Canada: CSA Release Proposed First-Year Amendments To Registration Rules

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.

Incorporate Omnibus/Blanket Relief Orders and FAQs

The First Year Amendments would incorporate the omnibus/blanket relief orders issued by members of the CSA on February 26, 2010. Generally, the omnibus/blanket relief orders addressed issues relating to transition issues, including the continuation of grandfathering provisions in jurisdictions added to a registrant's registration, exemptions for chief compliance officers and advising representatives of portfolio managers from the proficiency requirements when adding specified categories of registration, and an exemption for mutual fund dealers from the requirement to establish whether a client is an insider of a reporting issuer or other publicly traded issuer. For additional information on the omnibus/blanket relief orders, see our post dated March 8, 2010.

The First Year Amendments would also incorporate into Companion Policy 31-103CP (31-103CP) some of the guidance in the CSA staff notices published as Frequently Asked Questions (FAQs) on December 18, 2009 and February 5, 2010. The First Year Amendments would include guidance from the FAQs on, among other matters, the availability of the dealer registration exemption under section 8.5 of 31-103 for cross-border "jitneys" (discussed in more detail below) and the availability of the international dealer exemption and international adviser exemption to foreign firms otherwise registered in one or more Canadian jurisdictions. For additional information on the FAQs, see our posts dated January 5, 2010 and February 11, 2010.

Amendments relating to International Financial Reporting Standards

Taking into account the upcoming changeover to international financial reporting standards (IFRS), the First Year Amendments would replace the term "market value" with the term "fair value" as it appears in the following:

  • section 8.22 [Small security holder selling and purchase arrangements] of NI 31-103;
  • section 14.14 [Account statements] of NI 31-103;
  • Form 31-103F1 Calculation of Excess Working Capital;
  • section 1.2 of 31-103CP, in the guidance relating to the determination of assets under paragraph (o) of the definition of permitted client;
  • question b) in Schedule N to Form 33-109F4 Registration of Individuals and Review of Permitted Individuals; and
  • question b) in Schedule E of Form 33-109F7 Reinstatement of Registered Individuals and Review of Permitted Individuals.

As a result of the proposed change, where a person or company is required to determine the fair value of a security under the above-referenced sections, the fair value would be determined in accordance with IFRS. The requirement to determine fair value of a security in accordance with IFRS would apply equally to resident and non-resident registrants, which may be onerous for non-resident registrants not otherwise subject to IFRS.

The proposed amendment is further to the proposed amendments to 31-103, 31-103CP and 33-109 published by the CSA for comment on October 23, 2009, which, in turn, operate in conjunction with the proposed amendments to National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, published by the CSA for comment on September 25, 2009 (the IFRS Proposals). The proposed amendments of October 2009 generally address the changeover to IFRS as it applies to a registered firm's financial reporting obligations under Part 12 of 31-103. The IFRS Proposals would allow foreign registrants, subject to certain conditions, to prepare their financial statements in accordance with U.S. GAAP or such other accounting principles that meet the foreign disclosure requirements of the foreign regulatory authority to which the registrant is subject. For additional information on these proposed amendments see our posts dated September 25, 2009 and October 23, 2009.

Additional Requirements and Restrictions on Registered Representatives

The First Year Amendments would formally and explicitly entrench in 31-103 the requirement for a registered representative to understand the structure, features and risks of each security recommended by the registered representative. Currently, this requirement is addressed in 31-103CP and CSA Staff Notice 33-315 Suitability Obligation and Know Your Product.

The First Year Amendments would also entrench in 31-103, the practice of staff in various Canadian jurisdictions to restrict advising, associate advising and dealing representatives from being registered with more than one firm. This restriction would apply even if the firms are affiliated, however, the proposed guidance in 31-103CP states that when considering an exemption for relief from this restriction, affiliation of the firms will be one of the factors the CSA will consider. Other considerations for an application for relief from this restriction would include evidence that:

  • there are valid business reasons for the individual to be registered with both firms;
  • the individual will have sufficient time to adequately serve both firms;
  • the sponsoring firms have policies and procedures addressing conflicts of interest that may arise as a result of the dual registration; and
  • the sponsoring firms will be able to deal with these conflicts.

Extending Dealer Registration Exemption

Under the First Year Amendments, the dealer registration exemption under section 8.6 of 31-103 available to registered advisers and advisers relying on the international adviser exemption, for trades in securities of an investment fund managed by the adviser and traded to a managed account of a client of the adviser would no longer be restricted to non-prospectus qualified investment funds managed by the adviser. This dealer registration exemption would also be made available to prospectus-qualified funds managed by the adviser.

