Canada: Canadian Securities Regulators Propose Registration for Non-Resident Investment Fund Managers

Last Updated: November 29 2010
Article by Marsha P. Gerhart and Rebecca A. Cowdery

Most Read Contributor in Canada, September 2016

In draft amendments to National Instrument 31-103 Registration Requirements and Exemptions published for comment in October 2010, the Canadian Securities Administrators (CSA) set out proposed rules that would require registration of both international and Canadian-based investment fund managers as "investment fund managers" (IFM) in potentially multiple Canadian jurisdictions. The draft amendments supplement the current requirements that Canadian IFMs register as an IFM in the province or territory where they have their head office. At the present time, international IFMs are not required to register in this category of registration, pursuant to transition provisions contained in NI 31-103 that expire on September 28, 2011.

The CSA signalled that they were considering additional registrations for Canadian and international IFMs when NI 31-103 was first implemented in September 2009. With this most recent proposal, the CSA explain that the policy reasons for requiring IFM registration in a province or territory – i.e. to ensure that IFMs have sufficient proficiency, integrity and solvency to adequately carry out their functions - extend to all fund managers whose investment funds are distributed in the province or territory regardless of where the IFM's head office is located.

Comments are due on the proposals described in the CSA's Notice of and Request for Comment on Proposed Amendments to National Instrument 31-103 Registration Requirements and Exemptions - Registration of International and Certain Domestic Investment Fund Managers [available here] by January 13, 2011.

The October IFM proposals are the third set of amendments to NI 31-103 published for comment since its implementation in September 2009. The proposed first-year amendments to NI 31-103 are summarized in Borden Ladner Gervais LLP's (BLG) Investment Management Bulletin The Canadian Registration Regime: Canadian Regulators Propose "First Year" Amendments to National Instrument 31-103 and Other Developments [available here]. The IFRS amendments to NI 31-103 were finalized in October 2010 and will be implemented on January 1, 2011. Please see BLG's Investment Management Bulletin Compliance with International Financial Reporting Standards (IFRS) for Canadian Registrants and Investment Funds [available here].

Proposed Registration Requirement

Under the CSA's proposals, unless one or more of the proposed exemptions discussed below applies, registration would be required by an international IFM in each province and territory where

  1. residents of that province or territory are securityholders of the investment funds managed by the international IFM and/or
  2. the IFM or the investment funds it manages have actively solicited residents to purchase securities of the investment funds.

This registration requirement would apply to international fund managers notwithstanding that the fund manager and the investment funds may be regulated by another regulator and regardless of the jurisdiction where the investment funds are organized and actually managed.

Registration would also be required of a Canadian IFM in each province and territory, in addition to the province where its head office is located, where

  1. residents of that province or territory are securityholders of the investment funds managed by the Canadian IFM and/or
  2. the Canadian IFM or the investment funds it manages have actively solicited residents to purchase securities of the funds.

With these proposals, the CSA appear to have resurrected a regulatory concept that was abandoned when NI 31-103 came in force. Prior to the implementation of NI 31-103, certain members of the CSA, and most notably the Ontario Securities Commission, took the position that non-resident portfolio managers of non-resident investment funds that were distributed in their jurisdiction had to be registered in that province or territory in the category of adviser (portfolio manager). This was referred to by some as the "look-through" or "flow-through" theory of advice, in that the applicable regulators "looked through" the fund and determined that the securityholders residing in the particular province were acquiring the advisory services of the non-resident portfolio manager despite the fact that the advice was provided to the fund outside of the province (in many cases, outside of Canada) in question. This regulatory principle

was not carried forward under NI 31-103 for portfolio managers. Under the current proposals, by distributing investment funds in a particular province or territory, the manager of that fund will be considered to be "acting as an investment fund manager" in that province or territory, notwithstanding that the firm and the funds are situate and are actually managed in another jurisdiction – Canadian or international. This means that while non-resident portfolio managers of non-Canadian investment funds that are distributed in a Canadian province or territory will not be subject to registration as an adviser, the non-resident IFM of those same investment funds will likely become subject to registration as an IFM – a peculiar result.

Limited Registration Exemptions Proposed

The CSA propose two limited registration exemptions for IFMs.

