Canada: Non-Resident Investment Fund Manager Registration Requirement

As a result of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Obligations (NI 31-103), any person or company that acts as an investment fund manager in a province or territory of Canada (each, a "Jurisdiction") is required to become registered, or exempt from registration, as such with the relevant Canadian securities regulatory authority (Securities Regulator), subject to certain transition period exemptions that have been granted for non-residents.

Transition Period

Section 16.6(1) of NI 31-103 provides that the investment fund manager registration requirement does not apply to a non-resident that is acting as an investment fund manager if its head office is not in a jurisdiction of Canada. Section 16.6(2) provides that section 16.6(1) is repealed on September 28, 2012 which would have required non-residents who act as investment fund managers in a Jurisdiction to become registered, or exempt from registration, as such on or before September 28, 2012 absent the transition exemption extension described below.

On July 5, 2012, the Securities Regulators issued CSA Staff Notice 31-330 Omnibus/Blanket Orders Extending Certain Transition Provisions Relating to the Investment Fund Manager Registration Requirement and the Obligation to Provide Dispute Resolution Services (Staff Notice 31-330) to advise, among other things, of further transitional relief that has been granted from the requirement to register as an investment fund manager. Staff Notice 31-330 advises that the Securities Regulators have issued parallel orders to extend the September 28, 2012 transition date that is contemplated by section 16.6(2) of NI 31-103 to December 31, 2012. As a result of these parallel orders, a non-resident that acts as an investment fund manager in a Jurisdiction is exempt from the investment fund manager registration requirement until the later of:

  1. December 31, 2012; and
  2. the date on which the relevant Securities Regulator accepts or refuses an application for registration as an investment fund manager that is filed with the Securities Regulator on or before December 31, 2012.

A Bifurcated Regulatory Framework

Despite the harmonization objective underlying the adoption of NI 31-103 as a national registration instrument effective September 28, 2009, the Securities Regulators have been unable to reach a consensus respecting the regulation of non-resident investment fund managers. Non-resident investment fund managers must therefore contend with two distinct regulatory frameworks that will govern their activities in Canada effective September 28, 2012. Multilateral Instrument 32-102 Registration Exemptions for Non-Resident Investment Fund Managers (MI 32-102) will govern the activities of non-resident investment fund managers in Ontario, Québec and Newfoundland and Labrador (Instrument Jurisdictions) and Multilateral Policy 31-202 Registration Requirement for Investment Fund Managers (MP 31-202) will govern the activities of non-resident investment fund managers in all Jurisdictions other than the Instrument Jurisdictions (Policy Jurisdictions).

MI 32-102 — The Instrument Jurisdictions

MI 32-102 comprises the instrument itself, two forms and a companion policy (CP 32-102). CP 32-102 provides guidance respecting the interpretation of MI 32-102. The interpretive guidance provided by CP 32-102 includes a description of the activities which will be considered to constitute acting as an investment manager for purposes of the investment fund manager registration requirement. According to CP 32-102, a person or company will be considered to be acting as an investment fund manager if it directs or manages the business, operations or affairs of one or more investment funds by engaging in some or all of the following activities:

  • establishing a distribution channel for the fund;
  • marketing the fund;
  • establishing and overseeing the fund's compliance and risk management programs;
  • overseeing the day-to-day administration of the fund;
  • retaining and liaising with the portfolio manager, the custodian, the dealers and other service providers of the fund;
  • overseeing advisers' compliance with the investment objectives and the overall performance of the fund;
  • preparing the fund's prospectus or other offering documents;
  • preparing and delivering security holder reports;
  • identifying, addressing and disclosing conflicts of interest;
  • calculating the net asset value of the fund; and
  • calculating, confirming and arranging payment of subscriptions and redemptions and/or dividends or other distributions.

If a non-resident person or company is acting as an investment fund manager, it will become subject to the investment fund registration requirement of an Instrument Jurisdiction if one or more of the investment funds that it manages distributes, or has distributed, securities to residents of the Instrument Jurisdiction. If a non-resident person or company becomes subject to the investment fund manager registration requirement of an Instrument Jurisdiction, it must either apply to become registered as an investment fund manager in the Instrument Jurisdiction or rely upon one of two registration exemptions that are available pursuant to sections 3 and 4 of MI 32-102.

Section 3 of MI 32-102 provides that the investment fund manager registration requirement does not apply to a non-resident acting as an investment fund manager of one or more investment funds if the non-resident does not have a place of business in an Instrument Jurisdiction and if one or more of the following apply:

  • none of the investment funds has security holders resident in the Instrument Jurisdiction; and/or
  • neither the non-resident nor any of the investment funds has, at any time after September 27, 2012, actively solicited residents in the Instrument Jurisdiction to purchase securities of an investment fund.

Section 4(1) of MI 32-102 is more broadly cast than section 3 and provides for an exemption that is comparable to the international dealer and international adviser exemptions that are also available to non-resident dealers and advisers pursuant to NI 31-103. Section 4 provides that the investment fund manager registration requirement does not apply to a nonresident investment fund manager if all securities of the investment funds managed by it that are distributed in an Instrument Jurisdiction are distributed in reliance upon a prospectus exemption to "permitted clients" only, as that term is defined in NI 31-103 (International Investment Fund Manager Exemption).

The International Investment Fund Manager Exemption contemplated by section 4(1) of MI 32-102 is not available unless all of the following apply:

  • the non-resident investment fund manager does not have its head office or principal place of business in Canada;
  • the non-resident investment fund manager is incorporated, formed or created under the laws of a foreign jurisdiction;
  • none of the investment funds is a reporting issuer in Canada;
  • the non-resident investment fund manager has submitted to the relevant Securities Regulator(s) a completed Form 32-102F1 Submission to Jurisdiction and Appointment of Agent for Service for International Investment Fund Manager;
  • the non-resident investment fund manager has provided each of its permitted clients with notice in writing of the following:
    • the investment fund manager is not registered in the relevant Instrument Jurisdiction to act as an investment fund manager;
    • the foreign jurisdiction in which the head office or principal place of business of the investment fund manager is located;
    • all or substantially all of the assets of the investment fund manager may be situated outside of Canada;
    • there may be difficulty enforcing legal rights against the investment fund manager as a result of the foregoing; and
    • the name and address of the agent for service of process of the investment fund manager in the relevant Instrument Jurisdiction(s).

Within 10 days of the date on which a non-resident investment fund manager first relies on the International Investment Fund Manager Exemption in an Instrument Jurisdiction, the non-resident must file a completed Form 32-102F2 Notice of Regulatory Action with the Securities Regulator of the Instrument Jurisdiction. If there is any change to the information previously provided on a Form 32-102F2, notice of the change must be provide to the Securities Regulator with 10 days of the change.

A non-resident investment fund manager that has relied on the International Investment Fund Manager Exemption at any time during the 12 month period preceeding December 1 of a year must provide the Securities Regulator in the relevant Instrument Jurisdiction with notice of the following by December 1 of that year:

  • the fact that it relied on the International Investment Fund Manager Exemption; and
  • for all investment funds for which it acts as an investment fund manager, the total assets under management, expressed in Canadian dollars, attributable to securities beneficially owned by residents of the Instrument Jurisdiction as at the end of the most recently completed month.

MP 31-202 — The Policy Jurisdictions

Unlike MI 32-102, MP 31-202 adopts a principles based approach to the regulation of investment fund managers that places primary emphasis on actually acting as an investment fund manager within a Policy Jurisdiction rather than having security holders resident in the Policy Jurisdiction. MP 31-202 does not provide any "bright line" exemptions from registration. Accordingly, for purposes of the investment fund manager registration requirements of the Policy Jurisdictions, a non-resident person or company that acts as an investment fund manager must simply decide whether it is, or is not, required to register as such based on the guidance provided by MP 31-202.

Like CP 32-102, MP 31-202 begins by identifying those functions or activities that are indicative of a person or company that directs or manages the business, operations or affairs of an investment fund and thereby acts as an investment fund manager for purposes of the investment fund manager registration requirements of the Policy Jurisdictions. The functions or activities that are identified by MP 31-202 are the same as the activities identified by CP 32-102 that are set out above.

MP 31-202 then goes on to provide that an investment fund manager is required to register in a Policy Jurisdiction if it directs or manages the business, operations or affairs of an investment fund from a physical place of business in the Policy Jurisdiction or if its head office is located in the Policy Jurisdiction. If it does not have a physical place of business or head office in the Policy Jurisdiction, it will still be required to register if it engages in activities that result in its directing or managing the business, operations or affairs of an investment fund in the Policy Jurisdiction.

According to MP 32-102, in determining whether registration is required, a non-resident investment fund manager must consider what functions or activities, if any, that it is directing from within a Policy Jurisdiction, and, for such purpose, no single function or activity is determinative. In particular, functions or activities that are tied to the presence of security holders, the solicitation of investors or the distribution of securities in a Policy Jurisdiction are not activities that would give rise to investment fund manager registration, unless they are directed from within the Policy Jurisdiction and result in the person directing or managing the business, operations or affairs of an investment fund in the Policy 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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
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 you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (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 www.mondaq.com

    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 Mondaq.com’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.

    Disclaimer

    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.

    Registration

    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.

    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 unsubscribe@mondaq.com 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.

    Cookies

    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.

    Links

    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.

    Mail-A-Friend

    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.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    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 webmaster@mondaq.com.

    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 EditorialAdvisor@mondaq.com.

    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 enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions