number of administrative remedies to ensure
compliance with its listings rules. These remedies include:
• requiring an issuer to make a news release or to clarify a news release
• mandatory attendance at TSX workshops on disclosure practices
• requiring the adoption of disclosure policies or the establishment of a disclosure
committee
• prohibiting or restricting individuals from being involved with TSX issuers
• requiring changes to the board of directors or to the composition of board
committees
Of course the TSX also has discretion on whether to approve specific transactions or
filings that the Exchange must approve under the listings rules, and may impose
conditions on an approval.
In a serious case the TSX also has the power to delist a company’s securities, although
that remedy is primarily used in cases where an issuer no longer qualifies for listing
under the continued listing rules. There are formal procedures applicable to delisting of
securities, including a right to a hearing if an issuer decides to contest a proposed
delisting.
Managing Conflicts of Interest in TSX Listed Company Regulation
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The TSX was not able to provide data on the number of times it has used certain specific
powers under the listing rules, or the number of times it has notified the OSC of
potential violations of securities laws. The TSX stated that it does not track these
numbers.
It is unusual for a regulator or self‐regulatory organization not to record and monitor
information on its compliance activities, including the application of specific penalties or
remedies under its rules. It appears that the TSX should be maintaining such data, at
least for purposes of internal supervision and management of its listings regulation
program, as well as for purposes of OSC oversight of the program. In fact, many
regulators periodically release summaries of their compliance activities to the public.
Managing Conflicts of Interest in TSX Listed Company Regulation
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4. Conflicts of Interest in Listings Regulation
4.1 General Listings Regulation Conflicts
It has always been acknowledged that conflicts of interest exist in self‐regulation, so the
existence of conflicts does not mean that an SRO should be disqualified from performing
a regulatory role. If that were the case self‐regulation would not exist. Rather the
central issue with conflicts of interest at SROs is whether a conflict can successfully be
managed in a manner that justifies continued reliance on self‐regulation.
Conflicts of interest are greater for an SRO that is responsible for a wide range of
regulatory functions. An exchange that is responsible for market regulation, member
business conduct, listings, and clearinghouse operations obviously has more conflicts to
manage than an exchange that has only limited market surveillance and listing
functions. This reasoning is one major factor behind the global trend towards reduced
regulatory responsibilities at many for‐profit exchanges. Even if a conflict can
successfully be managed, an exchange or the authorities may decide that the need to
focus on business priorities and competitiveness require that the exchange relinquish
certain regulatory responsibilities.
Regulation standards are a double‐edged sword for exchanges: on one hand, an
exchange’s reputation and market quality are critical to its competitive position,
investor confidence and brand; on the other hand, overly stringent and intrusive
regulation may lead to loss of business. An exchange has business incentives to
maintain market integrity and credible listed issuers in order to attract trading interest,
maintain its reputation, and instill investor confidence in the market. But if an exchange
is too aggressive in its regulatory approach, it may discourage listings or even create
incentives for listed companies to move to competing exchanges that have less stringent
rules. For instance, it has been widely reported that non‐US companies are reluctant to
list on US exchanges because of the stringent regulatory environment in the US,
including the exchanges’ rules on corporate governance. The LSE has been the prime
beneficiary of this perspective.
Therefore it is vital for an exchange to strike the right balance in listings regulation. The
competitive environment and an exchange’s particular competitive position are
important factors in striking the right balance.
While conflicts of interest between exchanges’ business development interests and
listings regulation functions have always existed, regulators and other participants
believe these conflicts are exacerbated at demutualized, for‐profit exchanges because
their business objectives are primary, whereas non‐profit exchanges have lower
incentives to promote commercial objectives over regulatory objectives.17
17 See, for example, IOSCO (2006) at page 8
Managing Conflicts of Interest in TSX Listed Company Regulation
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For instance, an IOSCO report on the commercialization of exchanges expressed concern
that an exchange might lower listing standards in order to attract new listings.18 The
report added that:
… for‐profit exchanges may reduce the resources they devote to regulation.
Worse, they may place insufficient value on the regulatory process, fail to sustain
a strong regulatory culture and be less willing to co‐operate with their
supervisory authorities…
In its 2004 review of the corporate governance of SROs, the SEC cited fears about
increasing conflicts of interest at for‐profit exchanges. The SEC specifically noted that
competition for listings might lead to lower listing standards, among other concerns.19
The overall conflict between an exchange’s business interests and its duties as a listings
regulator may manifest itself in several ways:
1) High initial listing requirements and stringent continued listing rules on subjects
such as corporate governance, disclosure, minority shareholder rights and
dilution of shareholder equity can have a negative effect on attracting and
retaining listings business.
2) Maintaining high standards of supervision of compliance may negatively affect
relationships with listing customers. Strong compliance supervision can mean:
• Extensive filing requirements
• Requirements to obtain Exchange approval of corporate transactions
• Making compliance enquiries on ongoing obligations
• Issuing information requests
• Enquiries on material developments and continuous disclosure
• Requiring changes in filings, disclosure etc. if shortcomings are found.
3) Pressure from big listing customers could result in biased administration of rules
if management’s discretion in the interpretation or application of listings rules,
or on the availability of exemptions (also called waivers), favours large issuers.
This could be a bigger risk if transparency on listing interpretations and
compliance decisions is lacking.
4) Regulatory policy initiatives or the activities of listings regulation staff may
produce tensions between business development needs and regulation
responsibilities. This can be reflected in strained relationships between
regulation staff and listings customers, as well as with the exchange’s business
development staff.
18 Ibid.
19 SEC (2005)
Managing Conflicts of Interest in TSX Listed Company Regulation
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5) An exchange could discriminate against listed companies that compete with it in
administering its listings rules. Conversely, an exchange could favour companies
that are business partners. Such bias could be reflected in the handling of listing
applications, the administration of continued listings rules, the use of
investigation and enforcement powers, or in improper use of confidential
information about listed companies for business instead of regulatory purposes.
In the normal course of business customer relationship management considerations are
clearly a major factor in developing and applying corporate policies and procedures to
customers. The listings business is necessarily different. The existence of listings
regulation responsibilities at exchanges means that permitting customer relationship
management considerations to unduly influence the development and application of
corporate policy – in the form of rules, standards and interpretations – cannot be
permitted. Regulatory policy must respond to a range of needs, and while the interests
and needs of the customer may be one factor, they cannot be the main factor.
Therefore there is a clear conflict between an exchange’s commercial interests in
meeting its customers’ needs and the broader public interest that its regulatory
program must address.
The existence of a conflict does not mean that an exchange will handle the conflict
inappropriately. Steil wrote that, “Any assumption that listing standards will always be
set too low if established on a purely commercial basis is clearly faulty”.20 But while it is
clear that exchanges have not set listings standards at levels that are designed simply to
maximize the number of listings, it does not follow that when a commercial exchange
aims to broaden its product range and focus on improving customer relationships that
regulators and stakeholders can simply rely on market incentives and an exchange’s
good intentions to maintain quality. As this Report shows, they have not done so – in
most advanced markets where exchanges have a strong listings regulation role, special
structures and procedures have been implemented to ensure that conflicts of interest
do not compromise the integrity of exchanges’ regulatory decisions.
Commercial pressures are more likely to have an impact on listings standards and
regulation programs in markets where strong competition for listings business exists. In
Canada, exchanges that historically competed with the TSX – namely, the Alberta,
Vancouver and Montreal Exchanges – used lower listings standards and continued
listings rules to carve out niches with smaller issuers than the TSX aimed to attract. By
merging the former junior exchanges into the TMX Group, this form of competition was
eliminated. Instead, TMX is able to position its TSX and TSXV markets to appeal to
specific target markets, drawing the line between the two exchanges where the Group
believes it makes business sense.
20 Steil (2002) at page 73
Managing Conflicts of Interest in TSX Listed Company Regulation
21
But new listings competition has emerged in Canada. Today the Canadian National
Stock Exchange (CSNX) employs a listings regime that is mainly disclosure‐based, and
imposes few requirements beyond those that securities commissions require of a public
issuer. CSNX aims its listings marketing at junior issuers that may be dissatisfied with
the regulatory burden. Recently the Alpha ATS announced that it is applying to the OSC
for approval as an exchange, and will enter the listings business in competition with the
TSX. If its listings rules apply lower standards than the TSX’s, the TSX could face strong
commercial pressures to compromise its standards.
Organizational influences must also be considered. If SRO functions are “part and parcel
of the business”, listings regulation staff will be subject to the same cultural changes,
values and incentives that apply to business units. This is especially the case at
exchanges where there is no formal separation of business and regulation departments,
or where there is weak separation. For instance, if Listings is treated primarily as a
business unit, arguably listings decisions are more likely to be influenced by business
considerations.
Even if an exchange pursues a compliance issue with a major listings client, subtle
pressures to deal with the issue in a less stringent and more unobtrusive way are likely
to arise. Such pressures can be unspoken. In a corporate culture that is increasingly
dominated by values such as good customer relations, business innovation and financial
performance, the unspoken message might be that regulatory objectives should be
achieved without jeopardizing customer relationships and business objectives, if at all
possible. Over time this could lead to subtle changes in regulatory approach. These
changes do not need to be obvious to be harmful or inappropriate.
In addition, the profit motive and other business incentives change the emphasis to
business development and customer focus from regulation. Exchanges are developing a
range of new services for listed companies in an attempt to attract and retain listings
customers, and to add value to their listings product. The emphasis of a Listings program
can easily swing from investor protection, maintenance of high listings standards and
strict neutrality to business development and customer relations – especially if the
departments involved in each function are not separate and provided with incentives
that are relevant to their individual mandates.
4.2 Self‐listing Conflicts of Interest
Exchanges and supervising regulators have universally recognized the conflicts of
interest that arise when an exchange lists its stock on its own market. Specific conflicts
that can arise when an exchange is “self‐listed” are:
1) An exchange might assess whether it meets its own initial listings requirements
when it first applies for a listing.
Managing Conflicts of Interest in TSX Listed Company Regulation
22
2) Once it is listed, an exchange might monitor compliance with its continued
listings rules in respect of its own listing.
3) An exchange might monitor trading in its own stock for potential irregular
trading and decide whether to review or investigate trading for any reason.
4) An exchange might administer continuous disclosure requirements (for material
news) as they apply to its own business.
In addition, similar conflict of interest issues could arise if an exchange lists securities of
an affiliated party, such as a major shareholder in the Exchange (where an exchange is
not a wholly‐owned subsidiary of a holding company).
The US SEC expressed concerns about similar self‐listing conflicts of interest in its 2004
release on proposed new rules on SRO governance. The proposal contained a specific
set of rules on listing of affiliated securities by exchanges.21 (The rules were never
implemented.) The conflicts that the SEC cited were the potential for:
• Reluctance to effectively monitor compliance with initial and continued listings
rules
• Reluctance to effectively regulate trading in its own stock
• Stricter treatment of listings regulations applied to competitors of the exchange.
Interestingly, the SEC has not taken over responsibility for approving self‐listings or for
monitoring compliance with listing standards or trading rules. It continues to rely on the
exchanges to perform these functions directly, subject to regular reporting to the SEC.
Australia provided a good example of a conflict with a competitor. In 1998 the ASX
made a take‐over bid for the Sydney Futures Exchange (SFE). Later Computershare
Limited, an ASX listed company, made a rival bid. Computershare’s business included
providing trading systems and share registry services, services that the ASX was also
involved in. The Australian regulator, ASIC, made an agreement with ASX and
Computershare that until the bids for SFE were resolved, ASX would not make any
decisions about Computershare’s listing without first consulting with ASIC and acting as
required by ASIC.
Self‐listing conflicts are fairly narrow in nature and easily defined. As such, the measures
needed to manage them are not complicated and are fairly similar across jurisdictions.
21 SEC Proposed Rules – Fair Administration and Governance of Self‐Regulatory Organizations;
Proposed Regulation AL – National Securities Exchanges and Registered Securities Associations
Listing Affiliated Securities, SEC Release 34‐50699, Dec. 8, 2004. See
http://www.sec.gov/rules/proposed/34‐50699.pdf
Managing Conflicts of Interest in TSX Listed Company Regulation
23
5. Managing Conflicts of Interest in Self‐Regulation
5.1 Overall SRO Functions, including Listings Regulation
Exchanges and their supervising regulators use a range of mechanisms and tools in
managing conflicts of interest between their self‐regulatory responsibilities and business
interests. The mechanisms discussed here are relevant to the management of listings
regulation conflicts, as well as overall regulatory conflicts. Section 5.3 describes how
seven major exchanges manage listings regulation conflicts specifically.
The mechanisms that are used to manage conflicts at Exchange SROs generally involve
one or more of the following:
1) Special corporate structure and governance arrangements, such as creating a
subsidiary company to house SRO functions, or establishing an independent
committee to oversee SRO functions.
2) Organization structures that separate regulation departments or units from
business operations.
3) Internal policies and procedures designed to address conflicts of interest, such as
imposing information firewalls and restricting access to premises and files.
4) Transfer or outsourcing of regulation functions to another SRO, a statutory
regulator or a third party.