Cross-border "jitneys"

The First Year Amendments would include guidance in 31-103CP that generally incorporates the guidance from the FAQ published December 18, 2009 regarding the availability of the dealer registration exemption under section 8.5 of 31-103 for cross-border "jitneys". As provided in the proposed guidance, the dealer registration exemption in section 8.5 for trades made solely through a registered dealer would be available to a foreign dealer trading on behalf of its client, provided that all trading activity that occurs within the local Canadian jurisdiction is done through or to a dealer in that jurisdiction. The exemption would not be available if the foreign dealer or its client interacts directly with the client in the local Canadian jurisdiction.

International Dealer and International Adviser Registration Exemptions

Under 31-103, to continue to rely on the international dealer exemption or international adviser exemption, foreign firms must notify the applicable regulators (other than in Ontario) 12 months after it first submits a Form 31-103F2 Submission to Jurisdiction and Appointment of Agent for Service, and each year thereafter that it continues to rely on the exemption. To simplify the administrative process, under the First Year Amendments the date on which the regulator must be notified annually of the continued reliance on the exemption would be December 1. Under the First Year Amendments, compliance with the filing and fee payment requirements under Ontario Securities Commission Rule 13-502 Fees would continue to satisfy the annual notice requirement in Ontario.

Currently, under the international adviser exemption, a non-Canadian adviser can advise permitted clients provided the non-Canadian adviser does not advise in Canada on securities of Canadian issuers, unless providing that advice is "incidental" to its providing advice on a foreign security. The First Year Amendments would include guidance under 31-103CP on the meaning of "incidental" advice on securities of Canadian issuers. This proposed guidance provides that the language is not intended to provide a "carve out" that allows some portion of the portfolio to be made up of Canadian securities chosen by the international adviser without restriction. According to the proposed guidance, any advice with respect to the Canadian securities must be directly related to the activity of advising on foreign securities. That said, the proposed guidance also provides that "an international adviser may recommend a foreign investment fund that primarily holds foreign securities, but which also holds some Canadian securities, and still meet the conditions of the exemption."

Compliance System

The First Year Amendments would include enhanced guidance in 31-103CP on the risks that should be mitigated by a firm's internal controls, as well as enhanced guidance on effective monitoring and supervision of compliance by the firm and its registered representatives.


The First Year Amendments would include guidance and recommendations in 31-103CP regarding complaint handling, including the documenting of complaints, what should be included in a firm's complaint handling policies and procedures, responding to verbal and written complaints and the timeline within which a complaint should be addressed. Under the proposed guidance, where a firm requests that a complainant put in writing a verbal complaint not clearly expressed, it would be expected that the firm offer the complainant reasonable assistance to put the complaint in writing, unless the claim is clearly frivolous.

The First Year Amendments would change the obligation of registered firms to ensure independent dispute resolution and mediation services are made available with respect to complaints relating only to:

  • trading or advising activity;
  • breach of client confidentiality;
  • theft, fraud, misappropriation or forgery;
  • misrepresentation;
  • undisclosed or prohibited conflicts of interest; or
  • personal financial dealings with a client.

The proposed guidance would also encourage that firms seek to resolve complaints relating to the above-listed matters within 90 days.

Account Activity Reporting

The First Year Amendments would allow a registered dealer to send trade confirmations to a registered adviser acting for the client, provided the client consents in writing. The First Year Amendments would also impose account activity reporting obligations on investment fund managers, requiring that an investment fund manager send a trade confirmation to a security holder when the investment fund manager executes a redemption order received directly from the security holder, as well as require that an investment fund manager deliver account statements to a security holder, at least once every 12 months if there is no dealer on record for the security holder.

Members of SROs

The First Year Amendments would remove certain non-harmonized provisions respecting the mutual fund dealer category, and would provide additional exemptions to members of self-regulatory organizations (SROs) where the SRO rules adequately cover the same regulatory risks.

Ongoing and future CSA work on registrant regulation

The First Year amendments do not address a number of substantive issues that are still under review by the CSA, including:

  • the application of the investment fund manager registration requirement with respect to an entity that directs the operation of an investment fund from a head office or other physical location that is outside the Canadian jurisdiction;
  • an exemption for sub-advisers (currently, in Ontario the exemption remains in section 7.3 of Ontario Securities Commission Rule 35-502 Non-Resident Advisers, and Quebec has issued a decision to accommodate the regulatory gap for sub-advisor arrangements entered into prior to March 28, 2010 – for additional information, see our post dated January 5, 2010);
  • an exemption for capital accumulation plans; and
  • the requirements and guidance on cost disclosure and performance reporting to clients (which is part of the CSA's development of the client relationship model).

According to the notice, these matters will be addressed separately, and the CSA may publish staff notices or propose further amendments to 31-103 with respect to these specific matters in the future.

The CSA is accepting comments on the First Year Amendments until September 30, 2010.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions