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Posted on July 30, 2010
On Monday, Her Majesty's Treasury launched a consultation to gather views on the British Government's proposals to reform the UK's financial regulatory framework. As discussed in our post of June 17, the proposals would: (i) give the Bank of England the authority over macro-prudential regulation; (ii) establish a new prudential regulator, operating as a subsidiary of the Bank of England, that would regulate financial firms; and (iii) establish a new Consumer Protection and Markets Authority to regulate the conduct of financial firms providing services to consumers. The just-released consultation document provides further details regarding the proposals and asks specific questions for public comment.
Posted on July 23, 2010
Daniella Laise
As we discussed in our post of June 25, the Canadian Securities Administrators (CSA) recently published for comment proposed amendments to National Instrument 31-103 Registration Requirements and Exemptions (31-103), National Instrument 33-109 Registration Information (33-109), and Ontario Securities Commission Rule 33-506 (Commodity Futures Act) Registration Information and related policies and forms (the First Year Amendments). The First Year Amendments range from technical adjustments to more substantive matters and, according to the CSA, will serve to “enhance investor protection and improve the day-to-day operation” of the registration regime for both industry and regulators. Summarized below are some of the more substantive proposals under the First Year Amendments.
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Posted on July 13, 2010
The Canadian Securities Transition Office today announced the release of its Transition Plan for the Canadian Securities Regulatory Authority. The Transition Plan provides a roadmap for establishing the CSRA and sets out a vision for the Authority's regulatory approach. Issues considered by the Transition Plan include governance, organization design, business processes and implementation planning.
According to the Transition Office, the next step in the transition will involve the signing of development agreements between the participating provinces and territories and the federal government by September 2010. Under the development agreements, the provinces and territories would assign regulatory and ministry staff to share expertise in establishing the CSRA. Work under the development agreements would be followed by memoranda of understanding between the participating provinces and territories and the federal government to address various matters of interest. These MOUs would be concluded by July 1, 2011. A launch date for the CSRA, meanwhile, has been established as July 1, 2012.
For more information on the move towards a national securities regulator, see our post of June 8, 2010.
Posted on June 25, 2010
The Canadian Securities Administrators (CSA) today published proposed amendments to National Instrument 31-103 Registration Requirements and Exemptions, National Instrument 33-109 Registration Information and related policies and forms.
The proposed amendments are intended to:
- provide clarifications to guidance in the Companion Policy to better reflect the original intent of the rule and to codify staff administrative practice;
- give effect to relief orders, which mostly address issues relating to the transition to the new registration regime;
- add an obligation for registered representatives to understand the structure, features and risks of each security that they recommend;
- include guidance for registrants in meeting the requirement to document complaints and to fairly and effectively respond to them;
- amend the obligation of registered firms to ensure independent resolution or mediation services in certain cases of complaints;
- add obligations for investment fund managers to deliver trade confirmations and account statements to investors who deal directly with them, rather than through a dealer;
- address the impact of IFRS on the valuation of securities for the purposes of NI 31-103;
- remove certain non-harmonized provisions respecting the mutual fund dealer category;
- provide additional exemptions to members of self-regulatory organizations where the
SRO rules adequately cover the same regulatory risks; and
- extend certain exemptions to circumstances that are consistent with the original policy intent of the rule.
The CSA is accepting comments on the proposed amendments until September 30, 2010.
Posted on June 10, 2010
With news reports suggesting that Bay Street is preparing to decamp to the suburbs during the G20 Summit, some of you may be wondering about access to regulators during the week of June 21. On that point, the Investment Industry Regulatory Organization of Canada (IIROC) has stated that its Toronto staff will be working offsite on June 24 and 25. While staff will be picking up voicemail, IIROC is recommending that any contact be made via e-mail. Regulatory and electronic filing systems will function as normal.
Investor service provider Computershare, meanwhile, will be moving all critical functions to back-up locations for June 24 to June 28. It will also be relocating its Toronto Service Counter to Brookfield Place at 42 Yonge Street on those dates. Meanwhile, it appears to be business as usual at the Ontario Securities Commission (OSC) and Toronto Stock Exchange.
Should we hear of any change in plans, we will be sure to post an update.
Update: The Mutual Fund Dealers Association of Canada has announced that its operations will continue in the normal course. MFDA staff in Toronto will work off-site on June 24 and 25 and, while staff will be responding to voicemail, the MFDA recommends email communication during this time.
Posted on June 8, 2010
On May 26, 2010, the federal Department of Finance released its proposed Canadian Securities Act (the Act). The Act builds upon the Report released last year by the Expert Panel on Securities Regulation and represents the federal government’s proposal for a harmonized national regime to govern capital markets. Following decades of deliberation by various panels and committees, publication of the proposed Act by the Canadian Securities Transition Office evidences this government’s strong commitment to the establishment of a national securities regime and regulator.
The case for regulation of capital markets at a national level is set out in the preamble to the Act. Among other things, the preamble highlights the need to be competitive and consistent, enhance the integrity and stability of the Canadian financial system, have a comprehensive and coordinated enforcement regime and promote Canada’s interests at a national and international level. While the intent is to create a harmonized federal scheme for securities regulation, provincial participation is voluntary and the Act will only apply to those jurisdictions that choose to take part in the federal scheme. As we discussed previously, the draft Act is only a proposal at this stage, and has been referred to the Supreme Court of Canada for a ruling as to its constitutionality.
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Posted on May 27, 2010
Margaret Grottenthaler
The proposed federal Securities Act tabled by the federal government on May 26 establishes a framework for the regulation of exchange-traded and over-the-counter derivatives markets and their participants. Don’t expect to see a new regime too soon though. This legislation has not yet been introduced as a Bill but only laid before Parliament on a Ways and Means motion. The draft legislation has been referred to the Supreme Court of Canada to obtain a ruling as to whether it is within the legislative competence of the federal Parliament and will not be introduced until that question is resolved. Provinces are given the choice to opt into the federal scheme as well. Many provinces (not including Quebec and Alberta) have taken part in the process and would be expected to opt into the national scheme.
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Posted on May 26, 2010
As we mentioned a few weeks ago, federal Finance Minister Jim Flaherty recently stated that legislation to create a national securities regulator was imminent. Earlier today, Minister Flaherty unveiled a draft federal Securities Act, which would create such a regulator and allow provinces and territories to opt into the new regime voluntarily. According to the Minister, the proposed regime will provide: (i) better and more consistent protection for investors across Canada; (ii) improved regulatory and criminal enforcement to better fight securities-related crime; (iii) new tools to better support the stability of the Canadian financial system; (iv) faster policy responses to emerging market trends; (v) simpler processes for businesses, resulting in lower costs for investors; and (vi) more effective international representation and influence for Canada.
As there are impending legal challenges on the constitutionality of the plan, however, the proposed Act has been concurrently referred to the Supreme Court for its opinion on whether the proposed Act is within the federal government's legislative authority.
