Recommendation 1 Recommendation 2 Recommendation 3 Recommendation 4

Recommendation 5 Recommendation 6 Recommendation 7 Recommendation 8

Market selection

Recommendation 4

Each market must have clear rules assuring investor protection by safeguarding participants from the financial risks of failed settlement and ensuring that listed companies are required to follow sound policies on corporate governance, transfer of economic benefits and shareholder rights.

1.	Does the depository or the market have securities lending and borrowing schemes in place, and are these open to all market participants and their settlement agents?	The depository in Canada does not do securities lending and borrowing for the community. Canada has a mature and active securities lending and borrowing market that is open to all market participants. The depository processes the transactions but does not act as an intermediary.
2.	Does the settlement system mark fail trades to market and collect margin from the failing counterparty to protect the innocent counterpart's interest?	Yes, for trades that are netted through the central counterparty system (i.e., continuous net settlement (CNS)) operated by CDS. The depository does not mark to market failed non-exchange trades that settle on a trade-for-trade basis - here, principle parties may claim for use of funds for direct payment.
3.	Does the market operate a guarantee fund or have an equivalent procedure to protect against the cost of failed transactions; and which sectors of the market does it cover?	There is a separate CNS participant fund to cover defaults of participants (i.e., failure to pay all amounts due in any settlement service, rather than failed transactions only) covering the CNS service, which is used only for stock exchange trades by brokers. There are other funds for other settlement services. In SSS, there is a participant fund. In DCS, there are rigorous value-for-value risk edits and positions purchased on the day are segregated until payment exchange in final, irrevocable funds. In addition, there are separate collateral rings for extenders of credit, receivers of credit and settlement agents.
4.	Are the stock transfer agents (share registrars) linked electronically to the depository?	This is planned for as part of a rationalization of CDS's debt and equities clearing services into one platform, scheduled for the end of 2002.
5.	Is there a legal maximum time period to complete ownership transfers in the books of the issuer? If so, does market practice adhere to the deadline?	There is no "legal" maximum. The market standard is within 48 hours of receipt by the transfer agent, with market practice approaching 24 hours for ownership transfers.
6.	Are investors entitled to all benefits arising on a security from the point of purchase; and how are any rules enforced?	The stock purchaser is not entitled to the dividend if the purchase is executed on or after the dividend record date. Interest payments for physical debt go into a "books-closed period" two weeks prior to interest payment date. The transfer agent will not process transfers of ownership during this period, however, trading and settlement can still occur during this time. If a trade has a settlement date on or after the "books-closed" period, on pay date the registered owner (seller) will receive the interest payment from the paying agent and the seller will send a cheque for the amount of the interest payment to the buyer.
7.	Is proxy voting permissible in the market and can such proxies be lodged by post or other remote delivery method?	Yes, proxy voting is permissible and can be done by a range of means. Canadian law is equally favourable to foreign investors who wish to cast their proxy vote. Beneficial shareholders may vote and a power of attorney is not required. A beneficial shareholder's attendance is not required at the annual meeting in order to cast a vote. Proxy materials may be mailed or sent electronically over the Internet by the issuer or their agent. Shareholders can vote by mail, telephone, fax and over the Internet.
8.	Are there binding rules in the market stating the minimum and maximum lapsed time between the announcement and completion of key events, including registration, the calling of shareholder meetings, the payment of dividends or interest, rights issues, tender offers and other voluntary corporate actions?	According to Part 2 of National Instrument 54-101, a record date for notice of a meeting must be no fewer than 30 and no more than 60 days before the meeting date. The issuer must send a notification of the meeting and record date for notice at least 25 days before the record date. There are binding rules for some other types of corporate actions, however, not all. Dividend payments are made to the holder as of record date (usually two to four weeks before payment date). The ex dividend date is set at the third business day before the dividend record date. Interest payments for physical debt go into a "books-closed period" two weeks prior to interest payment date.
9.	Are all voluntary corporate actions advised through a central mechanism assuring consistent information to all investors?	Voluntary corporate actions are advised to investors through CDS participants via CDS's bulletin service, which is available to all CDS participants and other subscribers to the service. Some information is also available through SEDAR, a database operated by CDS for the Canadian Securities Administrators (CSA) (Canada's virtual securities regulator). The CSA is considering a proposal that all registrants be required to electronically publish corporate actions directly to a central location, such as SEDAR, for even greater accuracy and transparency.
10.	Is information on corporate actions available electronically, and is the minimum lapsed time for responding to such actions sufficient to enable all domestic and foreign investors to respond in a timely and considered fashion?	See above; information is made available to participants and subscribers at the same time.