5) Regulatory oversight processes aimed at ensuring conflicts of interest are
managed appropriately, such as special reporting to the regulator about conflicts
that arise.
The International Council of Securities Associations (ICSA), a group of independent
member SROs that includes IIROC, developed a set of “Best Practices for SROs” in
managing conflicts of interest.22 ICSA advocates that an SRO should establish
appropriate structures, policies, and procedures to ensure that potential conflicts of
interest between its regulatory and commercial activities are appropriately managed.
ICSA specifically suggests the following:
• Use firewalls to separate regulatory operations from business or advocacy
operations.
• Have a separate governing body to oversee regulatory operations.
• Separate organizational structures for regulatory and business operations.
• House regulatory operations in separate and secure premises.
• Contract out all or part of the SRO’s regulatory responsibilities.
• Establish policies and procedures on management of conflicts of interest.
22 ICSA (2006)
Managing Conflicts of Interest in TSX Listed Company Regulation
24
In 2007, France’s Association française des marchés financiers (AMAFI) surveyed 41
organizations for IOSCO’s SRO Consultative Committee.23 The survey covered 25
exchanges and 16 member associations or CSDs. It showed that of 31 organizations that
operated or regulated markets, 21 formally separated their commercial and regulatory
activities, and 5 did not. (The others did not respond, perhaps because they had no
commercial activities.) Of the 25 exchanges, 17 reported they have formal procedures
for managing conflicts of interest, and the government regulator reviews the procedures
of 15 of the 17.
1) Corporate Structure and Governance
The organizational separation of the regulatory and the business operations of an
exchange is now established as a best practice for exchanges that retain significant SRO
functions. Some exchanges have established separate subsidiary companies with
independent boards of directors and management to house SRO operations, including
the NYSE, ASX and Brazil’s BM&FBovespa. Several examples are described in section
5.3.
Another corporate governance solution to managing conflicts is to establish a special
committee, usually of the Exchange’s board of directors, to oversee SRO operations.
The committees reinforce the independence of SRO functions by removing SRO
oversight from the board as a whole to a committee comprised mainly or entirely of
independent directors. For example, a number of Exchange SROs have created a boardlevel
Regulatory Oversight Committee (a “ROC”). Their job is to supervise the SRO’s
regulation programs and to ensure the independence and effectiveness of the SRO
department, particularly in light of the conflicts of interest discussed here. Several US
exchanges that do not have independent subsidiaries to house SRO functions have
established such committees, including BATS Exchange and Direct Edge’s new
exchanges. These exchanges have outsourced most of their regulation activities to
FINRA, since they do not believe that the complexity and cost of setting up a separate
subsidiary company to house SRO functions is justified.
Supervision of corporate governance of exchanges – both of the organization overall
and SRO functions specifically – is one of the primary means that securities regulators
worldwide use to ensure that Exchanges meet their public interest and regulatory
responsibilities and manage conflicts appropriately.
2) Organizational Structure: Separation of business and regulation
Many exchanges with SRO responsibilities have not gone as far as establishing a
23 AFEI/VD – 29/04/08 – SRO Consultative Committee Working Group on Self Regulation
(unpublished). The Association française des marchés financiers (AMAFI) is the representative
body for professionals working in the securities industry and financial markets in France.
Managing Conflicts of Interest in TSX Listed Company Regulation
25
separate subsidiary for SRO functions, but have addressed conflicts of interest by
establishing an organization structure that formally separates management of
regulation functions from business operations. This approach is well established as the
minimum “best practice” standard for managing management of conflicts of interest.
An extensive number of exchange SROs employ this approach, including several of the
seven exchanges reviewed in this Report. Section 5.3 describes the organization
structures of Nasdaq in the US, HKEx (for its listings department) and Nasdaq OMX
Nordic in Europe.
3) Internal Policies and Procedures
Exchanges generally have internal policies and procedures that apply to handling of
issues and files where a conflict of interest may arise. Written policies and procedures
usually supplement one of the other responses to conflicts listed here; rarely does an
exchange rely only on internal policies and procedures to manage conflicts. Conflict of
interest policies and procedures manuals typically cover the following matters:
• Definition of potential conflicts of interest
• General code of conduct and staff responsibilities concerning management of
conflicts
• Responsibility for identifying and reporting conflicts that arise in handling files
and addressing issues, and officers responsible for addressing conflicts
• Documenting handling of conflicts of interest, and procedures for any special
processes that apply (for example, referrals to a conflicts committee or to a
supervising regulator)
• Administration of information firewalls between business and regulation units
• Administration of physical separation of business and regulation units, and of
policy on restricted access to regulation units (if applicable)
• Maintenance of confidentiality of information filed for regulatory purposes
• Sharing of information that is permitted to be shared with other departments
Other exchange SROs have created “conflicts committees” to address any conflicts
between a listed exchange and listed companies that they regulate. Such committees
are in place at HKEx, SGX and TMX. The committees generally review any dealings with
companies that the exchange either competes with or has business dealings with to
ensure that listings rules are administered in an unbiased manner, and they report their
assessment to the regulator. In Hong Kong, issues are referred to the SFC if a conflict
could even be perceived—for example, a listing application from a company that
provides back office services to the HKEx.
Managing Conflicts of Interest in TSX Listed Company Regulation
26
4) Transfer or Outsourcing of regulation responsibilities
Canada is a very good example of this approach to reducing conflicts of interest in
Exchange SRO functions. The TSX and the CDNX and Montreal exchanges (as they
existed at the relevant time) transferred member regulation responsibilities to the
Investment Dealers Association (now IIROC) over a period of several years starting with
the TSX’s transfer of its department in 1997. As described in this Report, the TSX and
TSXV outsourced their market regulation functions to RS (now IIROC) in 2002. In
addition, the TSX, TSXV and the CSA agreed that responsibility for setting guidelines on
corporate governance for public companies would be transferred from the Exchanges to
the CSA in 2005.
Other illustrations of the transfer or outsourcing of regulation functions by exchanges
are set out below. There are many more examples.
As described in section 5.3, the UK government transferred the “Listing Authority”
function from the LSE to the FSA in 2000 on LSE’s demutualization because it did not
believe that an exchange that competes with other exchanges for listings should
perform that function.
In Europe, several European Commission financial services directives aimed at creating a
“single market” for financial products in the EU led to the transfer from exchanges to
statutory regulators (“competent authorities”) of certain regulatory or supervisory
functions that had been performed by exchanges in many EU countries. While not a
response to the existence of conflicts, the reforms had the effect of strongly positioning
European exchanges as commercial market operators that would compete for business
in an integrated European market. Conflicts of interest have been minimized where
regulators perform most regulatory functions.
In Hong Kong, the Securities and Futures Commission (SFC) assumed responsibility for
supervision of broker‐dealers (member regulation) and most market regulation
functions from the exchanges in 2000 as part of an overall government policy to
consolidate and demutualize Hong Kong’s exchanges. (The SFC had been primarily
responsible for market conduct and trading abuses since 1990.) The HKEx’s remaining
self‐regulatory role is to supervise compliance with its trading rules, which are mostly
business or operational rules. HKEx remains responsible for listings regulation, as
described in detail in section 5.3.
Before Nasdaq was separated from the NASD in the 1990s, in the first step towards
Nasdaq’s demutualization, the two organizations concluded that conflicts of interest
were much better managed if the exchange operator’s business was separated from the
SRO’s operations. With encouragement from the SEC, they decided that Nasdaq would
be more successful as a business and the NASD more successful as an SRO if their roles
Managing Conflicts of Interest in TSX Listed Company Regulation
27
were separated. Consequently Nasdaq retained the services of the NASD to perform
most market regulation services by contract. Today the Nasdaq Stock Market continues
to retain FINRA to carry out regulatory services on its behalf.
In Australia, the statutory regulator ASIC will assume most member and market
regulation functions from the ASX Group this year.
5) Strong Regulatory Oversight of Management of Conflicts of Interest
Stronger supervision of SROs by government regulators has been an almost universal
response to greater conflicts at Exchange SROs, with a particular focus on reviewing how
exchanges manage conflicts of interest. This supervision includes both the policies and
procedures adopted to address conflicts and the handling of specific cases of conflict.
IOSCO has suggested that if an SRO has a conflict of interest, the regulator should
assume responsibility for the investigation of a matter.
Effective regulatory oversight is viewed as a backstop by both exchanges and regulators.
It is considered essential to ensuring conflicts of interest do not lead to lower standards,
and that perceptions in the market about potential conflicts are addressed through
ongoing oversight by supervising regulators. Some exchanges have acknowledged that
under competitive pressure, standards could slip without strong oversight.
Oversight encompasses supervision processes such as approval of rules, periodic
examinations of the performance of regulatory functions, assessments of corporate
governance, monitoring financial viability, etc. Oversight processes that address
conflicts of interest take several forms, including:
• Increased scrutiny of governance and management, in particular the governance
of SRO operations, as well as decisions on business initiatives where conflicts
might arise, to ensure continued compliance with the exchange’s self‐regulatory
responsibilities and overall public interest obligations
• Review (and in some cases approval) of resources and budgets for SRO
operations
• Strengthened examination of the adequacy of regulatory programs and
processes, and staff and other resources made available to support them
• Review of the effectiveness of processes and procedures in place to manage
conflicts of interest, such as organizational structures for SRO departments,
information firewalls, conflicts committees and the like
• Specific review of the handling of files where conflicts may arise, such as listings
applications and decisions on compliance with listings rules
• Closer examination of proposed rule changes to ensure investor protection
needs are addressed, and that regulatory standards are not compromised by
Managing Conflicts of Interest in TSX Listed Company Regulation
28
commercial considerations.
More stringent oversight of an exchange’s investigations and disciplinary processes
should be imposed to ensure that they enforcement of the rules is not influenced by
conflicts relating to relations with large listings or trading customers, or by other
business considerations.
The transparency of an exchange’s regulatory processes, for instance thorough a notice
and comment process for rule changes and the publication of rule interpretations,
exemptions and waivers, is also important in the effective management of conflicts.
Communication and disclosure enables interested parties, including investors, regulated
firms, listed companies and competitors of the exchange, to assess whether regulatory
policy might be unreasonably influenced by the exchange’s commercial interests over
legitimate regulatory policy considerations. Transparency also strengthens the
regulator’s ability to identify and address potential conflicts and respond to them.
5.2 Managing Self‐listing Conflicts of Interest
Virtually all jurisdictions with listed exchanges have implemented special procedures to
address these conflicts. The main procedures that have been used are:
• The supervising regulator either deals with the listing application, or reviews and
approves the exchange’s handling of the listing application.
• Administration of the continued listings rules in respect of the exchange’s listing
has either been transferred to the regulator, or is subject to close oversight by
the regulator.
• Surveillance of trading in the exchange’s stock is either the regulator’s direct
responsibility or is closely supervised by it.
5.3 Managing Listings Conflicts of Interest – Country Examples
Summary
For purposes of this Report we reviewed the approach to addressing conflicts of interest
in listings regulation at seven other exchanges: NYSE and Nasdaq in the US, LSE in the
UK, Nasdaq OMX Nordic in Europe, ASX in Australia, TSE in Japan and HKEx in Hong
Kong. These exchanges were chosen because all have the following points in
commonality with TSX:
• All are major exchanges in developed markets
• All have significant and successful listings businesses
• All face strong competition for listings services, regionally and / or nationally
Managing Conflicts of Interest in TSX Listed Company Regulation
29
• All are subject to strong oversight by statutory regulators
• All operate in jurisdictions where government and / or regulators have
thoroughly addressed conflicts of interest issues at the exchanges, with specific
reference to regulatory responsibilities
• All (or their parent holding companies) are self‐listed on their own market.24
In summary, three main approaches are employed to address conflicts of interest in
listings regulation in these seven markets:
1) A regulation subsidiary company with independent governance performs
listings regulation:
• NYSE (as well as NYSE Amex and NYSE Arca, all US markets owned by NYSE
Euronext)
• Tokyo Stock Exchange (a unit of TSE Group)
• Australian Securities Exchange (a unit of ASX Group)
2) A special independent committee and a listings department that is separate
from the business operations of the Exchange (including listings business
development) performs listings regulation:
• Nasdaq Stock Market (a unit of Nasdaq OMX Group)
• Nasdaq OMX Nordic (a unit of Nasdaq OMX Group that operates 4 exchanges
in Scandinavia)
• Stock Exchange of Hong Kong (a unit of HKEx)
3) The statutory regulator mainly performs listings regulation.
• UK – for LSE and other UK exchanges
Of the jurisdictions reviewed, only the TSX carries out listings regulation as part of a
unified Listings Department that is responsible for both listings regulation and the
listings business.
Special procedures to address the specific conflicts of interest that arise in regulating the
exchange’s own listing (self‐listing) are in place at all of the exchanges reviewed,
including the TSX.
24 The Nasdaq OMX Group, Inc. is listed on Nasdaq in the US and Nasdaq OMX Dubai. It is not
listed on the Nasdaq OMX Nordic markets.
