Canadian Securities Lawyer & Attorney : Stikeman Elliott Law Firm : Montreal, Ottawa, Calgary, Vancouver, Montreal, Toronto

On November 14, 2008, the Canadian Securities Administrators (CSA) published CSA Staff Notice 31-309 to provide an update on the status of proposed National Instrument 31-103 Registration Requirements. NI 31-103 represents the CSA's proposal to reform the registration regime across the country by harmonizing and streamlining registration and related requirements. An earlier version of proposed NI 31-103 was published by the CSA in February 2007 and after industry comments were considered, the CSA introduced an amended version in early 2008.  Both proposals were subject to a great deal of interest by various market participants, as demonstrated by the 300 comment letters generated from the most recent version of proposed NI 31-103.

As such, the CSA has stated that they will need more time to develop their final proposal as they are still in the process of reviewing the many comments submitted.  The target date for implementation of NI 31-103 has, therefore, been delayed and will no longer occur on March 30, 2009.  The CSA expect their work to be completed by April 2009, at which time they plan to provide a timetable for the implementation of the new regime. 

For more information on registration reform, see our Registration Reform information page.

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On October 6, 2008 the Canadian Securities Administrators (the CSA) published CSA Consultation Paper 11-405 entitled “Securities Regulatory Proposals Stemming from the 2007 – 08 Credit Market Turmoil and its effect on the ABCP Markets in Canada” (the Consultation Paper). The Consultation Paper is divided into two parts, with the first part providing a narrative overview of the background to the credit market turmoil in the United States, its spread into Canada and its impact on the non-bank sponsored portion of the asset-backed commercial paper (ABCP) market in Canada. The second part of the paper sets out proposals made under the Concept Paper to deal with the credit market turmoil and related issues in Canada. 

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The MFDA is publishing for comment proposed amendments to Rule 2.6 Borrowing for Securities Purchases. The proposed amendments would require leverage risk disclosure only when an Approved Person makes a recommendation to invest using borrowed funds or becomes aware of a client borrowing for investment. The proposed amendments would also exempt RRSP loans from the disclosure requirements of Rule 2.6. In conjunction with the proposed amendments, MFDA staff will be revising the prescribed risk disclosure language in MR-0006 to provide a brief explanation of key risks and relevant considerations in plain language. The comment period expires November 3, 2008.

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The OSC is publishing for a 90-day comment period (ending January 3, 2009) OSC Rule 13-503 (Commodity Futures Act) Fees and the corresponding Companion Policy. The Rule and Companion Policy are intended to replace, and are consistent with, the current rule and policy. The proposed changes include the following:

• relying on historical data, as opposed to forecasted data in determining the size of market participants for the purpose of calculating participation fees;
• making changes governing the calculation of late fees;
• clarifying the calculation of a CFA registrant's Ontario percentage;
• changing and clarifying timing references;
• making adjustments to the participation fees; and
• make adjustments to activity fees.

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The OSC is publishing for a 90-day comment period (ending January 3, 2009) OSC Rule 13-502 Fees and the corresponding Companion Policy. The Rule and Companion Policy are intended to replace, and are consistent with, the current rule and policy. The proposed changes include the following:

• relying on historical data, as opposed to forecasted data, in determining the size of market participants for the purpose of calculating participation;
• eliminating special participation fees for those becoming or ceasing to be reporting issuers;
• making changes governing the calculation of late fees;
• changing and clarifying timing references;
• expanding the exemption from participation fees for reporting issuers that are subsidiaries;
• eliminating rule allowing certain reporting issuers to pay provisional participation fees;
• clarifying the calculation of a market participant's Ontario percentage;
• making adjustments to participation fees;
• making adjustments to late fees associated with the late filing of documents; and
• making adjustments to activity fees.

OSC Rule 13-502 does not include proposed fee changes reflected in proposed National Instrument 31-103 Registration Requirements. If the reform of the registration requirements is implemented in Ontario, further fee changes will need to be made.

