Canada: The Canadian Registration Regime: Canadian Regulators Propose "First Year" Amendments To National Instrument 31-103 And Other Developments

Last Updated: August 24 2010
Article by BLG's Investment Management Group

Most Read Contributor in Canada, November 2017

The Canadian registration regime continues to evolve at a rapid pace, with new rule amendments proposed and more under development, the introduction of new rules by the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC), and important compliance deadlines swiftly approaching.

The Canadian Securities Administrators (the CSA) released for comment at the end of June 2010, the anticipated proposed "first year" amendments to National Instrument 31- 103 Registration Requirements and Exemptions. At the same time, they also indicated their intention to continue working on several outstanding regulatory reform projects relating to registrant regulation. This regulatory activity comes at a time when registrants and other securities industry participants must ensure they will be in compliance with significant new requirements that come into effect at the end of September 2010 as transition periods end.

To help you keep reforms in sight, this Investment Management Bulletin highlights some of the important regulatory developments and upcoming deadlines that will affect securities industry participants carrying on business in Canada.

Comments on the proposed "first year" amendments to National Instrument 31-103 are due by September 30, 2010. We will be providing comments on the proposals and would be pleased to assist you in preparing a comment letter by the deadline.

BLG's Keeping Reforms in Sight

The Investment Management Advisories in our eight-part series entitled Keeping Reforms in

Sight: Understanding the New Canadian Registration Requirements explain the impact of National Instrument 31-103 on the various types of financial services firms that must be registered (or rely on registration exemptions) to conduct securities-related activities in Canada. Included are What's New commentaries for each of the key registration categories and an outline of the implications of National Instrument 31-103 for non-Canadian advisers and dealers doing business in Canada.

Our publications are available [here] and on our website You can also access our National Instrument 31-103 At a Glance publication [here]. If you would like to receive our publications in bound booklet format, please email to request a copy.

Proposed "first-year" amendments to National Instrument 31-103

The CSA indicate that the proposed amendments to National Instrument 31-103 and related instruments [available here] are a response to feedback obtained from industry participants working to implement National Instrument 31-103 and the CSA's own experience with the new registration regime. Generally, the proposed amendments are intended to make the registration rules clearer, either through new requirements or the rewording of existing rules or through additional guidance provided in the Companion Policy. To better reflect the breadth and scope of the various requirements, the CSA also propose to change the name of National Instrument 31-103 to: Registration Requirements, Exemptions and Ongoing Registrant Obligations.

Many of the proposed amendments simply reflect the exemptions that have been granted following the implementation of National Instrument 31-103.

For example, National Instrument 31-103 will provide for grandfathering proficiency for certain chief compliance officers and certain dealing or advising representatives and relief for mutual fund dealers from the requirement to establish whether a client is an insider of a reporting issuer or an issuer whose securities are publicly traded. BLG's April 2010 Investment Management Bulletin National Instrument 31-103: The First Six Months–What's Next? [available here] describes the earlier exemptions, as well as some of the responses to frequently asked questions released by the CSA following the implementation of National Instrument 31-103.

However, some of the proposed amendments reflect new requirements or new guidance that will, if adopted, significantly impact registrants. No transition is proposed for any of these new proposed requirements and guidance. Some of the more significant proposed new requirements and guidance are outlined below.

Individual registered representatives will

  • be required to have education and training sufficient to enable them to understand the structure, features and risks of each security they recommend; and
  • be prohibited from being registered as a representative for more than one registered firm, although exemption applications will be considered in limited cases and existing registered individuals that are registered with more than one firm will be grandfathered.

Portfolio managers will benefit from the proposal to extend the dealer registration exemption available for these registrants when they trade in their own investment funds to managed accounts to include their own prospectus-qualified funds, as well as their own privately offered funds.

Investment dealers acting as portfolio managers under IIROC rules will become subject to the same restrictions on certain managed account transactions as registered portfolio managers.