Managing Conflicts of Interest in TSX Listed Company Regulation
30
USA – NYSE
NYSE Euronext manages conflicts of interest between its business and regulatory
responsibilities mainly through strong structural separation of all regulation functions
into an independent subsidiary company, NYSE Regulation, Inc. (NYSER). NYSER is a
non‐profit company with independent governance and management from NYSE
Euronext and its operating exchanges.
Since NYSE Regulation was first established, NYSE Euronext has significantly streamlined
its regulation activities – and in doing so further minimized conflicts of interest between
business and regulation functions – by transferring major regulation responsibilities to
FINRA. First, it agreed with the NASD to form FINRA by merging its member regulation
program with the NASD’s program. Secondly, very recently NYSE Euronext announced
that all market surveillance functions for its US markets (including the NYSE25, NYSE
Amex and NYSE Arca exchanges) will be performed by FINRA, thus enabling FINRA to
carry out centralized supervision of most US equity trading through regulation services
agreements with Nasdaq, NYSE Euronext and several other equities marketplaces.
NYSER is a not‐for‐profit corporation that is responsible for enforcing the Exchange rules
and federal securities laws at the New York Stock Exchange. NYSER also oversees
regulation at its other two US markets: NYSE Arca Regulation and NYSE Amex Regulation
through regulation services agreements.26
NYSE Regulation’s board of directors is comprised of a majority of directors unaffiliated
with any other NYSE board: 3 NYSE Euronext directors, 6 independent of NYSE Euronext,
and the NYSER CEO. As a result, NYSE Regulation is independent in its decision‐making.
The CEO of NYSER has primary responsibility for the regulatory oversight of the U.S.
market subsidiaries within NYSE Euronext and reports solely to the NYSER board of
directors. There is no reporting relationship to the NYSE Euronext CEO.
According to NYSE Euronext: “This organizational structure preserves and extends the
separation yet pervasive communication between business and regulatory activities
achieved under the NYSE’s previous governance architecture that was comprehensively
reformed in 2003. It also seeks to insulate NYSE Regulation from the additional
crosscurrents created by public ownership.”
The Listed Company Compliance Division ensures that companies listed on NYSE, NYSE
Amex and NYSE Arca meet their financial and corporate governance listing standards.
The Division has two units: Financial Compliance and Corporate Compliance. Financial
Compliance reviews a company’s reported financial results both for new applicants and
for existing listings to ensure that the company meets original listing and continued
25 New York Stock Exchange LLC
26 All information from NYSE Regulation website:
http://www.nyse.com/regulation/nyse/1145313073247.html
Managing Conflicts of Interest in TSX Listed Company Regulation
31
listing requirements. Corporate Compliance ensures that listed companies adhere to
the rules on corporate governance and disclosure.
Self‐listing Conflicts
On listing of NYSE Group’s shares on the NYSE through its merger with Archipelago
Holdings Inc. in 2006, the SEC’s decision approving the transaction imposed a
requirement to file a quarterly report with the SEC on monitoring of compliance with
listings standards by NYSE Group, as well as monitoring of trading in its stock.27 NYSE
Regulation carries out such monitoring. NYSE Group also agreed to an annual audit of
compliance with listing standards by an independent accounting firm.
USA – Nasdaq Stock Market
Nasdaq manages listings regulation conflicts by using a listings regulation department
that is separate from Nasdaq’s business operations to perform regulatory functions, as
well as through an independent committee called the “Listings Council”. The “Listing
Qualifications” department provides listing regulation services. It is organizationally
separate from the business, although this fact is not generally promoted on the Nasdaq
website. Listing Qualifications reviews all listing applicants and existing listed companies
for compliance with both initial and continued listing requirements. Each listed company
is assigned to a specific qualifications analyst who reviews its SEC and other regulatory
filings.28
Listing Qualifications deals with queries on listing standards and the application process.
Nasdaq has a Corporate Client group that promotes listings and provides additional
services and products to listed issuers. In addition, a relationship manager from the
business side is assigned to all Nasdaq listed companies.
The Listings Qualifications department has 4 units:
• Initial Listings & Structured Financial Products team
• Continued Listings team
• Corporate Governance & Listing of Additional Shares
• Listing Investigations.
Although most of Nasdaq’s regulatory functions are carried out by FINRA under a
regulatory services agreement, Nasdaq is an SRO by law, and one of the main
27 http://www.sec.gov/rules/sro/nyse/34‐53382.pdf
28 All information from Nasdaq OMX website. The Nasdaq Listing Information page is at
http://www.Nasdaq.com/services/insideNasdaq.stm#resources
Managing Conflicts of Interest in TSX Listed Company Regulation
32
responsibilities of its board of directors is to oversee the Exchange’s regulatory program.
This obligation is primarily discharged through the Board’s Regulatory Oversight
Committee (the “ROC”). The ROC’s mandate is to “oversee the adequacy and
effectiveness of Nasdaq’s regulatory and self‐regulatory organization responsibilities;
assess Nasdaq’s regulatory performance; and assist the Board and other committees of
the Board in reviewing the regulatory plan and the overall effectiveness of Nasdaq’s
regulatory functions”. The ROC’s responsibilities include oversight of the Listing
Qualifications Department, which is one of three main regulation departments at
Nasdaq.29
Nasdaq’s independent listing committee is the Listing Council, which provides advice to
its Board on listings matters and hears appeals on the application of listings rules and
policies. The Nasdaq Listing and Hearing Review Council (Listing Council) is a standing
independent advisory committee appointed by the Nasdaq Board of Directors to
provide advice to the Board on issues relating to listed companies, and to review certain
decisions made under the Listing Rules by hearing panels. All Council members are
independent of the Exchange, and include institutional investor advocates, company
representatives, lawyers, accountants, securities industry professionals and
academics.30
The Listing Council hears appeals from decisions to deny listing or to delist securities
made by Nasdaq’s independent hearing panels. (A company that is denied initial listing,
that is being delisted for failure to satisfy the continued listing requirements, or that has
been issued a public reprimand letter may request review of the decision by an
independent body through the hearing process.) In addition, the Council also reviews all
Hearing Panel decisions, regardless of whether they are appealed, and may decide on its
own to reverse or modify a Panel decision. Decisions of the Listing Council may be
appealed to the SEC.
Self‐listing Conflicts
In a rule filing with the SEC in 2005 on its self‐listing, Nasdaq agreed to conditions similar
to those described for NYSE Group above.31
29 Duties and Obligations of NASDAQ Directors: Prepared for the Board of Directors of The
NASDAQ Stock Market LLC, at
http://files.shareholder.com/downloads/NDAQ/926657225x0x242365/c00d892b‐e8af‐4d4bbfdc‐
c0ca5fa14f3e/LLCDutiesandObligations.pdf
30 Nasdaq OMX website. Information on Listings Council at
http://www.Nasdaq.com/about/FAQsAppeals.stm
31 http://www.sec.gov/rules/sro/nasd/34‐51123.pdf
Managing Conflicts of Interest in TSX Listed Company Regulation
33
Australia – ASX
After taking a number of smaller steps to address conflicts of interest since ASX
demutualized in 1996, the ASX Group finally established an independent subsidiary, ASX
Markets Supervision Pty Limited (ASXMS), to carry out self‐regulatory responsibilities in
2006. ASX states that, “The subsidiary was created to provide greater transparency and
accountability of ASX’s supervisory operations, strengthen market integrity and address
the perception of conflict between ASX’s regulatory and commercial functions”.32
The Issuers Unit of ASXMS is responsible for the supervision of all listed entities and
monitors compliance with the listing rules. Other units oversee compliance with ASX
market rules, clearing and settlement rules, as well as SFE rules.
This chart illustrates the structure adopted by ASX:
Source: ASX website
ASXMS has an independent board of directors – only one of its five directors is also a
director of other companies in the ASX Group. The Chief Supervision Officer (CSO) who
is in charge of all ASX supervisory activities reports to the ASXMS Board and not to the
CEO of ASX Limited. The ASXMS Board receives regular reports from the CSO on the
32 ASX website: http://www.asx.com.au/supervision/approach/supervision_subsidiary.htm
Managing Conflicts of Interest in TSX Listed Company Regulation
34
conduct of supervisory activities and also approves all the ASX Group arrangements for
handling conflicts, including the internal information barrier arrangements and codes of
conduct for supervisory staff.33
This year ASIC will assume direct responsibility for many of ASX’s current market
regulation responsibilities, including market surveillance. This restructuring of the
regulatory system will further reduce conflicts of interest at ASX, but it will not affect the
ASX’s listings responsibilities. The Exchange will continue to supervise listed issuers
under its listings rules.
In Australia the Corporations Act requires the ASX Group to have adequate
arrangements to handle conflicts between its commercial interests and its obligations to
ensure a fair, orderly and transparent market, and to ensure that clearing and
settlement services are provided in a fair and effective manner. To meet this
requirement, ASX Group has developed the ASX Commercial and Supervisory Conflict of
Interest Policy.
The Policy is a code of conduct that applies to all ASX Group staff, and requires staff to
be cognizant of potential conflicts of interest and to “do the right thing”. The Policy
specifically acknowledges the potential listings conflicts set out in this Report, and
requires regulatory decisions to be made only by ASXMS staff. It prohibits staff
members from being influenced by other staff members who may have business
objectives. Supervisory decisions must be made solely for the purposes envisaged by
the rules and must not take into account commercial considerations or what will benefit
ASX as a commercial entity. Internal compliance reviews are carried out to ensure that
supervisory decisions are made in accordance with the required standards.
ASX states that it “has also recognized that conflicts between its commercial interests
and its statutory obligations could occur not only when supervisory decisions are made,
but also when the policy to be applied in making those decisions is devised or changed”.
To address this concern, any change in policy must be agreed to by the CSO, who is
accountable to the ASXMS Board for this function.
ASIC monitors compliance by the ASX Group with its statutory obligations and performs
examinations of ASX to ensure it meets its obligations, including the adequacy of its
arrangements for handling conflicts of interest and supervising the market.
Self‐listing conflict
ASIC is responsible for supervising ASX Group’s compliance with the listings rules. ASIC
may also intervene, at the request of a commercial competitor of ASX, to take a
33 ASX website
Managing Conflicts of Interest in TSX Listed Company Regulation
35
supervisory role where there is a specific and significant conflict, or potential conflict,
between the commercial interests of ASX and its regulation obligations in dealing with a
listed entity that is a competitor.
Europe
In the EU, the Markets in Financial Instruments Directive requires all regulated markets
to have governance arrangements to identify and manage the potential adverse
consequences of any conflict of interest between the regulated market, its owners or its
operators and the sound functioning of the market.
UK – London Stock Exchange
In the UK the listings regulation conflict was addressed by transferring the function of
“competent authority for listing” from the London Stock Exchange to the FSA following
the LSE’s announcement of its demutualization in 1999. Since the LSE would be
competing for listings with other exchanges as a commercial entity, it was agreed this
regulatory role should be transferred to the FSA. The transfer took place in 2000.
The FSA is the UK’s competent authority to regulate the admission of securities to the
“Official List” pursuant to European Community directives. The UK Listing Authority
(UKLA), a division of the FSA, carries out this function. The FSA makes rules governing
prospectuses, admission to listing, the continuing obligations of issuers, the
enforcement of those obligations and suspension and cancellation of listing. These rules
are the Listing Rules, the Prospectus Rules and the Disclosure and Transparency Rules.
The LSE is still responsible for the “admission to trading” of issues on the Exchange.
(Any other UK exchanges trading listed companies have the same responsibility.) The
LSE requires listed companies to meet the requirements of its Admission and Disclosure
standards. However, these requirements are minimal – to be “listed on the LSE” the
main approval required is UKLA’s approval.
To add to the complexity of the system, the LSE continues to be responsible for setting
listings standards and approving listings on AIM, its market for junior issuers, because
these securities are not part of the “Official List”.
Scandinavia – Nasdaq OMX Nordic
Nasdaq OMX Nordic consists of four local stock exchanges in Copenhagen, Stockholm,
Helsinki and Iceland. The four exchanges are separate legal entities in different
jurisdictions, and therefore each exchange has its own regulation. The exchanges are
responsible for initial and continuous listings regulation, and have their own “rule books
Managing Conflicts of Interest in TSX Listed Company Regulation
36
for issuers”. In Sweden the Nasdaq OMX Stockholm listings rules encompass
requirements set out in legislation and by the Swedish regulator.
Nasdaq OMX Nordic has a separate Market Surveillance unit that is responsible for both
trading and issuer surveillance at the four exchanges. Issuer surveillance applies and
enforces initial and continued listing qualifications of listed companies, and is also
responsible for the formal listings process and monitoring companies’ compliance with
rules on information disclosure, corporate governance and takeovers.34 The unit also
develops listings rules.
In Stockholm and Helsinki, a Listing Committee makes decisions on new listings. The
Board of each Exchange appoints the Committee, a majority of which is independent of
the Exchange.
