Staff of the Canadian Securities Administrators (CSA Staff) today published CSA Staff Notice 31-312 (the Staff Notice), which summarizes the key requirements and transition process for the new exempt market dealer (EMD) registration category under National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103). NI 31-103 was published by the Canadian Securities Administrators (CSA) on July 17, 2009 and subject to governmental and other local approval requirements, is scheduled to come into force September 28, 2009 (the Implementation Date).
The Staff Notice discusses a number of issues, including the planned local dealer registration exemptions in Alberta, British Columbia, Manitoba, the Northwest Territories, Nunavut and the Yukon Territory (the Northwestern jurisdictions), the transition for limited market dealers (LMDs) in Ontario and Newfoundland and Labrador, and the transition for firms acting in the exempt market in Canadian jurisdictions outside Ontario and Newfoundland and Labrador.
Northwestern exemption orders
As previously described in the CSA's notice of NI 31-103, the securities regulators in the Northwestern jurisdictions intend to issue local orders (the Northwestern exemption orders) exempting from the dealer registration requirement persons or companies who trade in securities distributed under one or more of the following prospectus exemptions in National Instrument 45-106 Prospectus and Registration Exemptions (NI 45-106):
- section 2.3 (accredited investor)
- section 2.5 (family, friends and business associates)
- section 2.9 (offering memorandum)
- section 2.10 (minimum $150,000 purchase of a security in one transaction)
To rely on the Northwestern exemption orders, the person or company must:
- not be registered in any category of registration in any jurisdiction
- not provide suitability advice about the trade to the purchaser
- except in British Columbia, not otherwise provide financial services to the purchaser
- not hold or have access to the purchaser's assets
- provide risk disclosure in the prescribed form to the purchaser, and
- file an information report with the securities regulatory authority.
The Staff Notice indicates that the Northwestern jurisdictions plan to issue the Northwestern exemption orders when the registration exemptions in NI 45-106 expire. As stated in the CSA notice of repeal and replacement of NI 45-106, the registration exemptions are scheduled to expire on March 27, 2010, being 6 months from the Implementation Date.
Transition for LMDs in Ontario and Newfoundland and Labrador
As indicated in NI 31-103, firms currently registered as LMDs in Ontario and Newfoundland and Labrador will be transitioned to EMDs on the Implementation Date. The Staff Notice makes clear that LMDs will only be transitioned to EMDs in Ontario and Newfoundland and Labrador and will not automatically be registered as an EMD in any other jurisdiction. Further, there is no transition period for those firms that begin acting as a dealer in the exempt market in Ontario and Newfoundland and Labrador after the Implementation Date. These firms will have to register prior to carrying on business in Ontario and Newfoundland and Labrador.
Transition in all other jurisdictions
As indicated in NI 31-103, dealers active in the exempt market in jurisdictions other than Ontario and Newfoundland and Labrador prior to the Implementation Date have a one year transition period. Accordingly, if these dealers cannot otherwise rely on the Northwestern exemption orders or any of the other limited exemptions from dealer registration, they must apply for registration as an EMD by no later than September 28, 2010.
Firms that begin acting as a dealer in the exempt market in jurisdictions other than Ontario and Newfoundland and Labrador after the Implementation Date can rely on the dealer registration exemptions in NI 45-106 for the 6 month transition period. However, as of March 27, 2010 these dealers will have to be registered as an EMD if they cannot otherwise rely on the Northwestern exemption orders or any of the other limited exemptions from dealer registration.
The Staff Notice emphasizes that to the extent a firm is required to register as an EMD before carrying on business, the firm must be able to demonstrate, at the time of its application, that it meets all of the requirements in NI 31-103 applicable to EMDs.