The Canadian Securities Transition Office has stated that it will release a technical commentary on the proposed legislation in the coming weeks and will also deliver a transition plan to the Minister and participating jurisdictions by July 12, 2010. Meanwhile, we expect to provide a more detailed review of the proposed legislation next week.
Posted on May 20, 2010
On May 18, Ontario's Bill 16, An Act to implement 2010 Budget measures and to enact or amend various Acts, received Royal Assent. Among other things, the Bill amends section 83 of the Securities Act to once again allow the Ontario Securities Commission (OSC) to publish a list of reporting issuers who are in default of any requirement of the Act or the regulations. Amendments to the Securities Act and the Commodity Futures Act also replace certain terms with comparable terms under International Financial Reporting Standards (IFRS).
Posted on May 7, 2010
Finance Minister Jim Flaherty is reportedly days away from seeing the completion of draft legislation to create a national securities regulator. According to press reports, Ottawa is planning to send the draft bill to lawmakers and the Supreme Court for a reference on its constitutionality within a few weeks.
Posted on April 23, 2010
The Investment Industry Regulatory Organization of Canada (IIROC) recently released its Strategic Plan for 2010-2012. The plan describes IIROC's vision and values and sets out the challenges it faces in fulfilling its mandate. Specifically, the plan discusses the following goals:
- Promoting a culture of compliance and high standards among those subject to IIROC's jurisdiction. This will include a reorganization of IIROC's rules to enhance comprehension, providing compliance examination findings and recommendations to members and undertaking periodic industry-wide compliance audits.
- Delivering effective, efficient and expert regulation. Projects that IIROC will undertake in pursuit of this goal include the implementation of a risk-based methodology for registration and completing its framework approach to IFRS.
- Maintaining market integrity by actively monitoring market structure developments and market-related events. IIROC states that it will reduce timelines to complete enforcement investigations and bring proceedings, clarify roles and relationships in order to strengthen the client/adviser relationship and continue to develop its policies respecting OTC and debt markets.
- Ensuring that it discharges its responsibilities in a cost-effective manner, which will include the implementation of an equitable Dealer and Marketplace Member fee model.
- Maintaining a confident and well-trained staff.
Posted on April 8, 2010
The Canadian Securities Administrators (CSA) announced last week that all CSA members except Ontario have issued an order, effective March 27, exempting from the dealer registration requirement scheduled banks, certain other financial institutions, and federally and provincially regulated loan, trust and insurance companies, for trades in a "negotiable promissory note or commercial paper maturing not more than one year from the date of issue", provided the instrument is: (i) not convertible or exchangeable into or accompanied by a right to purchase another security other than a security described in the order, and (ii) has an approved credit rating as specified in the order.
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Posted on April 1, 2010
On March 22, the British Columbia Securities Commission published BC Instrument 32-514, which exempts foreign portfolio managers registered on the date National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103) came into force (September 28, 2009) and which continue to be registered from certain requirements under NI 31-103, provided certain conditions are met. The exemption, which took effect on March 27, expires on September 28, 2010.
Posted on March 26, 2010
On March 12, the Investment Industry Regulatory Organization of Canada (IIROC) published a Rules Notice (the FAQ) addressing frequently asked questions regarding IIROC's registration reform related rule amendments, as well as the impact of National Instrument 31-103 Registration Requirements (NI 31-103) and related instruments on Dealer Members. IIROC's registration reform related rule amendments and NI 31-103 became effective September 28, 2009. The questions addressed in the FAQ were compiled from questions raised at various registration reform workshops hosted by IIROC in 2009. The FAQ covers issues such as NRD filing requirements, reinstatements, new NRD functionality, passport applications, category selection, proficiency requirements, termination notices and the business trigger.
Posted on March 25, 2010
As we reported back in January, the New Brunswick Securities Commission published answers to frequently asked questions regarding Local Rule 91-501 Derivatives. Last week, the NBSC published a revised notice expanding on its answer regarding whether the rule applies to spot foreign exchange contracts. Specifically, the revised notice states that "LR 91-501 does not apply to spot foreign exchange transactions involving the purchase or sale of a currency (i.e. transactions such as changing money at a currency exchange or withdrawing cash at a foreign ATM)." Whether other spot foreign exchange transactions are subject to LR 91-501, however, remains unclear, as the NBSC's use of "i.e." raises questions as to whether the example provided was intended to be comprehensive.
Posted on March 8, 2010
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On February 26, 2010, members of the Canadian Securities Administrators (CSA) each issued omnibus/blanket orders in response to applications requesting exemptions from certain provisions of National Instrument 31-103 Registration Requirements and Exemptions (31-103). 31-103, together with amendments to related instruments and policies, came into effect on September 28, 2009 (the Effective Date). Notice of these orders was provided under CSA Staff Notice 31-315 Omnibus/Blanket Orders exempting registrants from certain provisions of National Instrument 31-103 Registration Requirements and Exemptions, which was also published on February 26, 2010. The orders are summarized below.
Continuation of transition/grandfathering provisions for registrants adding jurisdiction
Each regulator issued an order that provides a person or company adding a jurisdiction to his, her or its registration, with the benefit of certain grandfathering and transition provisions provided under Part 16 of 31-103 in that additional jurisdiction. Specifically, those grandfathering and transition provisions that deal with proficiency, capital, insurance, relationship disclosure information, referral arrangements, dispute resolution service and client statement requirements were included in the order. To rely on the order, the registrant must: (i) have been continuously registered in a jurisdiction in Canada since the Effective Date; (ii) remain registered in that jurisdiction during its reliance on the order; (iii) be exempt under the relevant section of Part 16 in that jurisdiction; and (iv) register, after the Effective Date, in the same category of registration (and in the case of an individual, with the same sponsoring firm) in an additional jurisdiction.
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Posted on March 2, 2010
On February 25, Saskatchewan joined Alberta, British Columbia and Manitoba in issuing an order making available certain limited trade-based registration exemptions to persons that would otherwise be required to register as exempt market dealers in the province. The order is most similar to that of Alberta, as it includes a condition that the person relying on the exemption must not have provided financial services to the purchaser at any time other than in connection with a prospectus-exempt distribution under the relevant sections, while also including language that the person relying on the exemption must not be registered or required to be registered. A companion policy providing guidance was also released.
The Northwest Territories, Nunavut and the Yukon Territory are expected to issue similar orders.
Posted on February 26, 2010
The British Columbia Securities Commission (BCSC) issued an order today making certain limited trade-based registration exemptions to persons that would otherwise be required to register as exempt market dealers in BC. Meanwhile, the Manitoba Securities Commission issued a similar order. As previously discussed, with the implementation of the new registration regime and National Instrument 31-103 Registration Requirements and Exemptions, trade-based registration exemptions that parallel prospectus exemptions available under National Instrument 45-106 Prospectus and Registration Exemptions are to be repealed on March 27, 2010.