The Surveillance Committee of Nasdaq OMX Nordic was established to monitor the
performance of the Surveillance unit and to advise the Board of Nasdaq OMX Nordic on
surveillance related matters. The Committee operates independently from the
exchanges’ business. The Committee’s role is to enhance the integrity of and
confidence in the Nordic markets. One function of the Committees is to protect
surveillance functions from conflicts of interest. The Surveillance Committee is
appointed by the Nasdaq OMX Nordic board and has five members – three independent
members and two representatives of the exchanges. The Chairman is an independent
member.35
Japan – Tokyo Stock Exchange
The Tokyo Stock Exchange (TSE) has a separate regulation subsidiary, Tokyo Stock
Exchange Regulation. It is similar to NYSE Regulation in structure. The company has its
own board of governors. The Listing Regulation Unit carries out listings regulation
functions. The structure of TSE Regulation is set out below.
34 Nasdaq OMX Nordic website. On listing on Nasdaq OMX Stockholm, see
http://www.Nasdaqomx.com/listingcenter/nordicmarket/equities/stockholm/?languageId=1
35 Nasdaq OMX Nordic website. Re Surveillance, see
http://www.Nasdaqomx.com/listingcenter/nordicmarket/surveillance/aboutsurveillance/
Managing Conflicts of Interest in TSX Listed Company Regulation
37
Source: TSE website36
The Listing Regulation Unit has two divisions. The Listing Examination Division
conducts examinations of companies applying to list on the TSE to determine if they
qualify for listing. The Listed Company Compliance Division examines compliance
with continued listing rules, including eligibility for continued listing.
The Listing Department of Tokyo Stock Exchange, Inc. is a business unit that provides
consultation and support for disclosure of corporate information. If the Listed
Company Compliance Division determines that penalties or other measures against
a listed company should be imposed, the TSE Listing Department will delist or
otherwise penalize the company.
The Listed Company Compliance Department performs the following functions:
1) Decide if a company or instrument qualifies for continued listing, and if
not, delist the company or instrument
2) Transfer of issues from the 1st Section to the 2nd Section of listings
3) Assess the adequacy and timing of corporate disclosure and if necessary
impose penalties or take other compliance measures
36 http://www.tse.or.jp/english/about/index‐r.html
Managing Conflicts of Interest in TSX Listed Company Regulation
38
4) Issue alerts, advisories and warnings on issues of securities under TSE
rules.
Hong Kong – Hong Kong Exchanges and Clearing
In Hong Kong, the Stock Exchange of Hong Kong (SEHK), which is part of Hong Kong
Exchanges and Clearing Inc. (HKEx), is the frontline regulator of all listing‐related matters
and of issuers listed on its markets. The SEHK is also responsible for authorizing
prospectuses of companies listed on the Exchange. The SEHK Listings Rules are the main
form of regulation of listed issuers in Hong Kong, so the Stock Exchange plays a very
important role in regulating public companies. Its role has been maintained in spite of
proposals to make regulation statute‐based and to move most listings regulation
functions to the Securities and Futures Commission (SFC).
Given the SEHK’s strong role in regulating listings and issuers, conflicts of interest with
HKEx’s business interests have been a significant policy issue. The conflicts have been
addressed in three main ways:
1) Most listings regulation powers are vested in a Listing Committee that is
independent of the Exchange.
2) The Listings Division of the SEHK is structurally separate from HKEx’s business
operations.
3) The SFC exercises very strong oversight over listings regulation functions, and
has special powers in the listings arena.
In addition, if the SFC is satisfied that a conflict of interest exists between the SEHK and
“the proper performance” of a regulatory function, the law empowers the SFC to direct
the Exchange to take steps to address the conflict. Therefore a person who believes he
or she has been prejudiced by a conflict of interest at SEHK can pursue the issue with
the SFC.
The roles of the SEHK and SFC in listings regulation are set out in a detailed MOU. Key
points of the MOU37 include the following:
• The board of the SEHK will not make any decisions on matters covered by the
listings rules, except in exceptional circumstances and with prior notice to the
SFC.
• If the SEHK materially fails to comply with the MOU, the SFC can take any action
it considers necessary.
• SEHK must obtain SFC approval of any policy decisions or directives of general
application, in addition to approval of rules.
37 See http://www.hkex.com.hk/eng/rulesreg/regdoc/documents/mou_28jan03.pdf
Managing Conflicts of Interest in TSX Listed Company Regulation
39
• The SFC receives copies of listing applications, and may provide comments on
them to SEHK or object to approval of the application.
• Comprehensive reporting arrangements to the SFC are set out, to facilitate its
oversight of SEHK’s listings regulation.
• SEHK and SFC will hold monthly “listings liaison meetings”.
In theory, the SEHK Board has the power to make and amend the Listing Rules subject to
the approval of the SFC. However, as required by the MOU, the Listing Rules provide
that all powers and functions of the Board on listings matters are delegated to the
Listing Committee or the Listings Division of the Exchange. The Listing Committee has
delegated most day‐to‐day decisions to the Listings Division. The Committee makes
important decisions, including approval of new listings, findings of breaches of the rules,
imposition of disciplinary penalties or conditions, and reviews of Listings Division
decisions.38
The Listing Committee acts both as an independent administrative decision maker and
an advisory body for the Exchange. The Listing Committee has four principal
functions:39
1) To oversee the Listings Division
2) To provide policy advice to the Listings Division and to approve amendments
to the Listing Rules
3) To take decisions of material significance for listing applicants and listed
companies
4) To act as a review body for decisions made by the Listings Division and by the
Listing Committee.
The Listing Committee has a minimum of 28 members (they share the workload),
including 19 representatives of listed issuers and market practitioners who advise
issuers, and 8 persons who represent investors. It is appointed by the SEHK Board
based on nominations from the Listing Nominating Committee, which is made up of
three non‐executive directors from the HKEx board and the Chairman and two executive
directors of the SFC.
The Listing Committee has specific procedures for handling conflicts of interest that
preclude a member with a material conflict of interest from participating in the
deliberation of an issue.
38 Role and Mode of Operation of the Committee:
http://www.hkex.com.hk/eng/listing/listcomrpt/documents/LCRole_Mode.pdf
39 HKEx Listing Committee Report 2009
Managing Conflicts of Interest in TSX Listed Company Regulation
40
A Listing Appeals Committee is responsible for reviewing decisions made by the Listing
Committee. It consists of three members of the HKEx Board including the Chairman of
HKEx who chairs the committee.40 Appropriate modifications to membership are made
where conflicts of interest arise.
Self‐listing Conflicts
In order to manage the conflicts of interest in HKEx acting as market regulator and at the
same time being a listed company, before HKEx could list legislation required the SFC to
confirm in writing that:
1) satisfactory arrangements had been made to amend the Listings Rules to
deal with the potential conflicts of interest arising should HKEx become a
listed company, and
2) HKEx had made arrangements with the SFC to ensure market integrity and
HKEx compliance with its obligations as a listed company.
If a conflict of interest arises between HKEx’s status as a listed company and the SEHK’s
role as the front‐line listings regulator, the SFC assumes the Exchange’s functions
relating to HKEx’s listing, unless the SFC determines that no conflict exists.
Conflicts with other listed companies have also been addressed. Potential conflicts of
interest are referred to a Conflicts Committee that is comprised of three HKEx senior
executives. If the Committee determines that a conflict exists, it must refer the matter
to the SFC, which may then assume and exercise SEHK’s powers and functions. If an
applicant for listing or a listed company identifies a potential conflict of interest
between HKEx and SEHK’s role as a regulator, the company may raise the issue with the
SFC, and again the SFC may assume the Exchange’s functions on the listings file. The SFC
has established processes for the exercise of SEHK’s listings powers and functions, when
required.
40 Ibid.
Managing Conflicts of Interest in TSX Listed Company Regulation
41
6. TSX Management of Conflicts of Interest
6.1 TSX Demutualization and Management of Regulatory Conflicts of Interest
Historically the TSX has a strong record of taking a proactive approach to ensuring
effective management of the conflicts of interest between its self‐regulatory and
business functions. This was the case even though the TSX demutualized well before
most other exchanges – it was the first exchange in North America to demutualize. At
that time many global exchanges took the position that conflicts of interest were not a
major issue because conflicts had always existed in self‐regulation and an exchange has
strong incentives to maintain market integrity and to protect its reputation. The
creation of independent subsidiary companies such as NYSE Regulation was still years
away.
Even before it demutualized, the TSX transferred its member regulation functions –
supervision of investment dealers’ business conduct, financial compliance and sales
compliance – to the IDA in 1997. The consolidation of the two major SROs’ member
regulation departments streamlined the Canadian SRO system and at the same time
addressed the increasing conflicts of interest with the Exchange’s business strategy as it
positioned itself for demutualization. This step significantly reduced the TSX’s
regulatory footprint, and therefore reduced the scope of the potential conflicts.
Also prior to its demutualization, the TSX reformed its corporate governance and
adopted the standard of requiring 50% of its directors to be independent of both the
Exchange and its member firms, well before this level of independence became the
standard for North American exchanges and SROs.
When it demutualized, in order to address conflicts of interest issues between its
remaining SRO functions and its business operations, the TSX planned to establish an
independent, not‐for‐profit entity, TSE Regulation Services, to carry out its market
regulation functions. A new board‐level committee, the Regulation Committee, was
established to oversee regulatory operations. The Committee was comprised of a
majority of independent directors. This committee’s structure and responsibilities were
very similar to those of the Regulatory Oversight Committees (ROCs) that later became a
popular response to conflicts of interests issues at other Exchanges and SROs, especially
in North America. The new structure for the TSX’s SRO functions was approved by the
OSC and recognized in the new recognition order made by the OSC following its review
of the Exchange’s proposed demutualization.
However, some investment dealers advocated a further separation of TSX’s market
regulation functions because of concerns that TSX could use its regulatory powers to
hinder the development of competitors for trading services – ATSs for example. As a
result, the TSX agreed to create a new, independent SRO in cooperation with the IDA,
Managing Conflicts of Interest in TSX Listed Company Regulation
42
Market Regulation Services (RS). Although the two established SROs sponsored the new
SRO and nominally “owned” RS, half of the board of directors of RS was comprised of
directors who were independent of the TSX, the IDA and member firms.
RS commenced operations in 2002 with a mandate to carry out market regulation for
the TSX and other equity marketplaces – including the new ATSs that were being
launched at the time – on a contract basis. A common set of market conduct rules, the
universal market integrity rules (UMIR), was developed to apply to all exchanges, and RS
performed market surveillance for all equity markets. The OSC amended TSX’s
recognition order to approve TSX retaining RS to carry out market regulation services for
the Exchange.
When market regulation was contracted to RS, the TSX retained its listings operations,
which were and remain an important business for the Exchange. This included all
listings regulation functions. (Note that issuers’ compliance with TSX’s timely disclosure
policy was contracted to RS as part of its market surveillance functions – although TSX
retained ultimate authority over compliance.) At the time both listings business
development functions (including customer services) and listings compliance functions
were part of a unified Listings Department, albeit carried out by separate units.
With the merger of the IDA and RS in 2007 to create IIROC, the TSX became a
“marketplace member” of IIROC and retained IIROC to perform market regulation
services. Because of this relationship, the TMX Group continues to have a director’s
seat on IIROC’s board of directors, which is filled by TMX’s CEO.
It is important to understand the history above because the fact that the TSX
relinquished responsibility for directly carrying out member and market regulation
functions meant that the majority of its business–regulation conflicts had effectively
been addressed. Basically listings regulation was the sole remaining self‐regulatory
function carried out directly by the TSX after it transferred performance of member
regulation to the IDA and market regulation to RS. This may have reduced the onus on
the Exchange and the OSC to introduce formal structures and procedures to address
conflicts of interest in TSX’s remaining self‐regulatory role, listings regulation (other than
for purposes of its self‐listing). The fact that no one voiced concerns over listings
regulation conflicts at the time was no doubt a factor.
6.2 Current TSX Management of Overall Conflicts of Interest
Except on the issue of self‐listing conflicts (as described below) the TSX does not have
any policies or procedures that apply to conflicts of interest between its self‐regulatory
responsibilities and its business activities. However, the TMX Group has implemented
strong conflict of interest policies in other operating units, which indicates that it is
sensitive to the need to manage conflicts of interest in certain areas.
Managing Conflicts of Interest in TSX Listed Company Regulation
43
Montreal Exchange Regulatory Division and CDCC
The TMX Group’s Montreal Exchange (MX) does have strong mechanisms in place to
address conflicts of interest relating to its Regulation Division. Although the TSX’s
former self‐regulatory responsibilities for member and market regulation are now
covered by IIROC, the Montreal Exchange continues to perform market regulation
functions for its derivatives market. The Exchange and the Division are both recognized
as a self‐regulatory organization by Quebec’s Autorité des marchés financiers (AMF).
According to the MX: “The Regulatory Division governance and structure are designed to
ensure its independence, given the status of the Exchange as a for‐profit corporation. …
due regard is given to the preservation of the independence of the self‐regulatory
function of the Division and to its obligations to investors and the general public.”41
The MX’s mechanisms to address conflicts of interest comply with the terms of its
recognition order from the AMF, and include corporate governance, organizational
structure and internal policies and procedures, specifically:
• The Division operates as a separate and independent business unit of the
Exchange. Its financial budgets, as well as its financial results, are separated from
those of the Exchange. Its operations are self‐funded and are carried out on a
not‐for‐profit basis.
