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The Canadian securities regulatory authorities are moving
forward with two quite different regulatory approaches to
non-resident investment fund manager (IFM) registration in Canada,
notwithstanding the earlier unanimous commentary, including from
BLG, that the CSA should adopt a uniform approach. The two
different regulatory approaches raise obvious challenges,
particularly for international fund managers wishing to market
securities of their funds across Canada. In BLG's most recent
Investment Management Bulletin, we describe the registration and
exemption regime that will apply in three provinces and the policy
approach that will apply in the rest of Canada. Each approach
raises unique practical issues, with the registration and exemption
approach being,in our view, the most problematic.
One group of three provincial regulators - Ontario,
Québec and Newfoundland and Labrador - consider that IFMs
that manage investment funds whose securities are distributed in
one or more of these provinces generally should register as IFMs in
those provinces, regardless of where those IFMs are located and
actually carry on the activity of managing investment funds. These
regulators have finalized Multilateral Instrument 32-102
Registration Exemptions for Non-Resident Investment Fund
Managers (the Rule) and Companion Policy 32-102CP [available here] which provide limited
exemptions from IFM registration, generally in
circumstances where there are no significant connecting factors to
the applicable province, including no active solicitation in the
province or where only "permitted clients" invest in the
funds.
The other group of regulators, which we refer to as the
"rest of Canada", has finalized Multilateral Policy
31-202 Registration Requirement for Investment Fund
Managers (the Policy) [available here] that contains guidance on when
a non-resident IFM is required to register in those jurisdictions.
The regulators in the rest of Canada do not take the position that
distribution of securities of an investment fund in these
jurisdictions necessarily means that the firm is carrying on the
activities of an IFM in those jurisdictions. Rather, there are
additional factors that must be considered before a firm must apply
for registration as an IFM.
SCOPE AND TIMING
The instruments will apply to international investment fund
managers with investors in their funds located in one or more of
the jurisdictions of Canada, and also to Canadian fund managers.
The term "non-resident" refers to an investment fund
manager that does not have a head/principal office or a place of
business located in a particular province or territory.
Both instruments are expected to be effective on
September 28, 2012 (subject to government
approvals in applicable jurisdictions). If an IFM concludes it must
be registered in one or more jurisdictions, the firm must apply for
such registration in the applicable jurisdiction(s) by
December 31, 2012. If a firm wishes to avail
itself of one of the exemptions provided for in the Rule, it should
take steps right away to amend its practices with respect to
distribution of its funds in Ontario, Québec and
Newfoundland and Labrador, since the exemptions will be effective
immediately on the Rule coming into force.
The Rule and the Policy were first published for comment in
February 2012 and were preceded by proposed amendments to National
Instrument 31-103 Registration Requirements, Exemptions and
Ongoing Registrant Obligations (NI 31-103) published for
comment in October 2010. Please see Canadian Securities
Regulators Publish Proposals for Registration of Non-Resident
Investment Fund Managers Investment Management Bulletin March
2012 Borden Ladner Gervais LLP [
available here].
Please
click here to access BLG's Investment Management Bulletin
Two Distinct Regulatory Approaches for Non-Resident Investment
Fund Managers Finalized in Canada - Effective September 28,
2012.
We recommend that you print the Bulletin on
"legal" sized paper [8 1/2 X 14] for legibility of our
comparison table on pages 2-5, which we hope you will find
useful.
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.
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