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On September 30, IIROC published a notice setting out its position and providing guidance to its Dealer Members regarding the adoption of IFRS. As they are considered to be "publicly accountable enterprises", Dealer Members will also be subject to  the Canadian Accounting Standards Board's decision to move from Canadian GAAP to IFRS as of January 1, 2011.  This notice sets out IIROC's views on some of the transition issues raised by the move to IFRS for Dealer Members, including  IIROC's decision not to permit early adoption prior to January 1, 2011.  The notice also reminds Dealer Members that they are required to conduct their own firm-specific impact assessments and conversion planning (which may require the input of outside expertise), and that they will be required to submit progress reports on their conversion plans, with the first report to be due by April 1, 2009.  While the conversion date is January 1, 2011, as set out in the notice, Dealer Members will need to start planning for and implementing necessary changes well prior to 2011, including running parallel IFRS-based accounting records for up to a year prior to conversion.  Some of the critical and regulatory reporting dates are also set out in the notice.

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CSA Staff Notice 33-313 was published on September 12, 2008 and details the impact of the changeover to IFRS for registrants that are not members of an SRO (non-SRO registrants).

Under the current plans of the Canadian Accounting Standards Board (the AcSB), IFRS will replace Canadian GAAP effective January 1, 2011 for publicly accountable enterprises (PAEs). While many registrants are considered PAEs and will have to move to IFRS according to the AcSB’s implementation plan, others, mainly non-SRO registrants, do not fall under the definition of PAE and are technically not covered by the AcSBs implementation plan. These include investment counsel and portfolio managers, limited market dealers, exchange-contracts dealers, scholarship plan dealers and, if amendments to the registration regime are adopted under proposed NI 31-103, will also include new categories of exempt market dealers and investment fund managers.  

For all of these registrants, the Staff Notice identifies that if they hold or have access to any client assets, the CSA will expect them to comply with IFRS, which includes preparing both financial statements and working capital calculations in accordance with IFRS as opposed to Canadian GAAP. The Staff Notice also cautions that the move from Canadian GAPP to IFRS may also affect certain business functions, thus, planning for the changeover should be started soon, if not already underway. For those who do not hold or have access to any client assets, the CSA are still reviewing whether they should be mandated to use IFRS, and if so, what the appropriate implementation date should be for such a change.

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The Investment Industry Regulatory Organization of Canada (IIROC) is proposing a new rule to create a basic regulatory framework for the provision of financial planning services. The proposed rule would define "financial planning" and establish minimum industry standards by setting out proficiency and supervision requirements. Public comments on the proposal will be accepted for 30 days from the publication of the notice on August 8, 2008.

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On August 7, 2008, the U.S. SEC announced two new anti-money laundering compliance initiatives. The first, an online reference site, was originally developed for the benefit of SEC examiners and provides links to relevant laws, rules and guidance to assist mutual funds in AML compliance efforts. The second initiative, a centralized SEC SAR Alert Message Line, will allow the reporting of Suspicious Activity Reports that may require immediate attention by the SEC.

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The OSC has made an amendment to Rule 31-502 Proficiency Requirements for Registrants, which is expected to come into force on October 24, 2008. The amended rule revises post-registration proficiency requirements for salespersons of brokers, securities dealers and investment dealers and is intended to harmonize the rule with Rule 2900 of IIROC's Dealer Member Rules.

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All members of the CSA, other than the OSC, have published their proposed rule and policy for extending the Passport system to registrations. The proposals also include a new proposed national policy for all jurisdictions setting out how the process for registration in all jurisdictions will work.

Along with the proposed passport system for registrations, this notice also includes proposed rule and policy amendments to the existing Passport rules and policies to deal with issues that have arisen since Phase II of Passport was implemented.

These proposals are open for comments until October 17, 2008.

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Registration Reform Client April 3, 2008   VIEW WEBCAST On February 29, 2008, the Canadian Securities Administrators (CSA) published their revised proposals relating to national registration requirements for dealers, advisers and investment fund managers.  Over 260 comment letters were received on the original proposals (published in February of 2007). These proposals constitute an overhaul of registration requirements and registration exempt activities, and are intended to present a streamlined and harmonized approach to the regulation of investment activities across Canada. The revised proposals are open for comments until May 29, 2008.

Round Two (2008) Articles: Impact on "International Dealers" registered in Ontario Key features for investment fund managers, foreign funds and private equity funds An international perspective Proposed Canadian registration regime for dealers, advisers, fund managers Round One (2007) Articles: What it means for limited market dealers  What it means for investment fund managers What it means for dealers registered in Ontario What it means for international dealers registered in Ontario

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Kenneth G. Ottenbreit, Ralph A. Hipsher and Terence W. Doherty | Version française

On February 29, 2008, the Canadian Securities Administrators (CSA) published their revised proposals on National Instrument 31-103 Registration Requirements ("the Instrument"), relating to registration requirements for dealers, advisers and investment fund managers. The proposed registration reforms represent a major restructuring of the Canadian dealer, adviser and investment fund manager registration rules and have implications for non-Canadian dealers, advisers and investment fund managers doing business on a registered or exempt basis in any province or territory of Canada.

The Instrument is intended to create a streamlined and harmonized approach to the regulation of investment activities across Canada. Canada does not have a national or federal securities regulator; securities activities are regulated by Canada's thirteen provincial and territorial securities regulators (the CSA is their umbrella organization).

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Registration Reform Seminar   VIEW WEBCAST On February 29, 2008, the Canadian Securities Administrators (CSA) published their revised proposals relating to national registration requirements for dealers, advisers and investment fund managers.  Over 260 comment letters were received on the original proposals (published in February of 2007). These proposals constitute an overhaul of registration requirements and registration exempt activities, and are intended to present a streamlined and harmonized approach to the regulation of investment activities across Canada. On April 3, 2008, Stikeman Elliott hosted a seminar on the impact of registration reform. To watch the webcast, please click "View Webcast", right.

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Alix d'Anglejan-Chatillon, Jennifer Northcote and Kenneth G. Ottenbreit | Version française

On February 29, 2008, the Canadian Securities Administrators (CSA) published their revised proposals relating to national registration requirements for dealers, advisers and investment fund managers.  Over 260 comment letters were received on the original proposals (published in February of 2007). These proposals constitute an overhaul of registration requirements and registration exempt activities, and are intended to present a streamlined and harmonized approach to the regulation of investment activities across Canada. The revised proposals are open for comments until May 29, 2008. Continue Reading...

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Ken Ottenbreit, Ralph Hipsher and Terence Doherty | Version française

On February 29, 2008, the Canadian Securities Administrators (CSA) published their revised proposals on National Instrument 31-103 Registration Requirements (the "Instrument"), relating to registration requirements for dealers, advisers and investment fund managers. These revised proposals constitute an overhaul of registration requirements and registration exempt activities, and are intended to present a streamlined and harmonized approach to the regulation of investment activities across Canada. The proposed registration reforms represent a major restructuring of the Canadian dealer, adviser and investment fund manager registration rules and have implications for non-Canadian dealers, advisers and investment fund managers doing business on a registered or exempt basis in any province or territory of Canada, including non-Canadian dealers and advisers registered in Ontario.

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Alix d'Anglejan-Chatillon, Jennifer Northcote and Ramandeep Grewal | Version française

On February 29, 2008, the Canadian Securities Administrators (CSA) published their revised proposals on National Instrument 31-103 relating to registration requirements for dealers, advisers and investment fund managers.  Over 260 comment letters were received on the original proposals (published in February of 2007). These proposals constitute an overhaul of registration requirements and registration exempt activities, and are intended to present a streamlined and harmonized approach to the regulation of investment activities across Canada. The revised proposals are open for comments until May 29, 2008.  These proposals are expansive and will have a significant impact on registration issues generally, as well as on a broad range of capital markets activities, including private placements, trading and advising activities and private and public fund offerings. Continue Reading...

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Canada moves towards implementing the next phase of the Passport System to further simplify securities regulation, despite the OSC’s lack of participation.