• The Special Committee – Regulatory Division, which is appointed by the Board of
Directors of the Exchange, oversees the Division.
• The Special Committee – Regulatory Division must be composed of a majority of
independent members.
In addition the TMX Employee Code of Conduct contains specific “partition measures”
between the Regulatory Division and business operations.42 The code states that:
To ensure the independence of the Regulatory Division and that of its
employees, MX has established strict partition measures to ensure that there is
no conflict of interest with the other activities of MX, and that confidential
information currently or potentially held by the Regulatory Division concerning
its functions, activities or files remain confidential and is not communicated,
disclosed or exchanged inappropriately to the for‐profit services of MX or third
parties.
The code requires physical separation of offices of the Regulatory Division, restricted
access to its paper and computer files, maintenance of confidentiality, and restricts
41 Montreal Exchange website: http://reg.m‐x.ca/en/about/governance_structure
42 TMX Employee Code of Conduct, October 2009:
http://www.tmx.com/en/pdf/TSXGroupEmployeeCodeOfConduct.pdf
Managing Conflicts of Interest in TSX Listed Company Regulation
44
involvement in regulatory matters. It is strictly forbidden for the Regulatory Division to
disclose, communicate or exchange with other departments or services of TMX any
information or data on transactions conducted by a participating organization of TMX.
The code also requires a staff member who becomes aware of a situation of real,
potential or apparent conflict of interest involving TMX and the Division to immediately
report it in writing, for referral to the Vice‐President, Legal Affairs.
Similar provisions apply to partition measures between the MX and its clearing agency,
the Canadian Derivatives Clearing Corporation (CDCC).
Market Information Processor
In the TSX’s 2009 application to be appointed by the CSA as the official market
information processor for exchange‐traded securities, the TSX revised its original
proposal to include a Governance Committee with representation from various
marketplaces to oversee the operations of the information processor. It also took other
steps to reinforce the neutrality of the information processor and its independence from
the business of TMX Group. These changes were made to “address CSA staff concerns
regarding the proposed governance structure and the potential conflicts of interest, real
or perceived, associated with TSX, a competing marketplace, acting as an information
processor”. In approving the TSX as an information processor, the CSA concluded the
TSX met all of its criteria, adding:43
We note that the governance structure proposed by the TSX promotes the
independence of the governance of the information processor from that of TSX’s
business operations, and also ensures representation from each of the marketplaces
contributing the data. The technology solution provides no unfair advantage to TSX,
and an undertaking to this effect has been provided by TSX.
6.3 TSX Management of Listings Regulation Conflicts
This section addresses management of the overall conflicts of interest between listings
regulation and the TSX’s business. Section 6.4 addresses self‐listing conflicts relating to
the listing of TMX Group shares on the TSX.
43 CSA Staff Notice 21‐309, Information Processor for Exchange‐Traded Securities Other Than
Options, June 5, 2009: http://www.bcsc.bc.ca/policy.aspx?id=7846&cat=2%20‐
%20Certain%20Capital%20Market%20Participants
Managing Conflicts of Interest in TSX Listed Company Regulation
45
Listings Department Organization and Internal Policies
While the TSX’s recognition order contains specific conditions to address the self‐listing
conflicts of interest, it does not contain any terms that require the TSX to separate its
listings regulation operations from business operations, or to implement any policies or
procedures to address the conflicts of interest between its listings business and listings
regulation mandates. Only two sections of the recognition order address listings
regulation in general; both pertain to the listings rules:
• Paragraph 18 Sanction Rules – TSX shall ensure, through RS Inc. and otherwise,
that its Participating Organizations and its listed issuers are appropriately
sanctioned for violations of the Rules. In addition, TSX will provide notice to the
Commission of any violations of securities legislation of which it becomes aware
in the ordinary course operation of its business.
• Paragraph 21 Listed Company Rules – TSX shall ensure, through RS Inc. and
otherwise, that it has appropriate review procedures in place to monitor and
enforce issuer compliance with the Rules.44
As noted above, when market regulation was contracted out to RS shortly after the TSX
demutualized, the TSX retained its listings operations, including all listings regulation
functions, excepting day‐to‐day administration of TSX’s timely disclosure policy, which
was contracted to RS as part of its market surveillance functions. The listings regulation
functions are the primary self‐regulatory responsibilities that the TSX still performs
directly.
At the time that the TSX demutualized, both listings business development functions
and listing regulation functions were part of a unified Listings Department, but separate
groups performed the functions. This structure remains in place today. TMX Group’s
“Issuer Services” business line encompasses both TSX and TSXV listings operations. The
TSX Issuer Services Department is responsible for all TSX listings functions, which are
performed by three units:
• Listings Services – administers the initial listing requirements and the continued
listing rules on additional issues of securities, corporate transactions, etc.
• Compliance and Disclosure – administers the continuing requirements to remain
listed (including delisting procedures), review of the suitability of proposed
directors and officers, and deals with compliance with the timely disclosure
policy.
• Business Development – promotes listing on both the TSX and TSXV and advises
issuers on the listing process.
44 OSC ‐ Amendment to Recognition Order, September 3, 2002, (2002) 25 OSCB 6141
Managing Conflicts of Interest in TSX Listed Company Regulation
46
All three units report to the Senior Vice‐President, Toronto Stock Exchange.
The TSX advised that it does not have any formal organization structure or documented
policies and procedures in place to address conflicts of interest between its business
operations and its listings regulation responsibilities. The Compliance and Disclosure
unit is physically separate from the rest of the Department and it is assumed that access
to its files is restricted – but these policies are not documented, nor are there any
documented policies on maintaining confidentiality of information or on what
information may be shared with other parts of the Department or TMX Group.
Decisions on approving new listings and on the application of continued listing rules
(other than the rules administered by the Compliance and Disclosure unit) are made by
its staff listing committee. Only directors and managers of Listings Services are on the
committee and involved in decisions on applications. TSX’s SVP and Compliance and
Disclosure unit staff are invited to attend committee meetings but are not voting
members. Business development staff does not attend.
The TSX also has a Listings Advisory Committee that provides input on regulatory policy
issues and proposed changes to the listings rules. The Committee’s 16 members
represent stakeholders including securities lawyers, investment bankers and
institutional investors. The Exchange does not disclose the identity of members. The
Committee does not review individual files or specific applications; it deals with issues
on a general level. The appointment process is informal. The TSX appoints members
based on internal suggestions.
The TMX Group website pages on Listing services do not describe the organizational
structure of the TSX Issuer Services Department, or state that any particular group
within the department is responsible for regulatory matters such as approving listing
applications and administering compliance with continued listing rules. It is also not
clear from the site who is on the staff listing committee and how the integrity of its
decision‐making process is protected. The role of the Listings Advisory Committee is not
described on the website, nor is the make‐up of the Committee disclosed.
The website does not provide any information about policies and procedures to address
conflicts of interest, except for those applicable to self‐listing conflicts as noted in
section 6.4 below.
The website pages for listings provides a list of contacts, first and foremost “business
Managing Conflicts of Interest in TSX Listed Company Regulation
47
development” contacts who advise issuers interested in applying for listing.45 Persons
responsible for administering the continued listing rules are listed under “Listed Issuer
Services”. There is also a “Relationship Management” team “available to discuss any
concerns and/or answer any questions with respect to your listing…”. A few contacts
are listed under “Compliance and Disclosure”: two at IIROC covering market
surveillance and news releases, one at TSX for mining disclosure standards, and a
general line and email address at TSX for disclosure issues. This contact information
does not make it clear that there is a unit of the Issuer Services Department that is
responsible for some compliance functions.
The TSX listings web site content contrasts with those of most of the other exchanges
covered in this Report, which are generally careful to make clear the organizational
structure of listings services functions, and which group is responsible for vetting new
listing applications and for compliance and regulatory matters under the listing rules.
Some websites, notably those of ASX and HKEx, provide extensive disclosure on how
conflicts of interest are managed and the policies and procedures that are in place to
ensure that the integrity of regulatory decisions is maintained.
In general the TSX listings web pages are very thorough, providing access to a wide
range of rules, regulatory guidance, information about products and services, and
contacts. From a service standpoint, the website content is better than the other
exchanges’ content, in the author’s assessment. It raises a question about why the
conflicts issue has not received similar treatment.
TSX View on Conflicts of Interest
The TSX advised that it does not believe there are any conflicts of interest between its
listings regulation functions and its listings business, or the TMX Group’s overall
businesses, given how its processes work and its approach to listings regulation. The
interests of the TSX and maintaining a successful and credible listings business are best
served by maintaining the integrity of the listings rules and standards. Therefore the
TSX believes that the goals of maintaining the profitability of the business and
regulatory standards are congruent.
The TSX noted that the listings committee, which is comprised only of staff involved in
administering the listings rules, makes decisions on initial listing. In its view, staff
members are very focussed on quality and ensuring that applicants meet the
requirements. The TSX also pointed out that there is a great deal of transparency
around the listings process, which is followed closely by investment bankers involved in
new issues and lawyers who advise issuers. Extensive disclosure is required for IPOs and
45 See Listings “Contact Us” page:
http://www.tmx.com/en/listings/contact.html?relationblock=1#relation
Managing Conflicts of Interest in TSX Listed Company Regulation
48
other forms of listings, so it is clear if an applicant does not meet a requirement. The
media also scrutinizes any significant issues around IPOs, new listings and additional
issues made by existing listed companies.
The Exchange believes that it takes regulatory policy stances in favour of sound
regulation and maintenance of high standards. It points to these examples:
• In 2009, the TSX implemented a new rule requiring shareholder approval of the
acquisition of a public company if the transaction would result in dilution of
current shareholders’ equity by more than 25%. A number of listed issuers and
securities lawyers strongly opposed this change.
• TSX is currently proposing to require unitholder approval for investment fund
acquisitions as well.
• TSX issued a staff notice in 2009 that provided guidance on use of the “financial
hardship exemption” from shareholder approval of additional issues. TSX has
rejected several applications to use the exemption.
• A staff notice issued in 2006 provided guidance on the pricing of rights offerings,
stating that offerings should be priced at a level that encourages participation by
small shareholders, to ensure that large holders do not obtain a large block
without paying a premium.
• Another notice in 2005 imposed disclosure and disinterested shareholder
approval requirements on exploration company spinouts in the oil and gas
sector, where management teams were purchasing securities in private
placements at low values.
Other Views on Conflicts of Interest
While the TSX maintains that it does not face conflicts of interests relating to listings
regulation given its business objectives and approach, several issues have led to
complaints about the potential for conflicts of interest to affect decisions on regulatory
policy in the listings area, as well as on decisions taken in administering TSX’s listing
requirements and continued listing rules.
Recently the Ontario Legislative Assembly’s Standing Committee on Government
Agencies issued a report on the OSC. The report addressed the TSX’s listings regulation
functions, based in part on representations from FAIR Canada. The Committee’s report
stated that, “Our concern is with the perception that the TSX falls below international
standards with respect to the separation of its regulatory and commercial activities”. It
concluded:
The Committee recommends that the Commission review the potential for the
conflict of interest between the regulatory and commercial functions of the
Managing Conflicts of Interest in TSX Listed Company Regulation
49
Toronto Stock Exchange and that it take the steps necessary to address any
problems identified.46
Our Report finds that the “perception that the TSX falls below international standards”
in this area is accurate.
FAIR Canada is on record as advocating implementation of specific mechanisms to
address conflicts in the listings area:47
It is our position that the TSX/TSX‐V listed company regulatory function should
either operate as a separate entity within the TSX with its own board of directors or
at the very least the regulatory function should operate independently of the
business side of the TSX with appropriate Chinese Wall and other checks and
balances.
FAIR Canada cited two TSX listing rule changes in its comment on conflicts in listings
regulation.48
Firstly, it noted the TSX’s speedy passage of a new rule to permit the listing of special
purpose acquisition corporations (SPACs), which it characterized as “blank cheques”
offerings. (SPACs have no existing business so it is difficult to assess what one is
investing in.) The proposed rule was adopted and approved by the OSC following a
short 30‐day comment period in spite of comments (including FAIR Canada’s)
questioning the appropriateness of SPACs as investment vehicles. The total timeframe
from the initial rule proposal to implementation was four months. In FAIR Canada’s
view the fast process for implementation of this rule reflected TSX’s business interest in
introducing a new listing product as soon as possible.
FAIR Canada contrasted the fast process for adopting the rule on SPACs with the lengthy
process for adopting a rule that strengthened protection of shareholders against
dilution of their equity when a listed company issues additional shares to pay for an
acquisition. The rule was initially proposed in 2007 but following the expiry of a 60‐day
comment period the TSX had still not acted on the proposal over one year later. The
TSX issued a specific rule proposal on the issue in 2009 and the rule was adopted in
September 2009. It was implemented in November 2009, just over two years after the
original request for comments was issued. FAIR Canada stated that the slowness of
TSX’s response to the dilution issue indicated that investor protection issues are a lower
priority for the Exchange.
46 SCOGA (2010), recommendation 12, page 44
47 FAIR Canada website, “Is the TSX leading Canada in a ‘Race to the Bottom’”, April 13, 2009:
http://faircanada.ca/top‐news/is‐the‐tsx‐leading‐canada‐in‐a‐race‐to‐the‐bottom/
48 Ibid.
Managing Conflicts of Interest in TSX Listed Company Regulation
50
6.4 TSX Management of Self‐listing Conflicts
The OSC issued an amended recognition order in 2002 to permit the listing of TSX Group
49shares on the TSX.50 In the order the OSC imposed detailed requirements that the TSX
must comply with in managing conflicts that arise from self‐listing – namely, conflicts in
the approval of the initial listing of TSX Group under the TSX listing requirements;
conflicts in the TSX monitoring compliance by its parent company with TSX listing rules
and potential conflicts in the TSX regulating compliance with its listings rules by
companies that compete with the TSX as a business.
Several safeguards to address conflicts of interest were instituted under the terms of
the order:
• Initial listing of TSX Group – The TSX was required to file a report with the OSC on
its review of its own listing application with a recommendation for decision by
the OSC’s Director of Corporate Finance.
• TSX Group’s compliance with continued listings rules – The TSX was required to
establish a Conflicts Committee to consider any matters on TSX Group’s ongoing
compliance with the listings rules. In addition the TSX must file with the OSC all
materials that a listed issuer is required to file with TSX, and advise of any
deficiencies in those filings.
• TSX’s handling of listing applications and compliance issues for issuers that are
competitors of TSX Group – The Conflicts Committee also addresses the
Exchange’s application of listing rules to competitors.
TSX Conflicts Committee
The Conflicts Committee’s mandate is to review any matter that concerns a “conflict of
interest or potential conflict of interest relating to the continued listing of TSX Group or
the initial listing or continued listing of competitors”. (A competitor is basically any
entity that is in competition to a significant extent with a business of TMX Group. The
TSX must maintain a list of competitors. It advises that the list is quite short.) If the
Committee finds that a conflict exists in a listings regulation matter, it makes a written
recommendation to the OSC on how to deal with the matter along with a summary of
the issues. The OSC may then approve the recommendation, ask the TSX to reconsider,
or direct the TSX to take other action.
If a competitor believes it is not being treated fairly by TSX due to a conflict then TSX
must refer the matter to the Director of the OSC. The OSC may also intervene to ensure
that a competitor’s listing is treated fairly by TSX. A competitor may waive the conflict
49 The TSX Group has since changed its name to the TMX Group.
50 OSC ‐ Amendment to Recognition Order, September 3, 2002, (2002) 25 OSCB 6141
Managing Conflicts of Interest in TSX Listed Company Regulation
51
procedures, in which case the TSX deals with the matter in the normal course.
The Committee’s members are five TMX Group executives, two independent persons
and a representative of RS. The TMX Group Governance Committee nominates the
two independent members of the Conflicts Committee.51 The Committee meets as
needed, but at least twice annually.
The Conflicts Committee has considered several issues relating to its parent’s listing,
including its normal course issuer bids and an issuance of shares when the TMX Group
acquired the MX. Apparently the Committee has not addressed any conflicts with
competitors because where such issues have arisen, the listed company involved waived
the application of the special procedures that are available to prevent conflicts of
interest.
In the author’s assessment, the arrangements imposed by the OSC in the order are
thorough and appear to effectively address the self‐listing conflicts.
51 http://www.tmx.com/en/pdf/TMXGroupGovCmteCharter.pdf
Managing Conflicts of Interest in TSX Listed Company Regulation
52
7. Policy Options for Strengthening TSX’s Management of Listings Conflicts of Interest
7.1 Overall Conflicts of Interest in Listings Regulation
The author acknowledges that the TSX is largely correct in asserting that its regulatory
and commercial objectives are aligned because a successful business depends on market
integrity. Other exchanges have long taken the same position, including the exchanges
reviewed for this Report. However, that does not mean that depending only on this
broad alignment of interests to manage conflicts of interest in listings regulation is
adequate, for two reasons. Firstly, even if the two interests are broadly aligned,
conflicts could result in commercial interests influencing individual regulatory policy
decisions, listing decisions and decisions on the application of listing rules. Examples
were noted in section 4.1. Secondly, a perception clearly exists that conflicts of interest
could affect the administration of an exchange’s listings regulation program, especially
at a for‐profit, self‐listed exchange that operates in a competitive environment.
Governments, regulators, investors, media and other observers have expressed this
perception around the world.
Therefore, the TSX should implement safeguards to minimize the risk that conflicts will
affect the administration of listings regulation, as well as to address the perception that
they could do so. It is important to address perception issues because failure to do so
could have a negative impact on the credibility of, and confidence in, the Exchange and
its listings program. Other major exchanges have responded to both the perception and
the reality of potential conflicts of interest arising by implementing concrete
mechanisms to mitigate conflicts, and to ensure they are properly managed if they arise.
This Report concludes that the TSX should do the same – even if it believes it is only to
address a perception problem.
The purpose of this Report is not to recommend that the TSX adopt specific mechanisms
to address conflicts of interest. Other exchanges have adopted a range of structures,
policies and procedures to address conflicts and it is not clear that any single approach
represents the “best practice”. It is clear, however, that the TSX’s current approach is
not best practice, and lacks basic safeguards that one would expect to see in place.
This Report’s review of approaches adopted by other exchanges to manage conflicts of
interest in listings regulation indicate there are three main alternatives:
1) Transfer most listings regulation responsibilities to another regulator – either the
securities commissions or an independent SRO such as IIROC.
2) Establish a regulation subsidiary company with independent governance to
perform listings regulation.
Managing Conflicts of Interest in TSX Listed Company Regulation
53
3) Establish a listings regulation department that is separate from the business
operations of the Exchange (including listings business development) to perform
listings regulation.
The first alternative is not currently considered realistic in Canada since the TSX has not
indicated that it has any interest in relinquishing its listings regulation role, nor has any
regulator indicated any interest in assuming it. The last two alternatives are considered
realistic options for the TSX today. These alternatives are analyzed below.
1) Transfer of Listings Regulation Responsibilities to Another Regulator
This approach would be similar to the UK’s approach, where the FSA carries out most
listings regulation functions that apply to the LSE and all other equity exchanges in the
UK. This model has not found favour in other jurisdictions, where Listings is seen as an
exchange function and, at a minimum, exchanges set their own requirements for initial
listing. This is true even where exchanges have relinquished most of their selfregulatory
responsibilities. Nasdaq is a prime example.
There are also several important disadvantages to vesting listings regulation in a
statutory regulator or independent SRO rather than the exchanges. The main
disadvantage is that Listings is and will remain an important business line for stock
exchanges. It is an important business driver and a successful listings business is very
important to the competitive position of an exchange, not only nationally but also
internationally. This is particularly true for the TSX, because of its strong reputation as a
listings venue, the profitability of its listings business, and the longstanding significance
of competition with the major US exchanges for listings business.
While the UK’s example illustrates that an exchange does not necessarily need to set the
listings requirements and carry out continued listings regulation in order to offer valued
listings services, it is difficult for exchanges to differentiate their listings services and
position in the markets if the same listings requirements and rules apply on all
exchanges. The historical experience in Canada demonstrates that there is value in
enabling exchanges to carve out different market segments in the listings business, to
customize their rules and services to meet the specific needs of those market segments,
and to position their markets with investors accordingly. In addition, arguably an
exchange that can charge sizeable fees for listings should assume a reasonable degree of
responsibility for ensuring that its listed securities meet certain standards of integrity
and quality, for carrying out “due diligence” on listing applicants to ensure they meet
those standards, and for setting and ensuring ongoing compliance with rules that
protect the interests of shareholders and prospective investors in listed companies to
the extent that their interests are not already protected by law.
In spite of these disadvantages, centralizing at least part of the listings regulation
Managing Conflicts of Interest in TSX Listed Company Regulation
54
function is a policy option that could be explored if concerns that increased competition
for listings services within Canada could lead to lower standards of regulation become
real concerns. If another regulator assumed some of the TSX’s listings regulation
functions and imposed a single, sound set of minimum standards that applied to listing
on all exchanges, it would ensure that competition did not lead to a “race to the
bottom”. The minimum standards could cover continued listings rules, such as rules on
disclosure and minority shareholder protection, thus leaving it to each exchange to set
its own requirements for initial listing.
Several precedents exist for regulators establishing minimum standards applicable to all
exchanges and marketplaces. The CSA has already assumed responsibility for the
corporate governance guidelines for public issuers in Canada, which the TSX used to set.
In the area of trading rules, the universal market integrity rules (UMIR) that IIROC sets
and administers provide a similar set of uniform standards. UMIR establishes the
standards for trading conduct on all exchanges and other equity marketplaces in
Canada, including the TSX and TSXV. And finally, IIROC already provides several types of
regulatory services to the TSX and other marketplaces under regulation services
agreements.
2) Establish an Independent Regulation Subsidiary
The main advantage of establishing a regulation subsidiary company with independent
governance to perform listings regulation is that it provides the strongest safeguards
against conflicts of interest. A subsidiary has independent governance in the form of its
own board of directors, and management that is independent of an exchange’s business
if the subsidiary’s CEO reports only to its board. A subsidiary is a separate organization
and is likely to have more stringent policies on Chinese walls, confidentiality of
information and so on. A subsidiary can operate as a non‐profit entity in a clear‐cut
manner, and has an opportunity to develop its own corporate culture, operating policies
and procedures, and human resources policies. Finally, a separate organization is the
most visible and transparent solution for the public, regulated firms, supervising
regulators and other stakeholders.
On the other side of the coin, creating a subsidiary with its own board and structure is
more complex and expensive than other mechanisms. It could reduce synergies
between the business and regulation functions of listings services, including introducing
limits on the legitimate sharing of information and views. It could also lead to the
imposition of unnecessary requirements to minimize conflicts.
The TSX might argue that a subsidiary is not necessary or practical considering that its
SRO responsibilities are limited, compared to those of many other exchanges.
Exchanges that established SRO subsidiaries did so mainly because they had a wide
range of SRO functions, so the scale of their regulation operations justified such an
approach. As it turns out, the NYSE and ASX have transferred most of their member and
Managing Conflicts of Interest in TSX Listed Company Regulation
55
market regulation functions to FINRA and ASIC respectively, leaving listings regulation as
the main function administered by NYSE Regulation and ASX Market Supervision. But
the subsidiaries were established under different circumstances. Exchanges that have
more limited SRO functions have not set up SRO subsidiaries, and use less complex
approaches to manage listings regulation conflicts.
3) Establish a Separate Listings Regulation Department
The advantages of establishing a listings regulation department that is separate from the
business operations of the Exchange (including listings business development) to
perform listings regulation are:
• The model should produce strong safeguards against conflicts, since there is a
clear line between business and regulation activities and staff.
• The model is reasonably visible and clear to listed companies and other
stakeholders, if communicated and administered properly.
• It is less complex and costly than a subsidiary, and fairly easy to implement.
The only potential disadvantage of this model is that an exchange might argue that a
separate department is unnecessary given the degree of conflicts that actually arise.
But the appearance of the potential for conflicts suggests that this model may be a
minimum standard to address conflicts. Arguably the minor additional costs and
additional policies and procedures involved are justified in the context of the need to
manage conflicts in a sound, transparent manner.
Summary
Under either of the last two alternatives above, the TSX should establish internal policies
and procedures to identify and ensure appropriate handling of conflicts. The TSX might
consider adopting policies and procedures as the sole response to strengthen its
management of conflicts, but it is questionable if adopting internal policies alone would
be adequate because they do not address all of the management, cultural and staff
incentive issues that arise.
In the author’s view, a sound starting point for the TSX to address listings regulation
conflicts would be to simply build on the structures, policies and procedures that the
TMX Group already has in place at the MX for the MX Regulatory Division. (See section
6.2.) The MX’s arrangements have not been reviewed for this Report, but one assumes
that both the Exchange and AMF are satisfied that those arrangements are working
satisfactorily. The MX Regulatory Division provides an existing, operating separate
structure for SRO functions and a set of internal policies and procedures at TMX that
could easily be adapted to the TSX’s listings regulation functions.
Managing Conflicts of Interest in TSX Listed Company Regulation
56
The TSX could also build on its existing Conflicts Committee to support management of
conflicts of interest by expanding the mandate of the Committee to review other issues
where a conflict may arise or has been alleged to exist. The Exchange might also
consider raising the level of transparency around listings regulation processes, including
how listings applications are vetted and the role of the staff listing committee, how
decisions on administration of continued listings rules are made, and the mandate,
activities and composition of the Listings Advisory Committee.