Mutual fund dealers operating in Québec will only be able to rely on the exemptions from National Instrument 31-103 requirements available to MFDA members if equivalent requirements are applicable to the mutual fund dealers under the regulations in Québec. This is a change from the current exemption where a mutual fund dealer in Québec only has to comply with applicable requirements in Québec (and not concern itself with determining if the requirement in Québec is equivalent to the National Instrument 31-103 requirement). The Autorité des marchés financiers (AMF) has publicly stated that it intends to adopt rules largely harmonized to those of the MFDA by September 2011. Assuming that the proposed amendments to National Instrument 31-103 will be in force sometime in early 2011, mutual fund dealers operating in Québec will need to comply with some of National Instrument 31-103's ongoing registrant obligations for a few months, to then be subject to the new MFDA-harmonized rules. We understand that the AMF would consider providing some form of relief should this proposed amendment create undue hardship for mutual fund dealers in Québec.

Portfolio managers and dealers will benefit from the proposal to limit the requirement to provide clients with an independent dispute resolution or mediation service to specified types of complaints. Firms registered as of September 28, 2009 still can rely on the transition exemption from having to comply with this requirement until September 28, 2011.

Investment fund managers will be required to provide specified trade confirmations and account statements to investors who deal directly with them, including those investors who place redemption orders directly with them. The CSA acknowledge that these proposals may present challenges for investment fund managers and ask specifically for these firms to review the new rules carefully and comment.

International firms operating under the international dealer or international adviser exemption in National Instrument 31-103 will find more refined and restrictive conditions on those exemptions. For example, the CSA have clarified that these exemptions are intended only for non-Canadian advisers and dealers to provide limited services to Canadian resident permitted clients. The current requirement for international firms who intend to continue relying on these exemptions to notify each applicable CSA member on an annual basis will, under the proposals, be required to provide that notice by December 1 of each year. The CSA have also clarified to what extent international advisers can provide "incidental advice" about Canadian securities. This restriction is not intended to permit a de minimus amount of advice, but rather any advice about Canadian securities must be directly related to the firm's activity of advising on foreign securities.

SRO members will have more exemptions from provisions of National Instrument 31-103 available to them, primarily in areas where the SROs continue to develop their own rules – for example, complaint handling. The CSA will also exempt SRO members from the requirements in National Instrument 31-103 to provide client statements, once the SROs implement conforming rule amendments. SRO members that are also registered in another category will particularly benefit from the additional clarity provided for in the proposed amendments, with exemptions proposed for these firms that will allow them to be subject to only one set of rules – MFDA or IIROC rules – for many requirements.

All registrants that have referral arrangements in place will benefit from the changes proposed by the CSA for the referral rules. For example, a referral agreement need only be signed by the registered firm and the other party but not by any individual representative who may be participating in the referral arrangement.

Companion Policy: The CSA propose amendments to the Companion Policy to National Instrument 31-103, which expand significantly the guidance given to registrants on the following topics.

  • Additional guidance is given on the CSA's core principle that requires registrants to institute a "firmwide culture of compliance", including enhanced discussion of compliance systems and the distinction between "monitoring" and "supervision".
  • Guidance is provided about the availability of the "trades through a registered dealer" exemption, including that it is not intended to allow a firm to escape registration where it is "in the business of trading"(e.g. doing acts in furtherance of a trade) but then executes the trade through a registered dealer.
  • Guidance on complaint handling requirements has been significantly expanded, including the CSA's expectations as to when a firm must respond in writing to complaints and the various time-lines that firms will be expected to meet in connection with complaints. The CSA explain that a firm will be expected to take a balanced approach to fact gathering in the context of complaints. A firm's complaint handling policy should provide for specific procedures for reporting the complaints to superiors. Note that the complaint handling requirements of National Instrument 31-103 became effective on September 28, 2009, for all registrants other than investment fund managers.

SRO Rule amendments - client relationship requirements MFDA:

The "client relationship" amendments to the MFDA rules were approved by the applicable CSA members in mid-July 2010. These rule amendments relate to client accounts, minimum standards for account supervision, client communications and client reporting. The MFDA has indicated that the amendments will be presented to MFDA members at the December 2010 annual meeting for final approval and if approved will be made effective shortly thereafter subject to transition periods for certain requirements.

If approved by the MFDA membership, the amendments will, among other things,

  • require MFDA members to provide investors with certain fundamental information at the time an account is opened – similar to the "relationship disclosure information" requirements under National Instrument 31-103;
  • clarify the duty of MFDA members and approved persons to assess the suitability of investments in each client account when various triggering events occur;
  • clarify the responsibilities of MFDA members and their representatives in discharging obligations to ensure suitable recommendations;
  • require MFDA members to provide certain information to clients on an annual basis with respect to the performance of the client's account; and
  • clarify an MFDA member's supervisory requirements regarding client communications that disclose a rate of return.


IIROC has also proposed "client relationship" amendments to its rules similar to those proposed by the MFDA. IIROC's proposed amendments which were approved by the IIROC Board of Directors in June 2010 are expected to be republished in the near future for a 90-day comment period.

Ongoing CSA initiatives

The CSA explain in the recent publication that industry participants can expect to see other proposals for amendments to National Instrument 31-103 and related instruments as they continue their work on various outstanding projects. We expect that the CSA would welcome comments from industry participants on these issues .

  • Registration for investment fund managers in provinces and territories other than the jurisdiction of their head office – this could affect non-Canadian investment fund managers that are today not required to be registered in this capacity in Canada.
  • Exemption for sub-advisers – currently, Ontario and Québec are the only provinces that provide registration exemptions for sub-advisers; in the other Canadian jurisdictions such relief must be applied for.
  • Exemption for capital accumulation plans – the CSA proposed an exemption regime for capital accumulation plans in 2005 but that proposal was never finalized.
  • Cost disclosure and performance reporting to clients – the CSA continue to work with the SROs to develop harmonized requirements for enhanced cost disclosure and performance reporting requirements.
  • Client statements, including whether they should include securities held or controlled by a firm or whether they need to also include client name securities. In addition to seeking general comments on this issue, the CSA have asked for feedback on specific questions about the issue.
  • Requirements for registrants to report on client complaints to the CSA.

Mortgage investment corporations and mortgage syndicators:

The CSA are also considering how the registration regime should fit with the business of mortgage investment corporations and mortgage syndicators. These entities are expected to benefit from an additional transition period – to the end of 2010 – before the adviser and investment fund manager registration requirements will apply to them. Importantly, however, the CSA have indicated clearly that firms in the business of mortgage investment corporations and mortgage syndicators are in "the business of trading" in the exempt market and must comply with the requirement to apply for registration as an exempt market dealer by the September 28 deadline, unless there is an exemption available. The BCSC has said publicly that it will be issuing temporary relief until December 31, 2010 from dealer registration for real estate entities that are not registered in another category or jurisdiction.


We have worked with many of our clients to develop detailed 2010 Compliance Checklists which outline the specific requirements and next steps necessary to meet the deadlines that will apply to them.

The significant registration requirements in National Instrument 31-103 that come into effect on September 28, 2010 following the end of the transition periods are

  • Dealing representatives of scholarship plan dealers and exempt market dealers must meet enhanced proficiency by September 28
  • Investment fund managers - a firm acting as an investment fund manager must submit its registration application to the applicable CSA member (where its head office is located) by September 28
  • Exempt market dealers - a firm in the business of trading in securities in the "exempt market" on September 28, 2009 must apply by September 28, 2010 for registration in all provinces and territories (outside of Ontario and Newfoundland and Labrador – an existing firm will already be registered in these provinces as an EMD) where it carries on that business (except if the firm is able to rely on the EMD exemption in the northwestern jurisdictions)
  • All registered firms (other than investment fund managers) must begin providing new and existing clients with specified "relationship disclosure information" by September 28
  • All registered firms must comply with the new capital requirements in National Instrument 31-103 and begin using the new working capital form– Form 31-103F1 – for calculating excess working capital by September 28.

As well, there is a September 30, 2010 deadline under National Instrument 33-109 Registration Information for all registered firms that were registered on September 28, 2009, and are still registered, to file a completed Form 33-109F6 with their principal regulator. The same requirement and deadline applies to firms registered in Ontario under the Commodity Futures Act.

About BLG

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