Pursuant to the orders, effective March 27, 2010, an exemption from the EMD registration requirement will be available in both B.C. and Manitoba for persons trading in securities in reliance on certain prospectus exemptions under NI 45-106, specifically, section 2.3 ("accredited investors"), section 2.5 ("family, friends and business associates"), section 2.9 ("offering memorandum") and section 2.10 ("minimum investment amount").
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Posted on February 26, 2010
The Canadian Securities Administrators (CSA) today published an omnibus set of blanket orders exempting registrants from certain provisions of National Instrument 31-103. The orders, which take effect on February 26, 2010, cover the following areas:
- The continuation of transition/grandfathering provisions for persons and companies adding a jurisdiction;
- Relief from for the chief compliance officer (CCO) proficiency requirements for portfolio managers adding a category;
- Relief from proficiency requirements for portfolio managers adding registration in the mutual fund dealer or exempt market dealer category;
- Relief from the time limits on examination requirements for dealing representatives of exempt market dealers (in Ontario and Newfoundland and Labrador only) and scholarship plan dealers in all jurisdictions who were registered when NI 31-103 came into force;
- Relief from client notification requirements under section 14.5 of NI 31-103 for certain Canadian registrants with head offices outside of the local jurisdiction;
- Relief from requirements to establish whether a client is an insider under section 13.2(2)(b) of NI 31-103 for mutual fund dealers.
Posted on February 22, 2010
Effective September 28, 2009, all provinces and territories adopted National Instrument 45-106 Prospectus Requirements and Exemptions containing nationally harmonized prospectus exemptions. In addition to NI 45-106, some jurisdictions may continue to provide local prospectus exemptions through their local legislation, rules or otherwise. On February 12, the Alberta Securities Commission (ASC) published a notice requesting comments on a proposed local rule that would consolidate the remaining local prospectus exemptions available in Alberta along with related requirements contained in the Alberta Securities Commission Rules. Comments are being accepted until March 12, 2010.
Posted on February 18, 2010
On February 12, the Alberta Securities Commission issued a blanket order making available certain limited trade-based registration exemptions to persons who would otherwise be required to register as exempt market dealers in Alberta. As previously discussed, with the implementation of the new registration regime and National Instrument 31-103 Registration Requirements and Exemptions, trade-based registration exemptions that parallel prospectus exemptions available under National Instrument 45-106 Prospectus and Registration Exemptions are to be repealed on March 27, 2010.
Pursuant to the blanket order, effective March 27, 2010, an exemption from the EMD registration requirement will be available for persons trading in securities in reliance on certain prospectus exemptions under NI 45-106, specifically, section 2.3 ("accredited investor"), section 2.5 ("family, friends and business associates"), section 2.9 ("offering memorandum") and section 2.10 ("minimum investment amount").
The blanket order, however, applies only where certain conditions are met. Specifically, the person or company seeking to rely on the exemption: (i) must not be registered or required to be registered in any jurisdiction, including a foreign jurisdiction; (ii) must not have provided advice to the purchaser with respect to suitability; (iii) must obtain from the purchaser a signed risk acknowledgement in the form prescribed by the blanket order; (iv) must not have provided financial services to the purchaser at any time (other than in connection with a prospectus-exempt distribution under sections 2.3, 2.5, 2.9 or 2.10 of NI 45-106); (v) must not hold or have access to the purchaser's assets; and (vi) must electronically file with the ASC a current or updated information report in the prescribed form within ten days of relying on the exemption. A notice issued along with the blanket order provides additional guidance with respect to the applicable requirements.
Alberta, which is the first of the "North West" jurisdictions to issue such a blanket order, is expected to be joined by British Columbia, Saskatchewan, Manitoba, Northwest Territories, Nunavut and the Yukon Territory, whose regulators have announced their intention to issue similar orders.
For more information on the impact of the new registration regime on dealers trading in the exempt market, see our July 2009 publication: "Impact on Limited Market Dealers and Unregistered Dealers Trading in the Exempt Market".
Posted on February 16, 2010
On February 12, the Investment Industry Regulatory Organization of Canada (IIROC) published a notice correcting an oversight that left certain proficiency requirements out of the final rule amendments to IIROC's Dealer Member Rules, which related to the implementation of the new registration regime. The final rule amendments inadvertently omitted proficiency requirements for institutional supervisors of futures contracts, futures contract options and options trading. The changes announced last week correct this mistake and are intended to preserve the proficiency requirements existing before registration reform. As the applicable regulators have approved these changes, they are now effective.
Posted on February 11, 2010
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On February 5, 2010, staff of the Canadian Securities Administrators (CSA) published a staff notice (the February FAQ) addressing frequently asked questions regarding compliance with the financial reporting requirements under National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103). NI 31-103 came into effect on September 28, 2009 and was the subject of an earlier FAQ published on December 18, 2009. The questions in the February FAQ were compiled from informal public enquiries received by CSA members and the responses are based on views of CSA staff.
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Posted on February 11, 2010
On January 14, the Saskatchewan Financial Services Commission, the securities regulator for the province of Saskatchewan, announced that it will participate along with other "North Western" jurisdictions in making available certain trade-based registration exemptions to persons who would otherwise be required to register as exempt market dealers. As a result of the implementation of the new registration regime and National Instrument 31-103 Registration Requirements and Exemptions, trade-based registration exemptions that parallel prospectus exemptions available under National Instrument 45-106 Prospectus and Registration Exemptions are to be repealed on March 27, 2010.
Pursuant to a blanket order to be issued by the SFSC, an exemption from the EMD registration requirement will be made available for persons trading in securities in reliance on certain prospectus exemptions, including the "accredited investor" and the "minimum investment amount" exemptions under section 2.3 and section 2.10 of NI 45-106, provided the conditions set out in the blanket order are satisfied. Saskatchewan will be joining Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut and the Yukon Territory, whose regulators had previously announced their intention to issues similar blanket orders. The orders granting the exemption are anticipated to be issued on March 27, 2010.
For more information on the impact of the new registration regime on dealers trading in the exempt market, see our July 2009 publication: "Impact on Limited Market Dealers and Unregistered Dealers Trading in the Exempt Market".
Posted on February 5, 2010
The Canadian Securities Administrators (CSA) have published a staff notice this morning addressing frequently asked questions as of February 5, 2010 relating to financial reporting requirements under the new NI 31-103 Registration Requirements and Exemptions. The notice supplements an earlier FAQ published on December 18, 2009.
Posted on January 28, 2010
Amendments to MFDA Policy No. 3 Complaint Handling, Supervisory Investigations and Internal Discipline and consequential amendments to related MFDA rules and policies are scheduled to come into effect on February 1, 2010. The amendments are intended to provide "additional guidance with respect to the standards that Members should have in place regarding complaint handling and supervisory investigations" as well as consistency with the new registration regime and IIROC complaint handling requirements. The amended Policy No. 3 considers such issues as the assessment and handling of complaints, settlement agreements, supervisory investigations, internal discipline and record retention.