7.2 Self‐listing Conflicts of Interest
The assessment of the author is that self‐listing conflicts have been satisfactorily dealt
with in the terms and conditions of the recognition order issued by the OSC, as
described in section 6.4 above, and in the TSX’s administration of those terms and
conditions. Therefore we have not set out proposed alternatives for improving
management of those conflicts in this Report. If the TSX implements policy changes to
address overall conflicts of interest in listings regulation as suggested above, some
consequential changes to the policies and procedures on self‐listing conflicts may need
to be made. For example, this could be the case if the mandate of the Conflicts
Committee was amended to cover additional types of conflicts.
7.3 Policy Review Process
This section covers potential next steps in reviewing the TSX’s management of conflicts
of interest in its Listings functions.
As noted above, the Ontario Standing Committee on Oversight of Government Agencies
(SCOGA) has called for the OSC to review the TSX’s handling of conflicts of interest in
listings regulation. But rather than placing the initial onus on the OSC to act, the author
believes it is preferable for the TSX to take the initiative to address the issues identified
in this Report. It is the TSX’s organization, business and regulatory responsibilities that
are in question, and the TSX is most familiar with those operations and the issues that
arise. As a recognized boy with self‐regulatory responsibilities and a public interest
mandate, the Exchange should take these issues on board and develop appropriate
responses.
The TSX should undertake to review its approach to managing those conflicts of interest
and, following internal review and consideration, propose changes that would
significantly strengthen safeguards designed to mitigate conflicts and ensure they are
appropriately managed. The TSX should then publish its proposed changes for public
comment, and file the proposals with the OSC for approval. (While rule changes would
not necessarily be involved, it is assumed that the OSC would want to review any change
Managing Conflicts of Interest in TSX Listed Company Regulation
57
in the TSX’s organizational structure or internal policies that address conflicts of interest
between its business interests and its regulatory responsibilities, since the latter are
covered in several sections of the TSX’s recognition order issued by the OSC.)
The public comment process should allow sufficient time for interested persons to
digest the TSX’s proposals and formulate responses, including advocacy groups like FAIR
Canada, as well as listings customers and those who advise listings applicants and listed
issuers. This suggests that proposals should be open for comment for at least 60 days.
Consistent with the established public notice and comment process, the TSX would be
required to consider and respond to all comments received, which would ensure that
the OSC considers both comments submitted and the TSX’s responses to them in
evaluating the TSX’s proposals.
The benefits of this approach are that it would ensure that:
• The TSX is given the opportunity to first propose an approach that it believes is
the most practical and effective response to the issues, given its experience in its
Listings business and regulation functions.
• Market participants and other stakeholders have an opportunity to participate in
the debate by commenting on the TSX’s proposals, and the process would
ensure that the TSX and OSC consider their comments.
If the TSX declines to take the initiative to review its approach to managing conflicts of
interest in its listings regulation functions then it may be necessary for the OSC to
encourage it do so, or for the OSC to take the initiative itself, as the SCOGA report
recommended.
– End of Report –
Managing Conflicts of Interest in TSX Listed Company Regulation
58
Appendix A
TSX Company Manual
Special Provisions on Conflicts of Interest
Location: TSX Company Manual > Special Provisions Respecting Conflict of Interest and
Competitors of TSX Group Inc.
http://tmx.complinet.com/en/display/display_main.html?rbid=2072&element_id=440
Special Provisions Respecting Conflict of Interest and Competitors of TSX Group Inc.
General
The Toronto Stock Exchange is operated by TSX Inc. TSX Inc. is recognized as a stock
exchange by the Ontario Securities Commission (“OSC”) under a recognition order which
contains certain terms and conditions. In conjunction with the listing of TSX Group Inc.
(TSX Group”), the parent company of TSX Inc. on the Toronto Stock Exchange, the OSC
amended the terms and conditions applicable to TSX Inc. to detail certain special listing
related conditions to ensure TSX Inc. follows appropriate standards and procedures with
respect to the initial and continued listing of TSX Group and Competitors of TSX Group
(as defined below). These procedures require TSX Inc. to provide the following
disclosure in the Toronto Stock Exchange Company Manual.
Definition of Competitor
For the purposes of these special provisions, Competitor” means any person, the
consolidated business and operations or the disclosed business plans of which are in
competition, to a significant extent, with the listing functions, trading functions, market
data services or other material line of business of TSX Group or its affiliates.
Conflicts Committee
TSX Inc. has established a Conflicts Committee to review any matters brought before it
regarding a Conflict of Interest. “Conflict of Interest” is defined as a conflict of interest or
potential conflict of interest relating to the continued listing on TSX Inc. of TSX Group or
the initial listing or continued listing of Competitors.
Referrals to Director of the OSC
Where a Competitor certifies to TSX Inc. that information required to be disclosed to the
Conflicts Committee or TSX Inc. in connection with an initial listing or continued listing
matter of the Competitor is competitively sensitive and the disclosure of that
information would in its reasonable view put it at a competitive disadvantage with
respect to TSX Group, TSX Inc. will refer the matter to the Director of the OSC requesting
that the Director review issues relating to the competitively sensitive information. The
Managing Conflicts of Interest in TSX Listed Company Regulation
59
Conflicts Committee will consider all other aspects of the matter in accordance with the
listing‐related procedures. In addition, at any time that a Competitor believes it is not
being treated fairly by TSX Inc. as a result of TSX Inc. being in a Conflict of Interest
position, TSX Inc. will refer the matter to the Director of the OSC. Finally, the OSC has
the jurisdiction under the Securities Act (Ontario) to intervene at any time to ensure
that Competitors are treated fairly in respect of listing and continued listing matters.
Waiver by Competitor
In any initial listing or continued listing matter of a Competitor, the Competitor may
waive the application of the procedures set out in these special provisions by providing
a written waiver to TSX Inc. and the Director of the OSC. Where a waiver is provided,
TSX Inc. will deal with the initial listing or continued listing matter in the ordinary course
as if no Conflict of Interest exists.
Listing Related Procedures
A complete copy of the listing related procedures is attached and can also be found in
the September 13, 2002 edition of the Ontario Securities Commission Bulletin, (2002) 25
OSCB 6141.
Managing Conflicts of Interest in TSX Listed Company Regulation
60
Appendix B
OSC Recognition Order of TSX (2002) –
Listing‐Related Conditions
Location: TSX Company Manual > Special Provisions Respecting Conflict of Interest and
Competitors of TSX Group Inc. > Appendix I Listing‐Related Conditions
http://tmx.complinet.com/en/display/display_content.html?rbid=2072&element_id=44
7&record_id=447
1. Underlying Principles
1.1. TSX carries on the business of the Toronto Stock Exchange.
1.2. TSX Group proposes to become a listed company on TSX, which will be whollyowned
by TSX Group.
1.3. TSX will report to the Director (the “Director”) of the Ontario Securities Commission
(“OSC”) or other members of the staff of the OSC certain matters provided for in this
Appendix I (the “Listing Related Procedures”) with respect to TSX Group or certain other
TSX‐listed issuers that raise issues of conflict of interest or potential conflict of interest
for TSX,
1.4. The purpose of this reporting process is to ensure that TSX follows appropriate
standards and procedures with respect to the initial and continued listing of TSX Group
and Competitors, to ensure that TSX Group is dealt with appropriately in relation to, and
Competitors are treated fairly and not disadvantaged by, TSX Group’s listing on TSX. For
purposes of these Listing‐Related Procedures, “Competitor” means any person, the
consolidated business and operations or the disclosed business plans of which are in
competition, to a significant extent, with the listing functions, trading functions, market
data services or other material line of business of TSX Group or its affiliates.
2. Initial Listing Arrangements
2.1. TSX will review, in accordance with its procedures, the TSX Group initial listing
application. A copy of the application will be provided by TSX to the OSC’s Director,
Corporate Finance at the same time that the application is filed with TSX.
2.2. Upon completing its review of the application and after allowing TSX Group to
address any deficiencies noted by TSX, TSX will provide a summary report to the OSC’s
Director, Corporate Finance, with its recommendation for listing approval, if made. The
summary report will provide details of any aspects of the application that were atypical
as well as any issues raised in the process that required the exercise of discretion by TSX.
Any related staff memoranda, analysis, recommendations and decisions not included in
Managing Conflicts of Interest in TSX Listed Company Regulation
61
the summary report will be attached for review by the OSC’s Director, Corporate
Finance. A copy of TSX’s current listing manual will also be provided to the OSC’s
Director, Corporate Finance.
2.3. The OSC’s Director, Corporate Finance will have the right to approve or disapprove
the listing of the TSX Group shares. In the event of disapproval, TSX Group will have the
opportunity to address the concerns of the OSC’s Director, Corporate Finance and may
resubmit an amended application for listing, or amended parts thereof to TSX, which
will provide a revised summary report and any new materials to the OSC’s Director,
Corporate Finance in accordance with section 2.2, along with a copy of the amended
application.
3. Conflicts Committee
3.1. TSX will establish a committee (the “Conflicts Committee”) that will review any
matters brought before it regarding a conflict of interest or potential conflict of interest
relating to the continued listing on TSX of TSX Group or the initial listing or continued
listing of Competitors (each, a “Conflict of Interest”). Without limiting the generality of
the above sentence, continued listing matters include the following;
(a) matters relating to the continued listing of TSX Group or a Competitor or of a
listing of a different class or series of securities of TSX Group or a Competitor
than a class or series already listed;
(b) any exemptive relief applications of or approvals applied for by, TSX Group or
a Competitor;
(c) any other requests made by TSX Group or a Competitor that require
discretionary involvement by TSX; and
(d) any listings matter related to a TSX‐listed issuer or listing applicant that
asserts that it is a Competitor.
3.2. Notwithstanding section 3.1, where a Competitor certifies to TSX that information
required to be disclosed to the Conflicts Committee or TSX in connection with an initial
listing or continued listing matter of the Competitor is competitively sensitive and the
disclosure of that information would in its reasonable view put it at a competitive
disadvantage with respect to TSX Group, TSX will refer the matter to the Director,
requesting that the Director review issues relating to the competitively sensitive
information. The Conflicts Committee shall consider all other aspects of the matter in
accordance with the procedures set out in section 3.8. In addition, at any time that a
Competitor believes that it is not being treated fairly by TSX as a result of TSX being in a
conflict of interest position, TSX will refer the matter to the Director.
3.3. In any initial listing or continued listing matter of a Competitor, the Competitor may
waive the application of these Listing‐Related Procedures by providing a written waiver
Managing Conflicts of Interest in TSX Listed Company Regulation
62
to TSX and the Director. Where a waiver is provided, TSX will deal with the initial listing
or continued listing matter in the ordinary course as if no Conflict of Interest exists.
3.4. The Conflicts Committee will be composed of the Chief Executive Officer of TSX, the
general counsel of TSX ( (the “Committee Secretary”), the senior officer responsible for
listings of each of TSX and TSX Venture Exchange Inc., the senior officer responsible for
trading operations of TSX, a senior management representative of Market Regulation
Services Inc. and two other persons who shall be independent of TSX (as independent
defined in paragraph I (a) of Schedule “A” of the terms and conditions of the recognition
order). At least one such independent member must participate in meetings of the
Conflicts Committee, in order for there to be a quorum.
3.5. TSX shall use its best efforts to instruct senior management and relevant staff at
TSX, and relevant senior management and staff at RS, in order that they are alerted to,
and are able to identify, Conflicts of Interest which may exist or arise in the course of
the performance of their functions. Without limiting the generality of the foregoing:
3.5.1 TSX shall provide instruction that any matter concerning TSX Group that is
brought to the attention of staff at TSX mast be immediately brought to the
attention of the Committee Secretary.
3.5.2 TSX shall maintain a list in an electronic format, to be updated regularly and
in any event at least monthly and reviewed and approved by the Conflicts
Committee at least monthly, of all Competitors that are TSX‐listed issuers, and
shall promptly after the above‐noted approval by the Conflicts Committee
provide the current list to managers at TSX and RS who supervise departments
that (i) review continuous disclosure; (ii) review requests/applications for
exemptive relief; (iii) perform timely disclosure and monitoring functions relating
to TSX‐listed issuers; and (iv) otherwise perform tasks and/or make decisions of a
discretionary nature. In maintaining this list, TSX shall ensure that senior
executives in the issuer services division of TSX regularly prepare and review and
update the list and provide it promptly to the Conflicts Committee.
3.5.3 TSX shall provide instruction to staff at TSX that any initial listing or
continued listing matter or a complaint of a Competitor or of any TSX‐listed
issuer or listing applicant that asserts that it is a Competitor must be immediately
brought to the attention of the Committee Secretary.
3.5.4 TSX shall provide to staff who review initial listing applications and to
senior executives in the issuer services division of TSX a summary of the types of
businesses undertaken to a significant degree by TSX Group or its affiliates and
shall update the list as these businesses change, in order that initial listings staff
and senior executives in the issuer services division of TSX may recognize a
Competitor.
3.6. The Committee Secretary shall convene a meeting of the Conflicts Committee to be
held no later than one business day after a Conflict of Interest has been brought to his
or her attention. The Committee Secretary or any member of the Conflicts Committee
Managing Conflicts of Interest in TSX Listed Company Regulation
63
may also convene a meeting of the Conflicts Committee whenever be or she sees fit, in
order to address any conflict issues that may not be related to any one specific matter
or issuer.
