Canada: Canadian Securities Administrators Revise Proposals For Enhanced Account Level Disclosure And Investment Performance Reporting By Registrants

In mid-June 2012, the Canadian Securities Administrators (the CSA) released for comment a revised version of proposed amendments to National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), as well as to its Companion Policy [available here] that, when finalized, will require additional disclosure by registered firms in Canada to their clients.

These proposals – referred to by the CSA as the second phase of the client relationship model project or "CRM-2" – build on the client "relationship disclosure information" currently mandated under NI 31-103 (RDI). They will require a registered firm to provide disclosure of

• Account-level charges levied by the firm
• Charges relating to certain investments held in, and transactions made for, the account
• Compensation received by the firm and dealing representatives in respect of the client's account – with a particular focus on trailing commissions and embedded commissions relating to fixed-income transactions
• Performance of the investments held in the account

Comments on the revised proposals are due on September 14, 2012. It is critical that industry participants affected by these new requirements, including members of self-regulatory organizations, understand the significant impact CRM-2, if enacted in this amended form, will have on their operations and make their views known to the CSA. The 2012 proposals are significantly more complex than those published in 2011 and the comment period is shorter. The CSA have posed specific questions on fixed-income commission disclosure, client name account reporting and percentage return calculation methods that should be answered. This may be the last chance we have to comment on CRM-2. We would be pleased to discuss how these revised proposals would apply to you and to assist you in preparing a comment letter.

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