Posted on January 26, 2010
On January 7, the New Brunswick Securities Commission (NBSC) published NBSC Notice 91-701 to respond to certain frequently asked questions on NBSC Local Rule 91-501 Derivatives (the Rule). As discussed in our previous update dated December 14, 2009, the Rule imposes registration and risk disclosure requirements in respect of trades in “derivatives” as defined in the Rule, other than trades among qualified parties.
The notice clarifies that a qualified party that engages in a derivatives transaction is responsible for determining whether the other party is also a qualified party. To do so, it may rely on factual statements made by the other party provided that it does not have reasonable grounds to believe that the statements are false. The qualified party is also responsible for determining whether the exemptions under the Rule are applicable based on the facts supplied by the other party and should retain all documentation relating to its determination.
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Posted on January 18, 2010
The Ontario Securities Commission (OSC) has released the January 2010 edition of The Investment Funds Practitioner, a publication intended to assist those that regularly prepare public disclosure documents and applications for exemptive relief on behalf of investment funds. Authored by staff of the OSC's Investment Funds Branch, the Practitioner contains an overview of recent issues emerging from applications for discretionary relief, prospectuses and continuous disclosure documents. Specifically, the OSC provided a number of observations and practice points that may be of interest. Among other things, the publication considers the following:
- Responding to "novel applications" for relief from the various conflict provisions under Ontario's Securities Act (Act) and National Instrument 81-102 Mutual Funds (NI 81-102) based on IRC approval. The OSC reminded filers that the Canadian Securities Administrators deliberately chose to maintain the various conflict provisions in local securities legislation and codify only limited exemptions in National Instrument 81-107 Independent Review Committee for Investment Funds. The OSC stated that it intends to complete reviews to assess how the IRC approval system is working with existing codified exemptions.
- The OSC noted a number of "recurring issues" respecting the mergers and reorganizations of mutual funds, including applications missing required information and filers failing to properly factor in securities regulatory approval into the transaction planning process.
- The OSC also noted that it generally does not require a parallel application for relief from the conflicts of interest prohibitions under the Act where relief is sought under NI 81-102 to facilitate fund on fund arrangements that do not comply with all the conditions in section 2.5(2) of NI 81-102. The OSC indicated that it is of the view that the exemption codified under section 2.5(7) of NI 81-102 still applies even where the fund has obtained an exemption from some of the conditions in section 2.5(2).
- Filers were also reminded by the OSC that those wishing to receive a receipt for a (preliminary) prospectus that the (preliminary) prospectus and accompanying material should be received by the OSC on or before noon on the day the receipt is required.
- The OSC noted that while it has granted relief to file a prospectus beyond the 90 day period, it encourages filers to make applications for this type of relief prior to the expiration of the 90 day period.
Posted on January 7, 2010
On December 23, the Mutual Fund Dealers Association of Canada (MFDA) published proposed consequential amendments to its rules intended to ensure consistency with the new registration regime under National Instrument 31-103 Registration Requirements and Exemptions. Specifically, the amendments would impact the rules respecting proficiency requirements, referral arrangements, standards of supervision, client reporting and record retention. Meanwhile, MDFA Policy No. 6 Information Reporting Requirements would also be amended.
Comments on the proposals are being accepted until March 23, 2010.
Posted on January 5, 2010
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Historically, foreign advisers relied on the registration exemption in section 194.2 of the Regulation Respecting Securities (Quebec) (the 194.2 Exemption) to enter into sub-advisory arrangements with Quebec registered dealers and advisers. As previously noted, in connection with the coming into force of National Instrument 31-103 Registration Requirements and Exemptions (31-103) the 194.2 Exemption was repealed effective December 28, 2009. 31-103 does not provide for a sub-adviser exemption from the adviser registration requirement, although, it was included in previous proposals for 31-103. The CSA have indicated that they plan to consider further a sub-adviser exemption for inclusion in 31-103. To accommodate this regulatory gap, the Autorité des marchés financiers (AMF) issued a decision, effective December 28, 2009, which exempts foreign sub-advisers from the requirement to register, provided certain conditions are met.
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Posted on January 5, 2010
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On December 18, 2009, staff of the Canadian Securities Administrators (CSA) published a staff notice (the FAQ) setting out their answers to frequently asked questions regarding National Instrument 31-103 Registration Requirements and Exemptions (31-103) and amendments to National Instrument 33-109 Registration Information (NI 33-109). 31-103 and the amendments to NI 33-109 came into effect on September 28, 2009 (the Effective Date). The questions were compiled from informal public enquiries received by CSA members and the responses are based on views of CSA staff. Summarized below are responses to some of the more substantive issues.
Chief compliance officer proficiency requirements and exemptions
Under Part 3 of 31-103, an individual who satisfies the proficiency requirements for a chief compliance officer (CCO) of a portfolio manager (PM), also satisfies the proficiency requirements for a CCO of a mutual fund dealer (MFD), exempt market dealer (EMD) and investment fund manager (IFM). There is, however, no provision to accommodate for MFD, EMD and IFM registrations a CCO of a PM whose proficiency is grandfathered for the PM registration under subsection 16.9(2) of 31-103. The FAQ indicates that the CSA plan to issue an order providing a CCO of a PM whose proficiency is grandfathered under subsection 16.9(2) with an exemption from the proficiency requirements applicable to a CCO of an MFD, EMD or IFM where the firm was registered as a PM on the Effective Date and the individual was designated as the firm’s CCO on the Effective Date and remains so registered.
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Posted on December 18, 2009
The Canadian Securities Administrators (CSA) today published a staff notice containing answers to frequently asked questions regarding National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103) and amendments to National Instrument 33-109 Registration Information (NI 33-109), both of which came into force on September 28, 2009. According to the notice, the list of frequently asked questions were compiled from public enquiries the CSA members have received concerning NI 31-103 and NI 33-109. Among other things, the staff notice deals with proficiency exemptions, exempt market dealer underwriting activities and investment fund manager registration.
The notice consists of a chart organized according to the different sections of NI 31-103 and NI 33-109. Applicable answers based on views of CSA staff have been provided on the questions posed. A more detailed overview of these frequently asked questions will follow.
Posted on December 14, 2009
Margaret Grottenthaler | PDF Version
The Saskatchewan Securities Act, 1988 (the Saskatchewan Act) includes within its definition of “security” a futures contract or option that is not an exchange contract. Given the wording of the definition, there has been uncertainty as to whether OTC forwards and other OTC derivatives transactions would fall within this category and consequently be subject to the registration and prospectus requirements of the Saskatchewan Act. The issue has now been addressed by the Saskatchewan Financial Services Commission, Securities Division. On November 26, 2009, it issued General Order 91-907 exempting over-the-counter (OTC) derivatives trading among qualified parties from the registration and prospectus requirements under the Saskatchewan Act. The Companion Policy to the General Order states that the Act's definition of "security" includes futures contracts and options that are not exchange contracts and, thus, parties that currently enter into futures contracts or options are subject to the registration and prospectus requirements of the Saskatchewan Act.
