The International Swaps and Derivatives Association has asked regulators in British Columbia, Canada, to ease its proposals on applying securities laws to derivatives because they would burden and confuse investors and could impede the derivatives markets. ISDA argued that proposals in the province would too extensively equate privately-negotiated derivatives contracts as if they were securities. In a letter to the British Columbia Securities Commission, ISDA stated that the proposal to apply prospectus and registration agreements to contracts involving derivatives transactions takes a blanket approach that is too simplistic. "Specific regulation that targets those few areas in which these products impact securities markets is the only sensible regulatory approach," ISDA wrote in the Aug. 31 letter.
ISDA wrote that the BCSC as far as it can tell has not cited any evidence of specific problems regarding derivatives. The trade association argued given the primary investors in these private transactions are institutional or other sophisticated investors capable of determining their own suitability, subjecting the transactions to securities laws would just increase legal advice fees for the investors. It said insider reporting laws applied to securities are confusing in the proposal for derivatives transactions because it is unclear to what extent the BCSC is trying to apply such laws to these transactions. Andrew Poon, spokesman for the BCSC, said the regulator does not comment on comment letters. Calls to ISDA were referred to a spokeswoman, who did not comment by press time.