3.7. TSX shall, at the time a Conflicts Committee meeting is called in response to a
Conflict of Interest, immediately notify the OSC’s Manager of Market Regulation that it
has received notice of a Conflict of Interest and shall provide with such notice: (i) a
written summary of the relevant facts; and (ii) an indication of the required timing for
dealing with the matter.
3.8. The Conflicts Committee will consider the facts and form an initial determination
with respect to the matter. The Conflicts Committee will then proceed as follows
depending on the circumstances:
3.8.1 If the Conflicts Committee determines that a conflict of interest relating to
the continued listing on TSX of TSX Group or the initial or continued listing of a
Competitor on TSX does not exist and is unlikely to arise, it will notify the OSC’s
Manager of Market Regulation of this determination. If the OSC’s Manager of
Market Regulation approves such determination, TSX will deal with the matter in
its usual course. When it has dealt with the matter, a brief written record of such
determination with details of the analysis undertaken, and the manner in which
the matter was disposed of will be made by TSX and provided to the OSC’s
Manager of Market Regulation. If the OSC’s Manager of Market Regulation does
not approve the determination and provides notice of such non‐approval to TSX,
TSX will follow the procedures set out in section 3.8.2.
3.8.2 If the Conflicts Committee determines that a conflict of interest relating to
the continued listing on TSX of TSX Group or the initial or continued listing of a
Competitor on TSX does exist or is likely to arise or if TSX is provided nonapproval
notice from the OSC’s Manager of Market Regulation under section
3.8.1, TSX shall: (i) formulate a written recommendation of how to deal with the
matter: and (ii) provide its recommendation to the OSC’s Manager of Market
Regulation for his or her approval, together with a summary of the issues raised
and details of any analysis undertaken. If the OSC’s Manager of Market
Regulation approves the recommendation, TSX will take steps to implement the
terms of its recommendation.
3.9. Where the OSC’s Manager of Market Regulation has considered the circumstances
of an issue based on the information provided to him or her by the Conflicts Committee
under section 3.8.2, and has determined that be or she does not agree with TSX’s
recommendation (i) and has requested that TSX reformulate its recommendation, TSX
shall do so; or (ii) the OSC’s Manager of Market Regulation may direct TSX to take such
other action as be or she considers appropriate in the circumstances.
3.10. Where the OSC’s Manager of Market Regulation or the Director is requested to
review a matter pursuant to section 3.9 or 3.2, respectively, TSX shall provide to the
OSC’s Manager of Market Regulation or the Director any relevant information in its
Managing Conflicts of Interest in TSX Listed Company Regulation
64
possession and, if requested by the OSC’s Manager of Market Regulation or the Director,
any other information in its possession, in order for the OSC’s Manager of Market
Regulation or the Director to review or, if appropriate, make a determination regarding
the matter, including any notes, reports or information of TSX regarding the issue, any
materials filed by the issuer or issuers involved, any precedent materials of TSX, and any
internal guidelines of TSX. TSX shall provide its services to assist the matter, if so
requested by the OSC’s Manager of Market Regulation or by the Director.
3.11. TSX will provide to the OSC’s Manager of Continuous Disclosure a copy of TSX
Group’s annual questionnaire and any other TSX Group disclosure documents that are
filed with TSX but not with the OSC’s Continuous Disclosure department. TSX will
conduct its usual review process in connection with TSX Group’s annual questionnaire
and all prescribed periodic filings of TSX Group. Any deficiencies or irregularities in TSX
Group’s annual questionnaire or other TSX‐issuer prescribed filings will be
communicated to the OSC’s Manager of Continuous Disclosure and brought to the
attention of the Conflicts Committee which shall follow the procedures outlined in this
section 3.
4. Timely Disclosure and Monitoring of Trading
4.1. TSX shall use its best efforts to ensure that RS at all times is provided with the
current list of the TSX‐listed issuers that are Competitors.
5. Miscellaneous
5.1. Information provided by a Competitor in connection with an initial listing or
continued listing matter to the Conflicts Committee will not be used by TSX for any
purpose other than addressing Conflicts of Interest. TSX will not disclose any
confidential information obtained under these Listing‐Related Procedures to a third
party other than the OSC unless:
(a) prior written consent of the other parties is obtained;
(b) it is required or authorized by law to disclose the information; or
(c) the information has come into the public domain otherwise than as a result of
its breach of this clause.
5.2. TSX will provide disclosure on its website and in the TSX Company Manual to the
effect that an issuer can assert that it is a Competitor and will outline the procedures for
making such an assertion, including appeal procedures.
Managing Conflicts of Interest in TSX Listed Company Regulation
65
Appendix C
TSX Conflicts Committee Mandate
Source: TSX COMPANY MANUAL – CONFLICTS OF INTEREST
http://tmx.complinet.com/en/display/display.html?rbid=2072&record_id=450&element
_id=450&highlight=conflicts#r450
3.1. TSX will establish a committee (the “Conflicts Committee”) that will review any
matters brought before it regarding a conflict of interest or potential conflict of interest
relating to the continued listing on TSX of TSX Group or the initial listing or continued
listing of Competitors (each, a “Conflict of Interest”). Without limiting the generality of
the above sentence, continued listing matters include the following;
(a) matters relating to the continued listing of TSX Group or a Competitor or of a
listing of a different class or series of securities of TSX Group or a Competitor
than a class or series already listed;
(b) any exemptive relief applications of or approvals applied for by, TSX Group or
a Competitor;
(c) any other requests made by TSX Group or a Competitor that require
discretionary involvement by TSX; and
(d) any listings matter related to a TSX‐listed issuer or listing applicant that
asserts that it is a Competitor.
3.2. Notwithstanding section 3.1, where a Competitor certifies to TSX that information
required to be disclosed to the Conflicts Committee or TSX in connection with an initial
listing or continued listing matter of the Competitor is competitively sensitive and the
disclosure of that information would in its reasonable view put it at a competitive
disadvantage with respect to TSX Group, TSX will refer the matter to the Director,
requesting that the Director review issues relating to the competitively sensitive
information. The Conflicts Committee shall consider all other aspects of the matter in
accordance with the procedures set out in section 3.8. In addition, at any time that a
Competitor believes that it is not being treated fairly by TSX as a result of TSX being in a
conflict of interest position, TSX will refer the matter to the Director.
3.3. In any initial listing or continued listing matter of a Competitor, the Competitor may
Managing Conflicts of Interest in TSX Listed Company Regulation
66
waive the application of these Listing‐Related Procedures by providing a written waiver
to TSX and the Director. Where a waiver is provided, TSX will deal with the initial listing
or continued listing matter in the ordinary course as if no Conflict of Interest exists.
3.4. The Conflicts Committee will be composed of the Chief Executive Officer of TSX, the
general counsel of TSX (the “Committee Secretary”), the senior officer responsible for
listings of each of TSX and TSX Venture Exchange Inc., the senior officer responsible for
trading operations of TSX, a senior management representative of Market Regulation
Services Inc. and two other persons who shall be independent of TSX (as independent
defined in paragraph I (a) of Schedule “A” of the terms and conditions of the recognition
order). At least one such independent member must participate in meetings of the
Conflicts Committee, in order for there to be a quorum.
3.5. TSX shall use its best efforts to instruct senior management and relevant staff at
TSX, and relevant senior management and staff at RS, in order that they are alerted to,
and are able to identify, Conflicts of Interest which may exist or arise in the course of
the performance of their functions. Without limiting the generality of the foregoing:
3.5.1 TSX shall provide instruction that any matter concerning TSX Group that is brought
to the attention of staff at TSX must be immediately brought to the attention of the
Committee Secretary.
3.5.2 TSX shall maintain a list in an electronic format, to be updated regularly and in any
event at least monthly and reviewed and approved by the Conflicts Committee at least
monthly, of all Competitors that are TSX‐listed issuers, and shall promptly after the
above‐noted approval by the Conflicts Committee provide the current list to managers
at TSX and RS who supervise departments that (i) review continuous disclosure; (ii)
review requests/applications for exemptive relief; (iii) perform timely disclosure and
monitoring functions relating to TSX‐listed issuers; and (iv) otherwise perform tasks
and/or make decisions of a discretionary nature. In maintaining this list, TSX shall ensure
that senior executives in the issuer services division of TSX regularly prepare and review
and update the list and provide it promptly to the Conflicts Committee.
3.5.3 TSX shall provide instruction to staff at TSX that any initial listing or continued
listing matter or a complaint of a Competitor or of any TSX‐listed issuer or listing
applicant that asserts that it is a Competitor must be immediately brought to the
attention of the Committee Secretary.
3.5.4 TSX shall provide to staff who review initial listing applications and to senior
executives in the issuer services division of TSX a summary of the types of businesses
Managing Conflicts of Interest in TSX Listed Company Regulation
67
undertaken to a significant degree by TSX Group or its affiliates and shall update the list
as these businesses change, in order that initial listings staff and senior executives in the
issuer services division of TSX may recognize a Competitor.
3.6. The Committee Secretary shall convene a meeting of the Conflicts Committee to be
held no later than one business day after a Conflict of Interest has been brought to his
or her attention. The Committee Secretary or any member of the Conflicts Committee
may also convene a meeting of the Conflicts Committee whenever be or she sees fit, in
order to address any conflict issues that may not be related to any one specific matter
or issuer.
3.7. TSX shall, at the time a Conflicts Committee meeting is called in response to a
Conflict of Interest, immediately notify the OSC’s Manager of Market Regulation that it
has received notice of a Conflict of Interest and shall provide with such notice: (i) a
written summary of the relevant facts; and (ii) an indication of the required timing for
dealing with the matter.
3.8. The Conflicts Committee will consider the facts and form an initial determination
with respect to the matter. The Conflicts Committee will then proceed as follows
depending on the circumstances:
3.8.1 If the Conflicts Committee determines that a conflict of interest relating to the
continued listing on TSX of TSX Group or the initial or continued listing of a Competitor
on TSX does not exist and is unlikely to arise, it will notify the OSC’s Manager of Market
Regulation of this determination. If the OSC’s Manager of Market Regulation approves
such determination, TSX will deal with the matter in its usual course. When it has dealt
with the matter, a brief written record of such determination with details of the analysis
undertaken, and the manner in which the matter was disposed of will be made by TSX
and provided to the OSC’s Manager of Market Regulation. If the OSC’s Manager of
Market Regulation does not approve the determination and provides notice of such
non‐approval to TSX, TSX will follow the procedures set out in section 3.8.2.
3.8.2 If the Conflicts Committee determines that a conflict of interest relating to the
continued listing on TSX of TSX Group or the initial or continued listing of a Competitor
on TSX does exist or is likely to arise or if TSX is provided non‐approval notice from the
OSC’s Manager of Market Regulation under section 3.8.1, TSX shall: (i) formulate a
written recommendation of how to deal with the matter: and (ii) provide its
recommendation to the OSC’s Manager of Market Regulation for his or her approval,
together with a summary of the issues raised and details of any analysis undertaken. If
the OSC’s Manager of Market Regulation approves the recommendation, TSX will take
Managing Conflicts of Interest in TSX Listed Company Regulation
68
steps to implement the terms of its recommendation.
3.9. Where the OSC’s Manager of Market Regulation has considered the circumstances
of an issue based on the information provided to him or her by the Conflicts Committee
under section 3.8.2, and has determined that he or she does not agree with TSX’s
recommendation (i) and has requested that TSX reformulate its recommendation, TSX
shall do so; or (ii) the OSC’s Manager of Market Regulation may direct TSX to take such
other action as be or she considers appropriate in the circumstances.
3.10. Where the OSC’s Manager of Market Regulation or the Director is requested to
review a matter pursuant to section 3.9 or 3.2, respectively, TSX shall provide to the
OSC’s Manager of Market Regulation or the Director any relevant information in its
possession and, if requested by the OSC’s Manager of Market Regulation or the Director,
any other information in its possession, in order for the OSC’s Manager of Market
Regulation or the Director to review or, if appropriate, make a determination regarding
the matter, including any notes, reports or information of TSX regarding the issue, any
materials filed by the issuer or issuers involved, any precedent materials of TSX, and any
internal guidelines of TSX. TSX shall provide its services to assist the matter, if so
requested by the OSC’s Manager of Market Regulation or by the Director.
3.11. TSX will provide to the OSC’s Manager of Continuous Disclosure a copy of TSX
Group’s annual questionnaire and any other TSX Group disclosure documents that are
filed with TSX but not with the OSC’s Continuous Disclosure department. TSX will
conduct its usual review process in connection with TSX Group’s annual questionnaire
and all prescribed periodic filings of TSX Group. Any deficiencies or irregularities in TSX
Group’s annual questionnaire or other TSX‐issuer prescribed filings will be
communicated to the OSC’s Manager of Continuous Disclosure and brought to the
attention of the Conflicts Committee which shall follow the procedures outlined in this
section 3.
Managing Conflicts of Interest in TSX Listed Company Regulation
69
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