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Posted on November 27, 2009
Subsequent to the recent implementation of the new registration regime, the Canadian Securities Administrators (CSA) today published notice of local prospectus and registration exemptions for each jurisdiction that are not included in NI 45-106 Prospectus and Registration Exemptions or NI 31-103 Registration Requirements and Exemptions. The exemptions, listed by jurisdiction, are up-to-date as of November 27, 2009 and the CSA state that they will update the list periodically.
Posted on November 13, 2009
Alix d'Anglejan-Chatillon
Canadian, U.S. and other non-Canadian investment advisers which have entered into portfolio management agreements with permitted institutional clients in Quebec and, in particular, sub-advisory agreements with Quebec-registered dealers and advisers, on the basis of the existing adviser registration exemption under section 194.2 of the Regulation Respecting Securities (Quebec) (the 194.2 Exemption) should make sure that they consider the impact of the new Canadian registration regime on such arrangements.
In Quebec, the 194.2 Exemption has historically been relied on by non-Quebec advisers in connection with portfolio management arrangements entered into with permitted Quebec institutional investors. The 194.2 Exemption has been used, in particular, to structure sub-advisory arrangements with Quebec registered dealers and advisers. As part of the registration reform transition rules, the 194.2 Exemption will remain in place until December 28, 2009 when the exemption will be repealed.
As previously noted, National Instrument 31-103 Registration Requirements and Exemptions (31-103) does not include the sub-adviser exemption which the Canadian Securities Administrators (CSA) had formulated under preceding proposals for the Instrument. A sub-adviser exemption will remain available in Ontario under section 7.3 of OSC Rule 35-502 Non-Resident Advisers and the CSA have stated that discretionary relief on a similar basis will be granted in other jurisdictions.
For U.S. and other non-Canadian advisers, the 194.2 Exemption is effectively replaced by the more restricted international adviser exemption under section 8.26 of 31-103. It will not be possible to continue sub-advisory arrangements under the international adviser exemption since a registered dealer or adviser is not a "permitted client" for purposes of this exemption.
Non-Quebec advisers which have not already done so should, thus, consider the upcoming repeal of the 194.2 Exemption on sub-advisory arrangements entered into with Quebec registered dealers and advisers.
Posted on November 6, 2009
On October 30, the British Columbia Securities Commission (BCSC) announced amended conditions of registration for investment dealers that maintain an office in British Columbia and trade in U.S. OTC markets, and who have not filed a prescribed form of undertaking. Specifically, the BCSC has clarifed certain aspects of the previous obligations, amended Form B (reporting of OTC trading commissions) and revised language to reflect National Instrument 31-103 Registration Requirements. Of particular note, the conditions now specify who can act as a designated individual, as IIROC has removed that definition from its Dealer Member Rules. Like their previous incarnation, the conditions of registration include the effective management of risks and monitoring, recordingkeeping and reporting requirements. An interpretation note was also published to explain how the BCSC interprets the conditions. The amended obligations are effective immediately and are set to expire on December 31, 2011.
Posted on October 28, 2009
The U.S. House Committee on Financial Services announced yesterday that it had passed draft legislation (available here in its initial form as introduced in the House of Representatives) that would require the registration of advisers to private pools of capital. The draft legislation would also introduce new recordkeeping and disclosure requirements for private advisers and increase the regulation of advisers to hedge funds, private equity firms and other private pools of capital.
Posted on October 23, 2009
The Canadian Securities Administrators (CSA) published a notice today regarding proposed amendments to National Instrument 31-103 Registration Requirements and Exemptions, its companion policy and National Instrument 33-109 Registration Information. The proposed changes relate to the impending transition to IFRS and follow proposals respecting IFRS-related changes to investment fund disclosure and prospectus and registration exemptions published last week. Specifically, the immediate amendments include replacing existing Canadian GAAP terms and phrases with IFRS terms, providing registered dealers and investment fund managers a 15-day extension for delivery of their first IFRS interim financial information for an interim period beginning on or after January 1, 2011 and providing registrants with an exemption from the requirement to provide comparative information for financial years beginning in 2011. The CSA are accepting comments on the proposals until January 21, 2010.
Posted on October 22, 2009
Yesterday (October 21), the Investment Industry Regulatory Organization of Canada released a notice responding to "recurring questions" received by its staff regarding the new approval categories for "Executives" and "Supervisors" under the new registration regime. Specifically, the notice describes those individuals that must be approved under one of the above noted categories, as well as considering the proficiency requirements for Supervisors.
Posted on October 9, 2009
On September 25, 2009, the Ontario Securities Commission issued its passport decision In the Matter of National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103 or the Instrument), Miller Tabak Roberts Securities, LLC (the Filer) and certain other international dealers (the Decision). The Decision provides certain transitional relief for certain persons or companies that were registered in Ontario or Newfoundland and Labrador as international dealers immediately before the effective date of NI 31-103 (collectively, International Dealers). As noted in previous posts, the effective date of NI 31-103 was September 28, 2009 (the Effective Date). As of the Effective Date, the dealer registration of International Dealers was revoked. Under NI 31-103 an International Dealer can continue to transact business in the jurisdiction in which it was so registered by relying on the international dealer exemption, which, provided certain conditions are met, generally permits trading with "permitted clients" when trading in foreign securities and certain debt securities. Reliance on the international dealer exemption would, in certain respects, restrict the activity that could previously be conducted by the International Dealer under its dealer registration, including the trading of Canadian debt securities outside of a distribution of the securities with local "designated institutions".
Provided certain conditions are met, International Dealers can elect to rely on the transitional relief provided under the Decision to continue to trade in the local jurisdiction in which they were so registered in debt securities with local "designated institutions", other than during the security's distribution, for a period of one year from the Effective Date. Electing to rely on the transitional relief would also also extend the requirement to provide the prescribed notice to clients to six months from the Effective Date. To rely on the transitional relief, the International Dealer will have to satisfy certain conditions, which are generally those applicable to a firm wishing to rely on the international dealer exemption under NI 31-103 . Further, the International Dealer would, within one month of the Effective Date, have to provide notice to the applicable regulator of their intention to rely on the Decision along with the Form 31-103F2 – Submission to Jurisdiction and Appointment of Agent for Service.
