In a previous
Investment Funds@Gowlings we discussed proposals published by
two separate groups within the Canadian Securities Administrators
(the "CSA") with respect to the
registration of non-resident investment fund managers. On
July 5, 2012 both groups of regulators published notices of their
response to the comments received on their proposals. Securities regulators in Ontario, Quebec and Newfoundland and
Labrador published in final form Multilateral Instrument 32-102 Registration
Exemptions for Non-Resident Investment Fund Managers
("MI 32-102"). The most
notable change from the previously published version of MI 32-102
is that it is no longer being implemented by New Brunswick, which
has adopted the position taken by the rest of the CSA on this issue
(see below). Subject to all necessary approvals, MI 32-102
will come into force on September 28, 2012. The final version of MI 32-102 is not materially different from
what was published for comment. Registration would not be
required if an investment fund manager does not have a place of
business in the local jurisdiction and there are no security
holders of the investment fund, or there has been no active
solicitation of residents by the investment fund manager (or any of
the investment funds it manages), in the local jurisdiction after
September 27, 2012. There would also be a registration
exemption for international investment fund managers without a
place of business in Canada where all of the securities of the
investment funds managed by the investment fund manager are
distributed under a prospectus exemption to permitted clients only
(e.g. institutional investors) (the "Permitted Client
Exemption"). In order to rely on the Permitted Client Exemption, certain
notice requirements must be satisfied: Also, starting March 31, 2013, MI 32-102 will require registered
international investment fund managers to provide notice to
investors that is substantially the same as the non-resident
registrant cautionary disclosure prescribed by section 14.5
of NI 31-103 (which section does not apply to investment fund
managers by virtue of section 14.1 of NI 31-103). The rest of the CSA (now including New Brunswick) published Multilateral Policy 31-202 Registration
Requirement for Investment Fund Managers ("MP
31-202") in final form. This group of
regulators has maintained the position that the need to register as
an investment fund manager will depend on what activities are
taking place in the jurisdiction and the presence or solicitation
of security holders of an investment fund does not automatically
trigger the requirement to register. Registration will be
required in a jurisdiction if investment fund manager activities
take place in the jurisdiction. MP 31-202 will become
effective on September 28, 2012. As part of the implementation of MI 32-102 and MP 31-202, the
CSA issued parallel orders to extend the transition
provisions in the following sections of National Instrument 31-103
Registration Requirements, Exemptions and Ongoing Registrant
Obligations: The transition provisions in sections 16.5 and 16.6 are being
extended to December 31, 2012. This gives Canadian and
foreign investment fund managers a 3 month extension to apply for
registration, if required as a result of MI 32-102 or MP
31-202. Section 16.16 provides a temporary exemption from the
requirement to provide for independent dispute resolution or
mediation services for clients. Since the CSA is
considering amendments to that requirement, it is extending the
temporary exemption until the earlier of September 28, 2014 or the
coming into effect of amendments to those requirements.
This extension does not apply in Quebec because of the existing
regime in that jurisdiction. 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.
Ontario, Quebec and Newfoundland and Labrador
The Rest of the CSA
Transition
Canada: Registration Of Non-Resident Investment Fund Managers
Last Updated: July 16 2012
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