International IFMs will be able to rely on a de minimis exemption in respect of non-resident investment funds where

  • the IFM does not have a physical place of business in Canada
  • the investment funds managed by the IFM are incorporated, formed or organized under the laws of a non-Canadian jurisdiction and are only distributed to permitted clients (primarily institutions and very high net worth individuals) under an exemption from the prospectus requirements and the permitted clients receive prescribed information about the non-registered and non-resident status of the IFM
  • the fair value of all of the assets attributable to Canadian security holders of any investment fund for which the IFM acts as investment fund manager is not more than 10% of the fair value of all the assets of the fund as at the end of the IFM's most recently completed financial year
  • the fair value of the assets of all funds managed by the IFM that are attributable to Canadian security holders is not more than CDN $50 million as at the end of the IFM's most recently completed financial year; and
  • the IFM submits annual filings in each applicable province and territory.

A "grandfathering" exemption has also been proposed for both international and Canadian IFMs if they (and their investment funds) do not actively solicit investors in a Canadian jurisdiction after September 28, 2011 and they manage investment funds that are not reporting issuers in Canada. Accordingly, IFMs that have Canadian investors in their pooled funds as at September 28, 2011 can continue to permit their funds to issue securities to Canadians without IFM registration, so long as they do not actively solicit investors for those funds in any jurisdiction of Canada after September 28, 2011. Notably, all managers of publicly offered investment funds in Canada would be required to be registered as IFMs in each province and territory where those funds are reporting issuers, since the exemptions are only available where the funds are not reporting issuers.

It would appear that the Ontario Securities Commission (OSC) and the Autorité des marchés financiers (AMF) are concerned about the scope of this grandfathering exemption. The OSC and the AMF published jointly a request for comments [available here] on whether it would be appropriate to apply to the proposed "grandfathering" exemption the same threshold limitations – i.e. size of the investment fund attributable to Canadian security holders – as are proposed for the proposed "de minimis" exemption. We understand that the OSC and the AMF are concerned about the potential for "systemic risk" to the Canadian capital markets in the event that an unregistered IFM has a significant number of Canadian investors in its investment funds. The OSC and AMF proposals would undoubtedly reduce the number of international IFMs who would be able to rely on the proposed "grandfathering" exemption.

What Constitutes Active Solicitation?

The CSA propose guidance on what they consider to be "active solicitation". In their view "active solicitation" refers to intentional actions taken by an investment fund or its IFM to encourage a purchase of the fund's securities. Included would be such things as

  • direct communication to encourage residents of a province or territory to purchase securities
  • advertising in Canadian media (including through the Internet), if the advertising is intended to encourage the purchase of the fund's securities and
  • purchase recommendations made by a third party (e.g. a dealer) if the third party is entitled to compensation from the IFM or the fund for the recommendation or subsequent purchase.

Implications of IFM Registration

International IFMs that are not otherwise registered in any category in any Canadian jurisdiction and, if the proposals are adopted, would be required to be registered and will be subject to the proficiency and conduct requirements associated with being an IFM registrant. The IFM category is primarily a "firm" registration category with the ultimate designated person (UDP) and chief compliance officer (CCO) being the only registered individuals. The CCO is subject to Canadian-based proficiency requirements. As a firm, registered IFMs are subject to, among other things

  • capital ($100,000 minimum) and insurance requirements
  • financial reporting obligations (annual and quarterly financial statements)
  • conflicts of interest management
  • record keeping obligations and
  • compliance system requirements including having written policies and procedures.

A Canadian IFM is already subject to these requirements as a result of being registered as an IFM in its head office jurisdiction.

International and Canadian IFMs that do not have a physical place of business in a province or territory will also be required to provide a specified notice to fund security holders about their "non-resident" status. This notice requirement as it applies to Canadian fund managers is particularly inconsistent with the national scope of most fund offerings and the push towards a more national system of securities regulation.

In addition, under the proposed "First Year" amendments to NI 31-103 (referred to in the text box above), the CSA have proposed that registered IFMs 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.

IFM registration in multiple jurisdictions also raises issues related to

  • extra-provincial corporation registration requirements
  • the costs associated with IFM registration and whether they can be paid by the applicable investment funds and
  • the status in other provinces for financial institutions that rely on the IFM registration exemption available in Ontario (section 35.1 of the Securities Act (Ontario)).

International and Canadian IFMs will be able to rely on the "passport" system for registration applications in Canada – and would therefore designate a principal regulator which would take carriage of reviewing the application and ensuring continuing compliance. Registration fees will be payable in each province and territory where the firm is registered.

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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.