Posted on October 9, 2009
On September 28, 2009, the Ontario Securities Commission issued its passport decision In the Matter of National Instrument 31-103 Registration Requirements and Exemptions (NI 31-103 or the Instrument) and Crosbie & Company Inc. and Certain Other Limited Market Dealers that have become Exempt Marker Dealers under Subsection 16.3(2) of NI 31-103 (the Decision). The Decision provides additional transitional relief from particular requirements under NI 31-103 for certain limited market dealers (LMDs) that transitioned to exempt market dealers (EMDs) in Ontario and Newfoundland and Labrador as of the effective date of NI 31-103. As noted in previous posts, the effective date of NI 31-103 was September 28, 2009 (the Effective Date). An LMD that transitioned to an EMD as of the Effective Date and that is not registered in any other category of registration in Ontario or Newfoundland and Labrador, now has one year from the Effective Date to comply with the financial reporting requirements under section 12.12 of NI 31-103. Further, an LMD that transitioned to an EMD as of the Effective Date and that is not registered in any other category of registration in Ontario or Newfoundland and Labrador except as a registered mutual fund dealer as of the Effective Date or as an investment fund manager, has two years from the Effective Date to comply with the requirement to deliver client statements under s. 14.14 of NI 31-103.
Posted on September 28, 2009
Earlier this month, the Mutual Fund Dealers Association of Canada published a bulletin advising its Members of expected changes to its rules and Member practices due to the implementation of National Instrument 31-103 Registration Requirements and Exemptions. The bulletin specifically considers changes to proficiency requirements and categories of registration, new client mobility provisions, the harmonization of requirements for referral arrangements and changes to the frequency and content of account statements. A second bulletin, published a few days after the first, clarified record-keeping requirements for branch managers.
Posted on September 25, 2009
The Canadian Securities Administrators (CSA) today published for comment proposed amendments to National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) and its companion policy as well as related consequential amendments to National Instrument 14-101 Definitions. As previously discussed, International Financial Reporting Standards (IFRS) will apply to Canadian publicly accountable enterprises for financial years beginning on or after January 1, 2011. The amendments are intended to "provide an efficient transition mechanism for issuers and registrants to reflect the change to IFRS".
The Canadian Accounting Standards Board (AcSB) has announced that it plans to incorporate IFRS into the Handbook of the Canadian Institute of Chartered Accountants (the CICA Handbook) as “Canadian GAAP for publicly accountable enterprises.” As a result, Part 1 of the CICA Handbook will contain a version of Canadian GAAP to be known as Canadian GAAP for publicly accountable enterprises that will apply for financial years beginning on or after January 1, 2011, and Part IV will contain a version known as Canadian GAAP for public enterprises that are the standards constituting Canadian GAAP before the mandatory effective date (current Canadian GAAP).
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Posted on September 21, 2009
On September 18, the Ontario Securities Commission (OSC) announced that Ontario's Minister of Finance has approved National Instrument 31-103 Registration Requirements and Exemptions and related consequential amendments. The amendment and restatement of National Instrument 45-106 Prospectus and Registration Exemptions and related consequential amendments have also been approved.
For more comprehensive information regarding these instruments, see our earlier posts regarding NI 31-103 and NI 45-106. The amended instruments, forms and rules are scheduled to become effective on September 28, 2009.
Posted on September 17, 2009
The Investment Industry Regulatory Organization of Canada (IIROC) announced yesterday the approval of amendments to its Dealer Member Rules related to the implementation of registration reform. Proposed amendments were originally published for comment on September 26, 2008 and an amended proposal was published on July 17, 2009. The final version of the amendments, having incorporated the suggestions of the securities regulators, have now been approved by the regulators. The amendments will, among other things, reduce the number of approval categories from 46 to 11, merge supervisory categories and implement a principles-based approach to supervision. Most of the amendments will be effective on September 28, 2009 in conjunction with National Instrument 31-103 Registration Requirements and Exemptions.
Posted on September 16, 2009
In July, the U.S. Financial Industry Regulatory Authority (FINRA), published a regulatory notice regarding the approval by the Securities and Exchange Commission of amendments to NASD Rules 1022 and 1032. The amendments, effective November 2, 2009 and first described in our post of March 19, require individuals engaged in investment banking activities to register under a new limited representative registration category for investment banking professionals and take a corresponding qualification exam in lieu of the current General Securities Registered Representative (Series 7) exam. A transition period, however, will allow individuals holding the Series 7 registration to opt into the new category until May 3, 2010 without having to take the new exam.
Posted on September 15, 2009
The TSX announced last week that the temporary relief granted with respect to the Remedial Review Process will not be extended beyond the end of this month. As described in our post of March 26, the relief was initially granted on November 3, 2008 and, after providing for an extension, is set to expire on September 30, 2009. The relief, initiated in response to the "extraordinary market conditions" prevalent late last year, extends from 120 to 210 days the maximum time period that an issuer has to remedy deficiencies that triggered a delisting review.
Posted on September 14, 2009
On September 8, 2009, the Investment Industry Regulatory Organization of Canada announced that an overview of registration reform would be available on its website as of 4:00 p.m. on September 15, 2009. Topics to be covered include: changes to approval categories, the "Passport" registration system, the virtual elimination of transfer/approval delays and plans for implementing new requirements and standards. Registration is required to view the webcasts, which will be available in English and French.
Posted on September 4, 2009
The Canadian Securities Administrators have published a staff notice reminding registrants of their "suitabilty" and "know your product" obligations to clients. The CSA expect firms to have a process in place for reviewing and approving new products, as well as existing products whose structure or features have significantly changed. The notice provides specific factors that firms should consider in assessing investment products and reminds firms that the approval of an investment product does not mean that the product is suitable to any specific client.
Posted on August 26, 2009
Stikeman Elliott's second seminar on registration reform is now also available online. The webcast provides further details regarding the recently-published National Instrument 31-103 Registration Requirements, including a discussion of who needs to be registered and how to do so, as well as an overview of new capital, insurance and compliance requirements. A PDF of the seminar booklet accompanying the audio presentation is also available.
Posted on August 20, 2009
On Wednesday, the Investment Industry Regulatory Organization of Canada released a rules notice respecting the anticipated implementation of its client complaint handling rule proposals. IIROC first proposed amendments to its Dealer Member Rules to establish a framework for complaint handling in February 2009, and the proposals just released incorporate what IIROC has described as "minor" changes in response to public comments received. The complaint handling process requires Dealer Members to appoint a designated complaints officer and establish written complaint-handling procedures, while also setting out the general process and timelines for responding to complaints.
IIROC has submitted its proposals to the Canadian Securities Administrators (CSA) for final approval and the proposals will become effective 30 days after CSA approval and the issuance of an IIROC rules notice. Thus, IIROC advises Dealer Members to start preparing for implementation. A black-line copy reflecting changes to its earlier proposal was also provided.
Posted on August 19, 2009
A webcast of Stikeman Elliott's recently-held seminar on registration reform is now available online. The webcast provides an overview of recently-published National Instrument 31-103 Registration Requirements, describes the new regime's impact on various market participants and provides tips for effective transition and implementation. A PDF of the seminar booklet accompanying the audio presentation is also available.
Posted on August 7, 2009
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.