Alex Colangelo and Ramandeep Grewal

In September, 2004, the provincial and territorial Ministers responsible for the regulation of securities in Canada, other than Ontario, agreed to a memorandum of understanding with the intent of providing market participants with a single window of access in a harmonized securities regulatory regime. To that end, Phase I of the Passport System was introduced with Multilateral Instrument 11-101 (“MI 11-101”), which came into force on September 19, 2005. Phase I of the Passport System was considered an interim step towards the greater harmonization and streamlining of securities regulations across Canada. The proposed Phase II of the Passport System builds upon the system’s foundations by, amongst other things, further harmonizing the regulation of prospectus reviews and processes for obtaining exemptive relief.

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Proposed NI 31-103 - Registration Requirements requires investment fund managers to register and to comply with prescribed proficiency, capital and conduct standards.

Currently, investment fund managers that administer an investment fund but do not advise or trade are generally not required to be registered. However, the Canadian Securities Administrators (CSA) are proposing an investment fund manager registration that encompasses the managers of all public and private mutual funds and non-redeemable investment funds, labour-sponsored investment funds, scholarship plans, pooled funds and hedge funds.

The key elements of this new category of registration include: (a) a registration requirement for a person or company acting as an investment fund manager; (b) two new categories of individual registration requiring all registered firms to designate an individual as the ultimate designated person (UDP) and the chief compliance officer (CCO); (c) proficiency requirements for the CCO (but not the UDP) of an investment fund manager; (d) insurance requirements; (e) a $100,000 minimum excess working capital requirement (for non-SRO members); and (f) conduct rules for investment fund managers.

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Proposed NI 31-103 - Registration Requirements removes current limited market dealer category and introduces exempt market dealer category in its place.

In late February, 2007, the CSA published for comment proposed NI 31-103 - Registration Requirements (the Proposed Registration Rule) and accompanying companion policy (Companion Policy). The impetus for the Proposed Registration Rule is the harmonization and streamlining of the registration regime across all of the CSA jurisdictions by, among other things, moving away from the "trade trigger" towards a "business trigger" for dealer registration, and introducing several new categories of registration while removing others. One of the implications of these changes is that the current limited market dealer (LMD) category will cease to exist, and (except perhaps in British Columbia) an exempt market dealer (EMD) category will take its place. Further, in conjunction with moving towards a "business trigger" for dealer registration, the CSA propose to repeal the dealer registration exemptions currently contained in NI 45-106 - Prospectus and Registration Exemptions, including (except perhaps in British Columbia) the accredited investor exemption which will, however, remain available for prospectus exemption purposes.

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On February 20, 2007, the Canadian Securities Administrators (CSA) published for comment Proposed National Instrument 31-103 - Registration Requirements (Proposed Registration Rule). The comment period will expire on June 20, 2007.

The Proposed Registration Rule is one phase of the CSA Registration Reform Project which is intended to harmonize and streamline registration requirements across Canada. It represents a major restructuring of the Canadian dealer, adviser and investment fund manager registration rules, and has implications for Canadian and non-Canadian dealers, advisers and investment fund managers doing business on a registered or exempt basis in any province or territory of Canada.

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On February 20, 2007, the Canadian Securities Administrators (the CSA) published for comment Proposed National Instrument 31-103 - Registration Requirements (the Proposed Registration Rule). The comment period will expire on June 20, 2007.

The Proposed Registration Rule is one phase of the CSA Registration Reform Project which is intended to harmonize and streamline registration requirements across Canada. It represents a major restructuring of the Canadian dealer, adviser and investment fund manager registration rules, and has implications for Canadian and non-Canadian dealers, advisers and investment fund managers doing business on a registered or exempt basis in any province or territory of Canada, including non-Canadian dealers registered in Ontario in the category of "international dealer."

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Kathleen Ward, Alix d'Anglejan-Chatillon, Ramandeep Grewal, Jennifer Northcote, Darin Renton and Simon Romano

The Canadian Securities Administrators (CSA) have now released for comment the much anticipated proposed NI 31-103 - Registration Requirements (the Proposed Registration Rule), along with the accompanying companion policy (the Companion Policy) and forms. The Proposed Registration Rule represents a major overhaul of the current registration regime by moving from a "trade trigger" to a "business trigger" to require registration for those not only advising (as is currently the case) but also dealing in securities and by imposing a new registration requirement for investment fund managers.

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