First, theorder published in February exempting
mutual fund dealers from section 13.2(2)(b) of NI 31-103 (which
requires registrants to establish whether a client is an insider of
a reporting issuer or any other issuer whose securities are
publicly traded) is being replaced by an order that exempts all
registrants from that requirement. Specifically,
s. 13.2(2)(b) will no longer apply to a registrant in respect of a
client where the registrant only trades securities for that client
that are listed in sections 7.1(2)(b) and (c) of NI 31-103. The
securities listed in s. 7.1(2)(b) and (c) consist of: (i) mutual
funds; (ii) except in Quebec, investment funds that are
labour-sponsored investment fund corporations or labour-sponsored
venture capital corporations under legislation of a jurisdiction of
Canada; and (iii) securities of a scholarship plan, an educational
plan or an educational trust. The effect of the new order is that
the exemption, previously only available to mutual funds, now
applies to all registrants trading in the applicable
The second blanket order
exempts mutual fund dealers from the requirement to establish the
identify of an individual who owns or exercises control or
direction over more than 10% of the voting rights attached to the
outstanding voting securities of a corporation that is a client (as
per section 13.2(3)(b)(i) of NI 31-103,) under two conditions.
First, the mutual fund dealer must not be registered other than as
a mutual fund dealer or as both a mutual fund dealer and an
investment fund manager. Second, the mutual fund dealer must comply
with the provisions of the federal Proceeds of Crime (Money Laundering)
and Terrorist Financing Act requiring the
identification of any person who owns or controls 25% or more of
the shares of a corporation that is a client. According to the CSA,
the cost of compliance with this provision exceeded the benefit,
since mutual fund dealers primarily trade in securities of mutual
funds that are bound by investment restrictions and already comply
with certain requirements under the Act.
According to the CSA, it is currently considering amendments to
NI 31-103 and these particular provisions will be reconsidered in
the course of the amendments process. For more information, see National Instrument
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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