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Posted on August 6, 2009
Comment period open until August 31, 2009
Alix d'Anglejan-Chatillon | PDF Version
On July 17, 2009, the Canadian Securities Administrators (the CSA) published their final proposal for National Instrument 31-103 - Registration Requirements and Exemptions (31-103). Subject to governmental and other local approval requirements, 31-103 will come into force on September 28, 2009 (the Implementation Date). The adoption of 31-103 in Quebec can be expected to accelerate the further implementation of the Quebec Derivatives Act (QDA) which came into force in Quebec on February 1, 2009 and governs trading and advisory activities relating to all forms of derivatives.
On July 31, 2009, as part of this implementation process, the Autorité des marchés financiers (AMF), Quebec’s financial services regulator, published a proposed Regulation to amend the Derivatives Regulation (the Proposed Regulation). The Proposed Regulation incorporates by reference various registration-related instruments and material provisions of 31-103 and sets out an important registration exemption for non-Quebec dealers and advisers in exchange-traded derivatives offered primarily outside Quebec provided they limit their activities to “accredited counterparties”.
The draft instrument is open for comment until August 31, 2009 and is scheduled to come into force on the Implementation Date, subject to ministerial approval following the end of the 30-day comment period.
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Posted on August 5, 2009
On August 4, the Investment Industry Regulatory Organization of Canada published a notice providing additional guidance regarding amendments to its Dealer Member Rules related to the implementation of the registration reform project. The notice covers: (i) the approval of Ultimate Designated Persons and Chief Compliance Officers; (ii) the approval category of "Supervisor" and timelines for meeting the new approval requirements; (iii) new record-keeping requirements for Dealer Members; (iv) changes to business types; (v) automatic transfers; and (vi) approval notices. The amendments to IIROC's Dealer Member Rules were published on July 17.
Posted on July 23, 2009
As described in our post of June 18, the U.S. Treasury Department's financial reform plan included a proposal requiring that investment advisers to hedge funds and other private pools of capital whose assets under management exceed "some modest threshold" be registered with the Securities and Exchange Commission under the Investment Advisers Act. On July 15, the Treasury Department delivered such proposed legislation to Congress.
While some hedge fund managers are currently subject to regulation as “investment advisers” by the SEC under the Investment Company Act of 1940, the majority operate outside the ambit of the SEC as they are organized to qualify for exemptions from registration requirements that generally apply to managers of similar types of investment vehicles, such as mutual funds. The proposed legislation, however, would impose registration requirements on advisers to private investment funds with more than $30 million of assets under management. Funds would be subject to various obligations with respect to financial reporting, conflict of interest prohibitions and increased disclosure requirements. According to the Treasury Department's press release, the new legislation "would help protect investors from fraud and abuse, provide increased transparency, and provide the information necessary to assess whether risks in the aggregate or risks in any particular fund pose a threat to our overall financial stability.
Posted on July 20, 2009
Canada’s new registration rule was published by the Canadian Securities Administrators in final form on July 17, 2009.
The new regime is expected to be in force September 28, 2009 with transition periods for implementation of aspects varying. The new regime, which has been several years in the making, is intended to harmonize, streamline and modernize registration requirements and exemptions across all Canadian jurisdictions. It regulates dealers and advisers, effectively eliminating the dealer registration exemption for trading in the exempt market in Canada, and imposes a new registration requirement for investment fund managers.
The new regime has significant implications for Canadian and non-Canadian market participants, particularly those now doing business on an unregistered or exempt basis.
More details of the regime and its impact on particular types of market participants and their business activities are available by clicking the relevant topic set out below.
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Aug. 13 - Registration Reform in Canada: The Finish Line is Here
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Aug. 20 - The Practical Impact of the New Registration Regime in Canada: A Road Map for Implementation
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Posted on July 17, 2009
Ramandeep Grewal
In conjunction with publishing the final rules relating to registration reform on July 17, 2009 (in the form of National Instrument 31-103 Registration Requirements and Exemptions), the Canadian Securities Administrators (CSA) also published an amended and restated National Instrument 45-106 Prospectus and Registration Exemptions (the Revised NI 45-106) along with revised forms and companion policy. Most of the changes reflected in Revised NI 45-106 were required in order to harmonize that instrument with the new registration regime.
Pursuant to the new registration regime, in most jurisdictions of Canada, registration as a dealer will be triggered based on a “business trigger” as opposed to a trade-based trigger. The former NI 45-106 contained prospectus and registration exemptions based on the nature of the trade being undertaken. Since a trade-based trigger will not longer apply in most Canadian jurisdictions, NI 45-106 has been restructured in order to, primarily, be a prospectus exemption rule. The registration exemptions have been moved to a separate part of the instrument and are set to expire after a six-month transition period. However, certain trade-based exemptions (including “accredited investor” and “$150,000 minimum investment amount”) will continue to be available in the provinces of British Columbia, Alberta, Manitoba and in each of the three Territories. These exemptions will, however, be subject to new conditions setting out the circumstances in which they may be used, which conditions are to be set out in blanket orders issued by the respective regulators. Notably, these exemptions will be available only to those who are not otherwise registered. Saskatchewan is also considering whether to adopt this approach and will release a separate notice once it has made this decision.
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Posted on July 17, 2009
The Canadian Securities Administrators have just published National Instrument 31-103 Registration Requirements and Exemptions (31-103) in final form. 31-103, which results from a comment and review process that started in early 2007, is expected to be in force on September 28, 2009, with varying transition periods for implementation of different aspects of the rule. 31-103 regulates dealers, advisers and investment fund managers and is intended to harmonize and streamline registration requirements and exemptions across all Canadian jurisdictions. Some of the more material changes in approach include the effective elimination of the dealer registration exemption for trading in the exempt market in Canada and the imposition of a new registration requirement for investment fund managers.
The new registration regime has significant implications for Canadian and non-Canadian market participants, particularly those now doing business in any Canadian jurisdiction on an unregistered or exempt basis.
We will be providing a comprehensive review of the new regime and its impact on particular types of market participants and their business activities in the coming days.
Mark your calendars for the upcoming complimentary breakfast seminars in our Toronto and Montreal offices:
Registration Reform in Canada: The Finish Line is Here
Toronto: August 13, 2009
Montreal: August 25, 2009
The Practical Impact of the New Registration Regime in Canada: A Road Map for Implementation
Toronto: August 20, 2009
Montreal: September 1, 2009
Posted on July 10, 2009
The Canadian Securities Administrators (CSA) today published a staff notice updating registrants on the CSA staff's position on whether all non-SRO registrants should be required to use International Reporting Standards (IFRS) beginning in 2011. In September 2008, the CSA published a notice considering the impact of the changeover to IFRS for registrants that are not members of an SRO. Non-SRO registrants, including investment counsel and portfolio managers, limited market dealers, exchange-contracts dealers and scholarship plan dealers do not fall under the definition of publicly accountable enterprise (PAE) and are, therefore, technically not covered by the Canadian Accounting Standard Board's implementation plan relating to mandatory adoption of IFRS.
According to today's notice, the CSA propose that all non-SRO registrants also be required to adopt IFRS for financial years beginning on or after January 1, 2011, regardless of whether the non-SRO registrants falls within the definition of a PAE. Once the new registration categories set out in National Instrument 31-103 Registration Requirements are adopted, the CSA propose that the requirement to use IFRS apply to those categories as well, again, regardless of whether the registrant is a member of an SRO. The Mutual Fund Dealers Association of Canada, the Investment Industry Regulatory Organization of Canada and the Autorité des marchés financiers in Quebec will separately provide notice to their members of the use of IFRS.
Posted on June 24, 2009
The Investment Industry Regulatory Organization of Canada (IIROC) today released a guidance note setting out how it would transition current Approved Persons from existing categories to the proposed new categories under the upcoming registration regime to be implemented under proposed National Instrument 31-103 Registration Requirements, expected to come into force on September 28, 2009. The notice supplements the information published in CSA Staff Notice 31-311 on June 12.
The current category structure, consisting of 46 categories will be replaced with a regime containing 11 categories that will focus solely on the function of the Approved Person. The type of customer, product and whether the individual engages in portfolio management will be tracked separately.
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Posted on June 12, 2009
Daniella Laise, Kathleen Ward and Alix d'Anglejan-Chatillon | PDF Version | Version française
Staff of the Canadian Securities Administrators (CSA Staff) published CSA Staff Notice 31-311 (the Staff Notice), which outlines the CSA Staff's detailed recommendations to the relevant securities regulatory authorities and ministries regarding the transition of firms and individuals from the existing registration regime to the new one under proposed National Instrument 31-103 Registration Requirements (NI 31-103). The recommendations apply to both Canadian and non-resident registrants, and to firms that are not currently subject to registration but will be required to register under NI 31-103. These procedural recommendations do not address any of the substantive requirements of NI 31-103. The CSA Staff will seek final approval to publish the final version of NI 31-103 on or about July 17, 2009 intending for it to come into force on or about September 28, 2009 (the effective date).
The notice discusses a number of issues, including the conversion of existing registrants to new categories of registration, timelines for transition and compliance under the new registration regime, as well as the proposed “freeze period” of the National Registration Database (NRD) to allow staff to transition registrants and activate the new forms under proposed revised National Instrument 33-109 Registration Information (NI 33-109). While the Staff Notice contains detailed and helpful information on key transition issues, CSA Staff caution that it reflects only what CSA Staff are recommending.
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Posted on May 22, 2009
On May 22, 2009 the Ontario Securities Commission (OSC) published a request for comments on a second set of proposed amendments to NI 45-106 Prospectus and Registration Exemptions, OSC Rule 45-501 Ontario Prospectus and Registration Exemptions and NI 45-102 Resale of Securities (collectively, the “Prospectus and Registration Rules”). This second set of amendments has been proposed in connection with proposed amendments to the Securities Act (Ontario) (OSA) under Bill 162 An Act respecting the budget measure and other matters (specifically Schedule 26 relating to the OSA). The second set of amendments is required in order to remove or modify certain provisions of the Prospectus and Registration Rules that are proposed to be superseded by specific provisions of the OSA under Bill 162.
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Posted on April 27, 2009
IIROC has recently published a notice proposing rules and amendments in order to address various regulatory objectives under the Client Relationship Model Project, specifically: relationship disclosure, management and disclosure of conflicts of interest, account suitability and account performance reporting. Proposed rule changes were initially published in February 2008 by the IDA and the current proposals incorporate feedback received through the comment process as well as through subsequent consultations held with industry associations, the MFDA and provincial securities regulators. Comments are invited for a period of 90 days from the date of publication of the notice.
Posted on April 3, 2009
The CSA have recently released a Staff Notice indicating that they expect to publish National Instrument 31-103 Registration Requirements (NI 31-103) in July 2009. If approved by the appropriate government authorities in each jurisdiction, the CSA expect NI 31-103 to come into force at the end of September 2009.
Posted on March 26, 2009
On March 26, 2009, the TSX published a notice continuing temporary relief to listed issuers with respect to the Remedial Review Process. Originally granted on November 3, 2008 due to "extraordinary market conditions", the relief extends the maximum time period that an issuer has to remedy deficiencies that triggered a delisting review from 120 to 210 days. Unless further extended, the relief continues until September 30, 2009.
Posted on December 19, 2008
Pursuant to their earlier Notice, the CSA have now announced that proposed NP 11-204 Process for Registration in Multiple Jurisdictions and amendments to other Passport-related instruments and policies have been approved. The new National Policy sets out the processes for registration in multiple jurisdictions, while the amendments to existing Passport rules address issues that have arisen since Phase II of Passport was implemented in March 2008.
Today's notice by the CSA states that, since implementation of passport for registrants is dependent on the adoption of proposed NI 31-103 Registration Requirements, the changes described in the immediate notice will only be implemented once NI 31-103 comes into effect, which is expected to occur by the end of April 2009.
Posted on November 28, 2008
The CSA have announced that they are extending the time for public comment on their consultation paper regarding the effects of recent credit market turmoil on ABCP markets in Canada to February 16, 2009. For more information on the consultation paper, see our post of October 6, 2008. The comment period was originally set to expire on December 20, 2008.
Posted on November 25, 2008
The TSX Venture Exchange recently announced that given current market conditions, it will consider granting issuers temporary relief from certain policies on a case-by-case basis until March 31, 2009. Specifically, the Exchange may refrain from downgrading an issuer if it fails to meet continued listing requirements; capital pool companies may apply for an extension to complete a Qualifying Transaction; and issuers may be able to issue shares at a price of less than $0.05 per share under certain circumstances. The Exchange also announced that it would be making changes to a number of its policies in order to streamline them and to remove certain differences between Tier 1 and Tier 2 issuers. The latter changes are effective December 15, 2008.
Posted on November 14, 2008
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.
Posted on October 6, 2008
PDF Version
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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Posted on October 3, 2008
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.
Posted on October 3, 2008
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.
Posted on October 3, 2008
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.
Posted on October 2, 2008
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.
Posted on September 15, 2008
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.
Posted on August 11, 2008
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.
Posted on August 11, 2008
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.
Posted on August 7, 2008
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.
Posted on July 21, 2008
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.
Posted on June 1, 2008
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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 were open for comments until May 29, 2008.
Update: The CSA have recently released a Staff Notice indicating that they expect to publish National Instrument 31-103 Registration Requirements (NI 31-103) in July 2009. If approved by the appropriate government authorities in each jurisdiction, the CSA expect NI 31-103 to come into force at the end of September 2009.
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Round Two (2008) Articles:
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Posted on May 20, 2008
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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Posted on April 3, 2008
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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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Posted on March 19, 2008
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.
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Posted on March 12, 2008
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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Posted on March 7, 2008
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.
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Posted on December 1, 2007
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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Posted on April 18, 2007
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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Posted on April 18, 2007
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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Posted on March 1, 2007
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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Posted on March 1, 2007
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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Posted on February 28, 2007
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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